Clashindarroch Wind Farm

Proposed Community Benefit Fund

SAOS Consultation Report - Comments

The SAOS report on their consultation with local communities is available for download on this site. Local residents may wish to comment on their recommendations or on AMEC's response.

The following comments have been received. Anyone wishing to continue the discussion should send their comments to the webmaster (webmaster@glassclash.info). We reserve the right to refuse publication or to censor submissions which may be abusive or likely to cause offence.

Received from Richard Hammock. Copy of paper presented to Tap O' Noth Community Council 20 March 2006

CLASHINDARROCH WINDFARM COMMUNITY FUND ARRANGEMENTS

1 WHAT AMEC ARE OFFERING

Amec have issued a note and a press release telling us how much money will go into the fund , how it will be distributed and how it will be managed. They refer to the SAOS 'consultation' to justify their position but have not released the figures and comments from that exercise, so we have to take their word for it!

The offer - or rather the imposed settlement - since Amec show no desire to discuss or negotiate anything, unlike other windfarm developers, is as follows:

A sum of £400 per gigawatt hour of output achieved, the first sum to be paid 12 months after the windfarm goes into production

Payments to be index linked to RPI but only uprated every 5 years with no retrospective payment

£5000 up front to set up the management board

Amec estimate that based on 40 turbines each capable of generating 2 megawatts and if the plant is between 30-35% effective then the fund will be between £80-£100k per annum. The amounts to be spread as 25% to Huntly, Glass, Cabrach and Cairnie; 35% to Gartly, Rhynie, Auchindoir, Kearn and Kildrummy; and the remaining 40% to go anywhere as decided by the management board.

There is no mention of the 20% they said earlier would go to Aberdeenshire - it may be in the 40% or have already been taken out of the calculation.

2 SO WHATS WRONG WITH THAT?

A number of factors combine to make this the worst deal I have been able to turn up on the internet. It also differs in significant ways from what Amec led us to believe would be on offer. The changes they now put forward to the scheme are wholly beneficial to them and wholly disadvantageous to us.

Firstly, the amount going into the fund is wholly dependent on the actual output of the plant. Amec have suggested a 30% of capacity figure in the past but this in practice has never been achieved by an onshore windfarm of this size; 20-25% seems more likely.

The table calculated to show the size of the fund at various output levels shows that the actual size of the fund is more likely to be £60-70k (note that the tables were based on a higher capacity figure for each turbine - Amec have changed their specification again in their note to 2MW turbines) - so the higher figure seems to me to be pie in the sky.

Secondly, this formula introduces a high level of risk to the community fund. The industry norm formula, which Amec originally proposed to us, would guarantee a sum of a minimum of £1000 per annum of installed capacity, regardless of actual output. On Amecs latest figures that would be a fund of £80k per annum.

Under the new formula such factors as the weather, the robustness of the turbines, the level of service and maintenance and other risk factors could reduce the output and hence the amount in the fund. Note also that the annual payment would be paid in arrears.

Another factor to consider is what happens if the Renewable Obligation Certificate system changes and it becomes more commercially beneficial to the plant operator to reduce or stop production? This has already happened with Hydro schemes, and could therefore reduce or even stop any payments to the community.

Where this element of risk has been introduced to the community payment elsewhere, it has been on top of the guaranteed payment.

The third issue is that of indexing. By its nature indexing is always disadvantaging to the recipient as it is always in arrears, ie you have already paid the higher prices before your payment is adjusted to compensate. Amec are only prepared to review the payment every 5 years and adjust the future payments without retrospection. At current RPI rates of 2.5-2.7% that means that the real value of the payment will fall by 12.5-15% per 5 year period. Of course, should inflation resume its historical pattern we could see 5% per annum or 25% per 5 year devaluation of the fund.

The list of settlements from the Highland Council website shows what kind of settlements have been achieved. They are all better than what is on offer to us.

Richard Hammock, Gartly, 21 March 2006

Received from Mike Davies. Copy of letter to 'Huntly Express', 13 February 2006

The Community Fund offer from AMEC for the proposed Clashindarroch windfarm should be looked at in the context of other agreements which have been concluded or offered to communities in Highland. A report by the Highland Council Sustainable Development Select Committee dated 14 September 2005 [1] gives details of community benefits for all wind farm developments in that area. For six agreements concluded, the annual payments vary from £1000 to £2600 per MW with an average of £1518 and are index linked. At another site AMEC have offered £1000 per MW index linked but this is still in negotiation. Other sites are at varying stages in the negotiation process.

