The financial bit

Costs of a scheme

The costs of a scheme can be divided into four main areas:

Equipment

This includes the turbine, gearbox and drive belts, generator and water inlet control valve. Generally, equipment costs for high head schemes are lower than those for low head.

Civil works

This includes any work on installing the equipment in the ground from river inlet to turbine and house, and then back out to the water.

Electrical system

This includes all the necessary electrical equipment – control systems, wiring, and transformer, but also connection to the electric. The cost of the latter is controlled by the local electric distribution company.

Other costs

These could include costs for design and project management, licenses, planning permission etc.

Example indicative costs for a 100kW system are:

Smaller schemes are difficult to estimate, as some costs are fixed. Generally speaking the smaller the scheme the higher the cost per kW. Obviously this should be addressed in the feasibility study and an acceptable payback period or cost is essential.

Running Costs

These can include, any:

• rents payable on the land. If it is agreed with the landowner beforehand, then it could be possible to tie part of the rent in with the income from the property, so that the landowner has a vested interest in it being a successful scheme.

• metering services – monitoring of the meter by an external organisation. Metering is needed to calculate the total generation from the turbine, how much is being exported to the grid and how much imported. Eventually, smart meters, due to be rolled out in all homes by 2020, will be used to measure the feed into the grid.

• business rates as hydro schemes are classed as businesses unless they are part of a domestic property.

• maintenance of the system. This should be very low for the first few years apart from routine inspections. As the system grows older then there could be costs replacing seals etc.

• insurance costs – should include material damage for the equipment itself, business interruption to cover for any loss of income,

• any public or employers liability

Financing a scheme

The initial capital outlay depends on the site but with the long lifetime of the equipment, high reliability and no fuel costs the running costs are very low. Initial capital costs can be substantially reduced when using pre-existing infrastructure e.g. at a former water powered mill site. Costs are lower for schemes with a high ‘head’ of water with costs increasing as the height decreases. There are several ways a scheme can be financed - grants, loans and investment from the community. Community projects work well as there are financial and other benefits such as increased buying power and sharing expertise.

Clean Energy Cash Back or FITs (Feed-in tariffs)

In April 2010, the Govt. is introducing the Clean Energy Cash Back scheme. This is a mechanism whereby there is a guaranteed fixed premium rate paid for electricity generated by renewable means.

There will also be an additional payment, the export tariff, for every KWh that is exported to the grid. The suggested price for this is 5p/KWh.

This will go a long way to making systems financially viable and there is the potential for scheme to bring in substantial revenue into a community.

E.g. a 10 KW system, producing 10 KW an hour, every day for 365 days of the year will produce

.22p (17p +5p export tariff) x 24 x 365 = £19,272 per annum.

The tariff will be guaranteed for 20 years for projects established in 2010.

For more details of the scheme, see the DECC website.

Metering requirements for FIT:

- total generation meter from RE system

- export meter and import meter if grid connected

Grants

The Low Carbon Buildings Programme finishes in April 2010 with the introduction of FITs, www.lowcarbonbuildings.org.uk.

Some Councils offer schemes, such as Kirklees Council's Re-charge Scheme, which offers clients an interest free loan up to a max of £10k. http://www.kirklees.gov.uk/community/environment/RE-ChargeScheme.pdf

VAT

The government reduced VAT for domestic and not for profit community organisations on the equipment for a hydro scheme. The installer will be able to advise on this. This does not apply to DIY installations.

The Co-operative Bank

The Co-operative Bank has a track record in funding a wide range of renewable energy projects, including hydro.

The renewable Energy and Asset Finance Team provided £61,000 to help fund the installation of a hydroelectric Archimedean screw at Rorr Weir on the River Gyt at New Mills, Derbyshire

The funding was provided to Torrs Hydro New Mills Ltd (THNM) a company specifically set up to own the scheme at New Mills and install the hydro plant.

Power generated from the Archimedean screw will ultimately be sold, through an electricity supplier, to the Co-operative Group. The electricity will be fed directly into a nearby Co-operative food store

Charity Bank

Charity Bank is the UK's only regulated bank that is also a registered charity. Using 100% of depositors' savings, they support voluntary organisations, social enterprises and charities to address society's needs and maximise their social impact.

CO2 Sense

CO2Sense can offer funding to encourage the development of new renewable electricity generation in the Yorkshire and Humber region.

The funding, known as the Grid Connected Renewables Programme, is available in three streams:

• Emerging renewable technologies. This includes new or existing technologies which are innovative or technologically advanced

• Flagship projects. This is to support projects which can become icons for the region

• Community ownership of renewables. This is dedicated support for projects which are owned by the community.

To be eligible, the generation must take place in the Yorkshire and Humber region and must be connected to the national electricity grid. The selection procedure will be competitive, and a key selection factor will be the quantity of CO2 savings per pound bid.

Funding is available from £20,000 – 500,000, and will be subject to the EU rules on state aid. It is important to note that all funding must be spent by March 2011.

EON

The Sustainable Energy Fund offers grants of up to £20,000 to community groups and not for profit organisations who wish to consider and implement sustainable energy projects in their buildings – from energy efficiency through to micro-generation. Projects that would be considered include: the purchase and installation of one or more renewable energy technologies or the renovation of existing facilities to incorporate micro-generation technology (e.g. the reinstatement of a watermill and the purchase of a turbine to produce hydro-electricity).

Application forms are available from the website.

Scottish Power Green Energy Trust

Established in 1998, the independent charitable Green Energy Trust supports the development of new renewable energy sources in the UK helping to reduce our reliance on fossil fuels and combat climate change. Funded by ScottishPower's Green Energy Fund customers and ScottishPower, the Trust offers grants to a wide range of projects that will increase our use and knowledge of renewable energy. The maximum grant is £25,000 for up to 50% of the project costs.

EDF energy

EDF Energy Green Energy Plan This fund is generated by customers of EDF energy switching to a green tariff. It supports the installation of small scale community renewable energy technologies. Potential applicants should contact the green tariff helpline for an application form and greater details concerning the application criteria. Grants of up to £30,000 are available.

Community Sustainable Energy Programme (CSEP)

The Community Sustainable Energy Programme will provide £8 million to community-based organisations for the installation of microgeneration technologies. Funding will also be available for energy efficiency measures, such as cavity wall and loft insulation in combination with the microgeneration technology. Where these are not already in place, you will have to install them in order to qualify for a microgeneration capital grant. The upper limit for installed capacity funded under this scheme is 50kW. It will also provide £1 million for project development grants that will help community organisations establish a microgeneration and energy efficiency installation.

Grants available are:

Capital grants of up to £50,000 for up to 50% of the project costs, whichever is lower.

Project development grants of £5000 or 75% of the project costs, whichever is lower.

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