While still relatively small, the UK’s hydro industry is in rude health, with a surge in development spurred on by the government’s Feed-In Tariff. A pending review of the subsidy will be a key factor in determining whether the industry continues to thrive, or starts to stagnate.
Renewables are rarely far from the media spotlight, and the focus tends to be on wind turbines and solar power. But while these technologies generate the lion’s share of the attention, the same can’t be said for the electricity.
“Hydro has a very long life, is very green and very sustainable.”
Bob Middleton, Managing Director, TLS Hydro
Hydro-power accounts for around 17% of global electricity generation, compared with 3% for all other renewable technologies combined. Most of this comes from large schemes, which can generate staggering amounts of power – China’s Three Gorges Dam, which was completed in 2012, has a total generating capacity of 22.5 GigaWatts – around 19 times the output of Sizewell B nuclear power station. Yet larger schemes aren’t without their environmental and social consequences, including interrupting the flow of rivers, destroying local ecosystems and displacing people and wildlife.
The UK currently generates about 1.5% of its electricity from hydroelectric schemes, mostly from large-scale schemes in the Scottish Highlands. The potential for further large scale schemes are now limited, not just because of environmental concerns but as the most viable sites have already been used.
“The hydropower sector in the United Kingdom is going through an exciting phase.”
David Williams, chief executive of the industry trade body the British Hydropower Association (BHA)
But for small-scale schemes, there’s still plenty of scope to do more. According to the DECC and Environment Agency, the UK has an estimated remaining viable hydro potential of 850 to 1550 megawatts.
This represents approximately 1 to 2% of current UK generating capacity and so would make a modest but useful contribution to the renewable energy mix – if it can be exploited in a sustainable way.
Hydro’s certainly had a resurgence over recent years, driven in part by the imperative to harness more low carbon energy sources, and supported by the policy and incentive framework.
“The hydropower sector in the United Kingdom is going through an exciting phase,” says David Williams, chief executive of the industry trade body the British Hydropower Association (BHA).
“Government policy to limit carbon emissions has given us the opportunity to develop hydropower projects which previously would have been unviable. Businesses, communities and individuals are now involved and are playing their part in the fight against climate change.”
Small is beautiful
It’s a sector in which Triodos Bank sees significant potential, and a growing part of its environmental portfolio. At the end of 2012 the Bank financed eight hydro projects across the UK, up three on the previous year, with more projects in the pipeline.
Run-of-river schemes, the model Triodos Bank tends to finance, use a small weir to redirect water into an underground delivery pipe, which feeds the water downhill to the power station.
The water spins the turbines, generating electricity, before being returned to the river. The power extracted depends on the flow’s volume and drop in height. Hydro schemes aren’t just an effective emission-free way of generating energy, but potentially have great longevity. Bob Middleton, Managing Director of developers and operators TLS Hydro explains.
A modern hydro turbine generator can convert over 90% of the energy in the available water into electricity. This is more efficient than any other form of generation.
“On a full life cycle, hydro is probably the cleanest and the greenest form of renewable energy. Projects potentially last in excess of about 50 years while most other renewable technologies are lucky to last 20 years before they need replacing. For instance Balgonie power station, one of the TLS projects that Triodos financed, was built in 1922 and is still working more or less as well today as when it was built. So hydro has a very long life, is very green and very sustainable.”
Once up and running, small-scale hydro is extremely discrete. Some local disruption is caused during construction, but within a year or so most schemes have virtually disappeared into the landscape. “The small-scale projects we build hide in the environment very easily,” says Middleton. “You have a small building the size of a garage that can be made to fit the local environment. Sometimes we build them in stone, others are rendered to match the local buildings and most people driving through the area wouldn’t even notice they’re there.”
Government policies and incentives have unarguably helped to breathe new life into the UK’s hydro industry in recent years, but some industry experts believe the way they’ve been executed could be counter productive in the long term.
“The FIT as it is now is fine. Nobody’s going to makes millions but it’s a high enough rate that people are making an effort to build new hydro schemes.”
Jamie Needle is Development Manager, Derwent Hydro
Jamie Needle is Development Manager at Triodos Bank customer Derwent Hydro, which has been actively involved in developing and operating small UK hydro since the 1980s. He warns that while the Feed-In Tariff (FIT) has helped boost the industry, the way it has been structured could create short-term growth followed by years of inertia.
“The FIT as it is now is fine. Nobody’s going to makes millions but it’s a high enough rate that people are making an effort to build new hydro schemes. The big problem is that they’re trying to reduce it at the end of this year, which is why there’s this big rush to preaccredit schemes, and there’s no good reason for that.”
“We’re talking about maybe a 16-17% revenue reduction for a scheme overall. How many businesses can afford to reduce their income by that much without anything else changing?Hydro schemes that are pre-accredited this year will benefit from the current FIT rate, as long as they’re developed within two years. But the limited number of experienced developers in the UK means that the industry is unlikely to have the capacity to develop all the pre-accredited projects in time.
Hydropower beats all other electricity generating technologies with an energy pay-back ratio of 300 – a measure of the energy produced compared to the energy required to build, maintain and fuel it. This is ten times more than oil-fired power stations.
“The one critical error is that they’re counting schemes to be deployed when they’re pre-accredited. Which means they’ve got their permissions and they’re signed up for the tariff, but won’t necessarily get built. It’s almost a vicious circle – we’re seeing a lot of sites where people are trying to pre-accreddit them so they’re not subject to degression, and that makes the degression worse,” says Needle.
A factor which has further compounded the issue is that last year’s FIT review took longer than planned, putting new developments on hold awaiting its outcome. The backlog has been absorbed into this year’s development and degression count, alongside pre-accreddited projects. Needle warns this could damage the industry in the long-term.
“The deployment rate looks three to four times higher than it really is. The result is that rates are likely to drop by 20% and anything that is not accredited is much less likely to be built. You get a one year boom in accreditation applications and then nothing will happen, as nothing will be worth doing afterwards.”
“There is some hope that the large degression may take effect a year later than feared due to a backlog of applications at Ofgem leading to undercounting but this would be no more than a temporary reprieve for the industry.”
The coming months will be a critical time in the future of the UK’s hydro industry, with the outcome of the FIT review setting the pace for the coming years.
Set too low, and the inflow of funds into small-scale hydro development could dry up, leaving a valuable source of renewable energy still not meeting its full potential. But set at the right level, with a realistic assessment of which pre-accredited projects will actually be developed, this highly efficient, green and discrete source of electricity will continue to be a power for good.
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