Against this, the AMEC offer of £400 per GWh for Clashindarroch based on actual productivity will vary depending on the efficiency of the turbines. AMEC have worked on 30-35% but Danish and German experience suggests figures as low as 17% may be more realistic (E.On Netz reports for 2004 and 2005) [2][3]. For comparison purposes, the equivalent rate of payment based on AMEC's offer would vary from £525 to £1225 per MW for efficiencies between 15% and 35%.[4]

The income per annum to the wind farm operator will derive from sale of electricity to the grid but also from the value of Renewable Obligation Certificates (ROCs). Every MWh generated creates one ROC. Thus each ROC is worth 1MWh and they are currently trading at auction for around £47 (Non-Fossil Purchasing Agency)[5] so the possible income from this alone for the efficiency range above would be between £7,000,000 and £16,000,000. These work as a bonus premium on top of the price paid for the unit. Compare this with a proposed community fund value for the same range of between £58,000 and £135,000.[4]

Surely this offer appears derisory. Further information will be available on the Glass information website, www.glassclash.info.[References below]

[1] 'Progress Report on Community Benefit from Renewable Energy Development'. Download(1.75MB).
[2] 'Wind Report 2004' E.ON Netz. Download(345KB)
[3] 'Wind Report 2005' E.ON Netz. Download(1.0MB)
A useful summary of this report from Renewable Energy Foundation is also available(205KB).
[4] Personal calculation. Download(52KB)
[5] www.nfpa.co.uk

Mike Davies, Glass 13 February 2006

Received from Richard Hammock. Copy of letter to 'Huntly Express', 12 February 2006

Before applauding AMEC's generosity in suggesting that they will make some money available to local communities should their power generating plant go ahead, readers might like to note a few points:

1. The offer as reported is substantially different in essence to the one they had previously said they would be making. The industry norm, and the formula they had earlier discussed, based the amount of the money paid into the fund on the 'plated' ie the theoretical capacity of the plant. This would be fixed and paid whatever the actual output of the plant was, in other words it would be risk-free. Now they say the sums will be based on the power actually generated. This will be affected by such factors as the weather, the robustness of the machinery and the amount of maintenance effort put into the plant. Down the line there could be changes to the Governments incentive scheme for renewables and this could lead to restrictions in output for commercial reasons. For example some hydro plants have deliberately restricted their output to take better advantage of changes in the Renewable Obligations Certificate scheme. At present, a Certificate is worth about double the price of electricity.

2. On the fixed capacity basis of calculation, using AMEC's latest revisions to their proposal, we would see 40 turbines with a capacity of 2.75 megawatts. This equals 110 megawatts capacity and at the very bottom of the 'industry standard' pay out of Â£1000 per Mw would give an assured sum of Â£110,000 per annum, not the Â£80,000, subject to performance, which AMEC are now projecting . Also the Â£80,000 figure suggests that they are only expecting the plant to generate at about 21% of its potential capacity, whereas in the past they have claimed it will generate around 30%.

3. The article does not mention the 20% of the fund AMEC agreed to give directly to Aberdeenshire Council during closed discussions prior to the announcment of the fund. Tap'O Noth Community Council tried to get information on these discussions but were refused. There is currently an appeal under the Freedom of Information Act regarding this refusal to come clean with us.

4. AMEC's offers are at the bottom end of what is being achieved by other communities. There is a useful paper on Highland Council's website showing that most settlements are above the offer from AMEC, most are index-linked to preserve their value from inflation, most settlements are on a guaranteed basis with further money available where the performance related element of risk is involved, and in some cases up to Â£1million will be paid out upfront by the developer on completion of construction.

5. Wind power plants stand to make huge amounts of money for the operators whilst creating no wealth in the communities they are sited in . The offer from AMEC would see them putting potentially less than 1% of their yearly income into the community. Bear in mind too that it is our money anyway, because it is only the Renewable Energy Certificate regime which makes wind power an attractive proposition to developers and in the end we pay for this via a hidden surcharge on our electricity bills.

Am I the only person who feels that AMEC is trying to buy off opposition to its plans to industrialise our landscape a little too cheaply?

Richard Hammock, Gartly, 12 February 2006

Additional information to the above letter.

Richard also advised that Highland Council Sustainable Development Committee had had some considerable discussion on Community Benefits.

Copies of their meeting minutes are available on the Highland Council website, http://www.highland.gov.uk/minutes/headquarters/sustainable/.

A copy of a report to that committee 'Progress Report on Community Benefit from Renewable Energy Development' has been obtained and it can also be downloaded from the Highland Council website.(1.75MB).

This report gives details of some agreements which have been concluded with developers. In particular, note Annexe 2, developments at Causeymire, Farr, Kingairloch, Novar, Edinbane(AMEC) and Beinn Tharsuinn.