Energy View
The Property People
Summer 2009 Newsletter Contents: Budget measures page 2 CBM – Bringing back the gas page 3 Micro wind energy opportunity page 4 Small hydro electric opportunities page 5 Changes to the Renewable Obligation page 6
carterjonas.co.uk
Welcome Welcome to our Summer 2009 Newsletter, highlighting a number of topics which I hope you find of interest, including the exciting merger of Carter Jonas and Dreweatt Neate as from 1 May 2009, creating a significant new force in the UK property market.
The merger has created a property consultancy with a combined turnover of £30 million, 75 Partners and over 400 staff working from 31 offices. Carter Jonas now has a branch network covering virtually all of England and Wales. This exciting development comes on the back of the 2009 Budget. The Chancellor of the Exchequer, Alastair Darling has announced £1.4 billion of extra targeted support in the low carbon sector including offshore wind, energy efficiency and small scale renewables. Mr Darling also confirmed that the UK will become the first country to commit to legally binding targets for reducing CO2 emissions – a reduction of 34% by 2020. Amongst measures announced in the Budget are the following provisions:
Offshore wind £525 million will be made available through the Renewables Obligation (RO) over the next two years to push forward the development of offshore wind projects. This is an increase in support for offshore wind investments to reach financial close between now and 2011 through the RO.
Small-scale renewables In order to meet the UK target to generate 15% of energy from renewable sources by 2020 more energy will need to be generated and supplied by small-scale renewable energy technologies such as solar power, heat pumps and community heating schemes.
Combined Heat and Power (CHP) The Government’s long term strategy to support this sector will be set out in the heat and energy saving strategy, later in 2009. The Budget announcement extended the climate change levy exemption for indirect sales of CHP electricity from 2013 to 2023, subject to State Aid approval (worth a total of £2.5 billion).
Green manufacturing The Chancellor announced that the UK Government will allocate £405 million to support the development of a low carbon energy and advanced green manufacturing sector in the UK. All in all, the energy sector seems set for a significant amount of activity in the future, which many land, property owners and investors can benefit from. If you would like to discuss any points or opportunities then please do not hesitate to contact me or any of the team members located throughout the country.
Extra funding from the EIB The Chancellor announced that UK renewable and energy projects stand to benefit from up to £4 billion of new capital from the European Investment Bank (EIB).
Energy efficiency An additional £375 million will be made available to support energy and resource efficiency in businesses, public buildings and households across the economy over the next two years. Page 2 Energy View
Andrew Watkin Head of Energy & Marine Team DD: 01733 588617 E: andrew.watkin@carterjonas.co.uk
CBM – Bringing home the gas
Carter Jonas has been appointed to act on behalf of a leading alternative energy provider seeking to extract gas from otherwise unworkable coal reserves.
Extracting gas from these coal seams is exciting and innovative and is now possible due to recent technological advances introduced from the North Sea oilfields and the United States. Coal seams are created when organic matter decays and is then subjected to heat and underground pressure over long periods of time. Methane is also created as the organic matter decays and this is absorbed onto the surface of the coal and then trapped underground. This is known as Coal Bed Methane (CBM). The methane is released from the coal by drilling down into the coal seam and pumping the water held within the seam up to the surface. This process releases the pressure within the coal seam and consequently the methane is released and travels to the surface. Once at the surface it can be cleaned and pumped direct into the national grid. The attraction of CBM is that coal seams that are too far underground for conventional coal mining can be exploited for the national benefit. Utilising the methane from these coal reserves enables an energy source to be harnessed without the negative environmental impacts of deep mining or open cast coal extraction
as well as providing a cleaner form of energy from this natural resource. Due to recent technological advances it is now possible to drill horizontally at depth thereby significantly increasing the extent of the exploitation of the coal seam with minimal disturbance to the surface. Carter Jonas is actively involved in the early stages of this project and is identifying sites within specific licence areas in order to establish drill sites for appraisal coring for the purposes of assessing coal characteristics and gas content. Once the appraisal drilling has been completed it is hoped that CBM extraction will be developed on a commercial scale. This is an innovative project utilising technological advances to help plug the looming energy gap. As concern for the environment and energy gap grows the Carter Jonas Energy Team is becoming more involved with a diverse breadth of alternative energy schemes across the country.
