New feed in tariff rates and unintended consequences – Snowdon hydro…what size?

 

Afon Cwm Llan. The site for the new hydro

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The Governments FIT review 2b of non PV renewable energy generation has thrown up an interesting aspect. One of the weakness of having these stepped tariff rates is that they have some unintended consequences. e.g. it can encourage you to generate less renewable energy because you make more money by down sizing your system to fit into the next tariff band. This is very true with PV but it has been bought home in a big way for us on the Snowdon hydro. We are in a few weeks of placing the order for the new turbine and our engineers have been number crunching around the new FIT  2b 100kw to 500kw band of the Feed in Tariff …and it makes interesting reading

1. The hydro we intend to build which has undergone a long consultation and methodical abstraction negotiation to maintain habitats and visual amenity. This is what it looks like

  • 614 kW, 450 l/s.  Energy 1839 MWh, Average annual income £314k based on 12.1p FIT plus 5p energy export, total 17.1p/KWh.

2. But if we reduce the size of the system and its output this means –

  • 500kW:  366 l/s.  Energy 1659 MWh(10% less), average annual income £340k based on 15.5p FIT plus 5p export,  total 20.5p/kWh.

We also estimate capital savings on intake (smaller structure, less screen) ( £5-7k) , smaller pipe 500mm and 560mm rather than 560mm and 630mm (costs reduce from estimated 131k to 93k, so £38k saving), smaller turbine and  generator, powerhouse pipework– estimate £20k) smaller powerhouse, outfall etc – another £5-10k.  

Overall capital cost savings of around  £70k  and an additional £26k per year income.  This might need £3-4k of redesign costs etc.  

Overall.  Less cost and more profit but also less renewable energy produced. Interesting! As a project team we have decided to stick to plan A. At the end of the day we are here to generate renewable energy and keep in the spirit of the feed in tariff (don’t think future generations would thank us for thinking short term profit…sound familiar?) . Long term the additional 180MW pa will also we feel make more income. (the price of electricity does not seem to want to go down) and to replace this lost energy generation capacity for example we would need another 200kw of PV installed which would be a bit silly if you could generate it cheaper on the system that you intend to build anyway. We are also  working on ‘sleeving’ this energy , which should see the income differential (between the 500kw and 614kw) reduce (more on sleeving when we have i hope finalised the mechnaism)

I wonder how difficult it would have been to develop a sliding scale FIT rather then these precipitous rate drops which can encourage you to produce less renewable energy at certain scales?

(PS this new band can encourage you to go bigger on the 100kw turbines but its all relative since we are talking of loosing a whole 100kw in moving down but you may only be looking at a small percentage increase at the smaller scale turbines)

Hafod y Llan proposed wier location

 

 

 

 

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10 Responses to New feed in tariff rates and unintended consequences – Snowdon hydro…what size?

  1. That is interesting. Glad to hear that you are not downsizing though

    • Keith Jones says:

      my children would not thank me for going for the short term dash for the cash

      • mikekirwin says:

        This is a relatively easy position to take when not using your own cash.

        It’d be financial suicide to spend more on installation costs for a lower financial return.

      • Keith Jones says:

        No in fact the business case is strong and also ethical. we are also having to borrow the money at market rate and pay it back. this has to be business focused but also sustauinable in the long term. the drop off in the FIT is scewing the ammount of energy we ‘should’ generate.

      • Mike Kirwin says:

        I understand, but this simply isn’t a position individuals are in a position to take. Spending more for lower returns is financial suicide.

        Interesting that you’re having to borrow cash as the National Trust makes a profit every year from it’s +£400m turnover. Wasn’t there an opportunity to reinvest some of these profits rather than borrow from an ethical bank?

        ps I’m a fan of the national trust

      • Keith Jones says:

        Understood. The National Trust reinvests all of its surplus into its conservation work.
        There is another aspect which i did not go into fully which is our ability to sleeve the energy. Which in essence is using our generated energy against our consumption sites (plus paying the network opperator) which we think will negate any losses from reduced FIT. Over the medium term it will make the Hydro much more profitable (High enenrgy inflation rates) we are also looking to trial this with induvidual households at community level. Its more than short term FIT gain. Its the ‘for ever for everyone’ bit in our set up. I was trying highlight the unintended consiquesnces of what the Gov have structured but also that its about responsible renewable generation. But if we can also use some inginuity and the size of the NT to show ‘there is a different’ way of having your cake as it were. less financial support but also a way to maintain income and share benefit (lower bills for local communities)

      • mikekirwin says:

        Great that you could flesh out your intentions a little more. How do you see lower bills for the community coming about?

        Hopefully other public and private sector bodies will take note of your endeavours through this blog and follow suit. Which I hope won’t be to the detriment of individuals as we’re all accessing a very limited funding pot.

        Sizing schemes to fit the FiT and not the available resource is clearly the problem here. Until DECC gets to grips with basic maths, then these banding issues will remain along with the proven Peter principle.

      • mikekirwin says:

        This is an easy position to take as its not your personal cash you’re investing.

        For other installers it amounts to financial suicide to spend more to receive less.

  2. Simon Dennis says:

    Why don’t you size the long term, civil elements and possibly the electrical connection of the project for the full capacity of the site, but just install a 500 kW turbine, control system and generator. They are relatively small costs and will be replaced or extensively overhauled not long after the FiT period anyway, so could be replaced to full size then. The slightly oversized civils will increase system efficiency of the 500 kW scheme so not be altogether wasted for the next 20 years. If you’re using a Pelton turbine It may just be a matter of having the potential to add another jet, replace the manifold and generator – pretty minor in comparison to replacing the whole scheme. Perhaps the best balance for long and short term?

    • Keith Jones says:

      Firstly thanks for the comment. we did look at this option. the Hydro itself is about 35% of the capital and is fairly bespoke to the sites specification. The cost is not insignificant to re-engineer a 614kw hydro but doable. But at the end of the day we are there to produce as much energy as we can within our payback envelope and within the abstraction we have negotiated. based on our proposed energy sleeving regime we actually don’t think we will lose any money but its has taken a bit of ‘thinking around corners and energy brokering. all the best and thanks for the comment. Keith

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