Opportunities for Local Energy

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