Iain Nott Associate DD: 01733 588620 E: iain.nott@carterjonas.co.uk
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Micro wind energy opportunities Micro wind turbines are becoming increasingly important for famers and landowners in helping to reduce energy costs and potentially producing a new income stream to the business subject to achieving planning consent. Whilst the Government continues to support renewable energy through financial incentives and planning policy statements, obtaining planning permission for small turbines is not always straight forward. Turbines are supported in national and local planning policies and in the experience of Carter Jonas most Local Planning Authorities provide support in principle for such schemes. It is the detail of the proposal that normally raises concerns, however through negotiation these can often be overcome. The optimum location for wind turbines is at a distance from any buildings or structures, to minimise turbulence in wind flow, and at higher altitudes to take advantage of the stronger wind flows at these levels. Ideal sites are often located in sensitive landscape or heritage designations, such as National Parks, the Green Belt, Areas of Outstanding Natural Beauty and Conservation Areas, which can all impact upon the acceptability of a scheme. The most common issues that arise with proposals
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for micro turbines relate to the visual and landscape impact of the turbine and the impact upon any neighbouring residential properties in terms of noise. Concerns can also be expressed with regards to the cumulative impact of a number of turbines in a local area. It is also important to consult organisations such as National Air Traffic Services (NATS) at an early stage of the proposal to confirm that the turbine does not adversely impact upon safeguarded areas. Carter Jonas has extensive experience in steering through the somewhat confusing plethora of planning policies that can apply to proposals for micro turbines and resolving the issues that can arise. As part of our service we manage the planning application from conception to the point of the final decision. The application can comprise a number of reports and statements as required by the Local Planning Authority dealing with matters such as landscape impact and noise. Our skills lie in resolving any issues that arise as the planning application is determined and negotiating to ensure that an acceptable proposal is ultimately achieved for our clients. The Carter Jonas Energy Team can also advise on site suitability, feasibility and grant funding availability.
Charles Hardcastle Associate DD: 01904 558209 E: charles.hardcastle@carterjonas.co.uk
Small Hydro may make sense… Recent changes to the Renewables Obligation may make small hydro schemes a viable option, potentially producing a significant new income stream for property owners.
In the run up to the recent changes to the Renewable Obligation, Carter Jonas has advised on a number of potential micro-hydro schemes, in anticipation of the double Renewables Obligation Certificate (ROC) being introduced for schemes less than 50 kilowatts in capacity. The recent announcement has led to the financial viability of schemes being improved greatly, with payback times for the right site reducing to 5-10 years. Previously it was thought that only schemes over 400 kilowatts in capacity were viable and, due to the potential environmental impacts and site requirements of these projects, it was often difficult to achieve the required permissions. Micro-hydro offers the potential for a disused weir or old mill to be revived to produce renewable energy and opens up options for landowners looking to cut energy costs or diversify income streams. There are some complications to this process, and first and foremost it is essential to have a careful assessment undertaken of the site in question. Adequate ‘head’ is required in order to produce the required force to drive the generator and as a result the best sites are most likely to be found in upland areas. The presence of existing infrastructure and usable grid connection is also valuable, as these can impact significantly on the capital expenditure required to get the scheme up and running. Consultation with the Environment Agency at an early stage is equally critical to any project. Working with them will improve the chance of gaining consent. One of the main advantages of a hydro scheme as opposed to some of its other renewable counterparts is that the plant and machinery can last for in excess of 60 years once installed. When compared to wind energy, at around 25 years, this is a significant advantage and presents a good long term investment opportunity.
