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Opportunities for Local Energy

Explore the implications of transitioning to zero carbon by 2025 and beyond, addressing asset lifespan, regulation changes, and incentives for local energy systems. Learn about immediate opportunities in heat generation, electricity generation, and subsidy-free electricity production. Delve into reducing project costs through collective purchases and income generation strategies. Understand income requirements and potential benefits of local offsetting and non-domestic tariff offsets.

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Opportunities for Local Energy

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  1. Opportunities for Local Energy Andrew Morton - Local Energy Scotland

  2. Introduction • The implications of 2045? • Asset Lifespan (20 years) • All installations should have the potential for zero carbon from 2025 • All regulation and legislation change has to happen before 2025 • All incentives (and disincentives) need to be in place by 2025 • The future of the gas grid must be determined by 2025 • It should be socially unacceptable not to plan for zero carbon from 2025 now • “Transition” needs to be renamed “Switch” • New Asset Design & Manufacture • Likely to require an additional 2 to 5 years • Route Map definition / clarity required by 2020 • Existing Zero Carbon Options • Those that already exist can be implemented next • Those that provide benefits should be implemented immediately

  3. Introduction • Immediate opportunities? • Heat Generation • Renewable Heat Incentive (RHI) still in operation • RHI likely to close in April 2021 (the terms of closure may impact timescales for pre-accreditation, pre-registration &/or tariff guarantees) • Energy for Transport • Electricity generation for EVs - dependent on access to vehicles • Hydrogen production - not yet commercial, but improving • Biodiesel & Biomethane - beyond the scope of this presentation • Electricity Generation • Feed in Tariff (FiT) closed to new customers from the end of March 2019 • Grid constraints continue to limit implementation in many areas • Some technology costs continue to fall • Significant potential remains as part of a local energy system

  4. Subsidy free electricity generation • Gives a ball park indication of viability • Keeps inputs consistent • Uses an audited financial model with reliable output • Every project differs in some (or all) ways to a generic template • The parameters used are also time specific, as markets will change • Regulations, legislation, technical viability, etc. all remain just as critical • Benefits • Keep in mind Asset Life 25 years Rent 5% (gross revenue) Low export value (SEG) 4.192p/kWh Higher export (PPA) 5.24p/kWh Interest rates used at 0% & 5% Long term debt of 15 & 20 years used No corporate tax (assumed gifted) No business rates (relief available)

  5. Project IRR at 100% export

  6. Project IRR with increasing use on site Small Scale PV 10p/kWh offset 4.19p/kWh export PV 15p/kWh offset 4.19p/kWh export PV 10p/kWh offset 5.24p/kWh export PV 15p/kWh offset 5.24p/kWh export Wind 10p/kWh offset 4.19p/kWh export Wind 15p/kWh offset 4.19p/kWh export Wind 10p/kWh offset 5.24p/kWh export Wind 15p/kWh offset 5.24p/kWh export Hydro 10p/kWh offset 4.19p/kWh export Hydro 15p/kWh offset 4.19p/kWh export Hydro 10p/kWh offset 5.24p/kWh export Hydro 15p/kWh offset 5.24p/kWh export

  7. Income per kWh required

  8. Reducing Project Costs • Collective Purchase - example: Farm Scale Solar Framework Tender • Typical single installation 10 - 50kW PV on farm buildings ~ £900 / kWp • As part of a procured cluster indicative tenders averaged ~ £700 / kWp • Still individual contracts, but a potentially a significant project cost reduction

  9. Income from generation Benefit of local offset Benefit from export

  10. Offsetting Non-Domestic Import Tariffs The way some elements of a bill are charged is under review. Some costs charged per unit (p/kWh) may be removed & additional standing charges added

  11. Time of Use • Examples of time of use & per unit charges on non-domestic bills • Distribution Use of System (DUoS) (example below) • Balancing Services Use of System (BSUoS) • Renewables Obligation Charge • Feed in Tariff Charge • EMR CfD Payments • Climate Change Levy

  12. Income per kWh required

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