Grant aid is available, not only for the generating equipment, but for feasibility assessments as well. The level and availability differs between regions, and should be applied for with caution due to potential restrictions attached to it, including the possibility for a scheme to be limited to a single rather than a double ROC. With capital expenditure likely to be £300,000 - £500,000, coupled with the prospect of significant financial rewards, it is important to take professional advice in order to unlock an opportunity. The Energy Team is advising landowners on a number of schemes in the west. Should you require any further information please contact a member of the Energy Team.
Edmund Bailey Associate DD: 01248 360413 E: edmund.bailey@carterjonas.co.uk
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Changes to the Renewable Obligation Technology ROC’s receivable /MWh
The Renewable Obligation Order 2009 gained Royal Assent on 1 April following a significant consultation period. This has resulted in major changes, with less established technologies being incentivised to a greater degree through ROC banding. Table 1 shows the new breakdown.
Landfill gas 0.25 Sewage Gas Co-firing biomass
Onshore wind Hydro-electric Co-firing of energy crops Energy from waste with CHP Geopressure 1.0 Co-firing of biomass with CHP Standard Gasification Standard pyrolysis Offshore wind Dedicated biomass Co-firing of energy crops with CHP Wave Tidal-stream Advanced gasification Advanced pyrolysis Anaerobic digestion Dedicated energy crops Dedicated biomass with CHP Dedicated energy crops with CHP Solar photovoltaic Geothermal Tidal barrage Tidal lagoons Table 1 – 2009 ROC Banding
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0.5
1.5
2.0
In addition to these changes, micro generators, being those with an installation less than 50 kilowatts in capacity, will also benefit from a ‘double ROC’ improving the financial viability of small schemes across the spectrum. In particular, both small wind turbines and micro hydro schemes have received a significant boost from the inclusion of this band, with payback times being considerably reduced. Future changes to the UK system currently centre upon the government’s proposed ‘feed in tariff’ and ‘renewable heat incentive’ (RHI), which will be under consultation this Summer, with both potentially coming into force in 2010.
according to technology. This incentive would provide a much needed boost to the biomass sector which has been thus far in the shadow of electricity generating technologies. All in all these changes will serve to incentivise further those electricity generating technologies which were relatively unattractive to investors, such as dedicated biomass and anaerobic digestion, cutting payback times and diversifying the renewable energy mix. If you would like further information please contact a member of the Energy Team.
Details for both schemes are in outline, but it is likely that the feed in tariff will be restricted to electricity generated from schemes with less than 3 megawatts capacity, offering a guaranteed electricity price, differentiated according to the technology used. The long awaited RHI will focus on the heat output of specific technologies, and is likely to apply to projects at all scales, with payments again being differentiated
Nick Barber Surveyor DD: 01733 588647 E: nick.barber@carterjonas.co.uk
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Contact:
Our office network
Contact: Andrew Watkin — National DD: 01733 588617 E: andrew.watkin@carterjonas.co.uk
Paul Malam — Western DD: 01939 210118 E: paul.malam@carterjonas.co.uk
Edmund Bailey — Western DD: 01248 360413 E: edmund.bailey@carterjonas.co.uk
09
dates for your diary Carter Jonas is delighted to be attending a number of events over the summer months across the regions, these include: • All Energy Conference, Aberdeen from 20-21 May
• Cereals 09 at Vine Farm, Near Royston from 10-11 June Charles Hardcastle — Northern DD: 01904 558209 E: charles.hardcastle@carterjonas.co.uk
• The Great Yorkshire Show, Harrogate from 14-16 July • Royal Welsh Show, Builth Wells, Powys from 20-23 July • The CLA Game Fair at Belvoir Castle, Near Grantham from 24-26 July
Nick Barber — Eastern DD: 01733 588647 E: nick.barber@carterjonas.co.uk
your feedback…update • To obtain further copies of this publication • To update your details • To add a colleague to the mailing list • To request further details on topics covered or give us feedback... Contact us at: marketing@carterjonas.co.uk
Mark Griffiths — Southern DD: 01962 858511 E: mark.griffiths@carterjonas.co.uk
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