Chapter 1: Route to Market
In our draft Onshore Wind Policy Statement (OWPS), the Scottish Government raised and discussed a number of issues about how to improve the route to market for onshore wind. These included:
- The considerable economic benefits of onshore wind, including supply chain activities, consultancy and ongoing maintenance contracts.
- The impact of the UK Government's decision to close the Renewables Obligation early and to focus future Contracts for Difference auctions and support on "less established" technologies.
- The related UK Government decision to reduce Feed-in-Tariffs and introduce deployment caps, and its impact on small-scale and community wind projects.
- The significantly higher load factors experienced by island wind projects, and the importance of a mechanism which gives these projects an opportunity to drive down costs and to compete.
- The potential and value of a developing market in longer term corporate Power Purchase Agreements as a means to helping to finance new projects, alongside (or in the absence of) any other market mechanism(s).
- The potential to include efficiency as a material consideration within the section 36 application process.
- Additional ways in which the Scottish Government might support innovation within the sector and help reduce costs.
- Anything else that the Scottish Government might do to help establish a route to market for new developments.
1. As of October 2017, Scotland had 460 onshore wind developments, either operational or in planning (with local authorities or the Scottish Government's Consents Unit, depending on the capacity proposed). This figure consists of:
- 65 planning applications (2650 MW)
- 79 projects awaiting construction (2511 MW)
- 53 projects under construction (1667 MW), and
- 281 projects currently operational (6556 MW).
2. The Scottish Government is determined to influence, enable and deliver a clean and integrated energy system, delivering reliable supplies at an affordable cost. Onshore wind, a mature and established technology, is now amongst the lowest cost forms of generating electricity, renewable or otherwise. We expect onshore wind to remain at the heart of a clean, reliable and low carbon energy future in Scotland.
3. In order for onshore wind to play its vital role in meeting Scotland's energy needs, and a material role in growing our economy, its contribution must continue to grow. Onshore wind generation will remain crucial in terms of our goals for a decarbonised energy system, helping to meet the greater demand from our heat and transport sectors, as well as making further progress towards the ambitious renewable targets which the Scottish Government has set.
4. This means that Scotland will continue to need more onshore wind development and capacity, in locations across our landscapes where it can be accommodated.
5. That will sometimes take the form of further investment in existing wind farms - such as measures to extend the life of components and turbines at such sites, and / or proposals to remove and replace existing turbines with newer, more efficient (and larger) machines. It will require developers to continue to reduce costs and increase innovation - for example, taking advantage of increasing opportunities to combine wind generation with energy storage.
6. All such developments generate new scope and opportunities to benefit Scotland's economy - taking advantage of the supply chain that has developed over the past fifteen years. Our businesses have developed expertise and a strong commercial reputation for the development, installation, operation and maintenance of onshore wind.
7. Our draft advice on net economic benefit and planning sets out how developers and planning authorities can capture the contribution of development proposals to the economy, alongside potential impacts, and take account of this in planning decision making.
8. The industrial opportunity, and the extent to which we can continue to capture these benefits, remains a top priority for Scottish Ministers. The success and reputation for quality of CS Wind in Campbeltown serves as a reminder of Scotland's ability to serve these markets - we are determined to build upon that, and to continue to attract investment and jobs to Scotland.
9. We know that new projects face a highly uncertain route to market. The arrangements which have enabled onshore wind to expand and to reduce its costs so successfully, are no longer in place. Continued innovation and cost reduction, a supportive and well-resourced planning system, and continued advances in turbine and blade technology will help close the gap that currently exists - but not sufficiently, and not for all developments.
10. Helping to secure this route to market for onshore wind, at all scales, remains a priority for the Scottish Government - building on the successful development of the sector and technology over the past two decades, and capitalising on the learning and reductions in cost that these developments have brought about.
11. We believe that new onshore wind projects can and must be developed at no additional subsidy cost to consumers. However, we also believe that this will require some limited market intervention to protect projects against variations in the wholesale price of power.
12. We share the view that technology-neutral contract auctions, and the competitive process which these entail, can help the sector reduce the costs of onshore wind farms still further. We agree that these outcomes can be achieved through the provision of contracts designed to remove risk by protecting developments from fluctuations in the market price of power.
13. These would ensure that consumers are able to benefit from the low cost contribution onshore wind can make to a decarbonised energy future - but at no additional cost to their energy bills. By giving onshore wind this opportunity, and making it subject again to the same competitive forces that have driven down the costs of other technologies so dramatically, we believe that we can make progress towards Scotland's renewable and low carbon targets at the lowest possible cost.
14. We have already seen the UK Government demonstrate welcome flexibility in its decision to consult on access to support for wind generation on Scotland's islands - that inclusive and flexible approach needs to extend to low cost renewables across the country. That is why the Scottish Government is continuing to call upon the UK Government to deliver the required solution - using the reserved powers and market mechanisms which are currently established and well understood by the sector and investors.
15. We believe that the arguments in favour of this outcome are very strong. However, we will continue in parallel to explore other avenues, using all of the options, tools, powers and resources at our disposal in Scotland. For example, the Scottish Government is continuing to develop the scope to offer increased power purchase agreement (PPA) provision as part of our national collaborative contract for electricity supply.
16. There are clear and welcome signs of growth in the global market for corporate PPAs - agreements (on the part of non-utility or energy companies or organisations) to buy or off-take power from a particular development. These potentially offer new routes to market for developers in the absence of, or alongside, any further revenue stabilising mechanisms that might be made available.
17. This is a welcome trend, and the Scottish Government remains keen to understand and explore this in more detail. We welcome discussions both with the energy sector, and with those on the demand side who might be interested in the growth and availability of such PPAs.
18. We also remain determined to pursue opportunities for further development across the public estate, where that can be accommodated. For example, Scotland's national forest estate now has an installed capacity of almost 1 GW of onshore wind, generating enough electricity for around 500,000 homes each year.
19. Our draft OWPS asked for views and evidence on whether there was a case for including efficiency as a material consideration in the section 36 consenting process.
20. Although there was support for this approach in principle, there was little to no consensus on how this could be defined and delivered. Applications are typically based on the developer's considered view of the most efficient site, turbines and layout possible, balanced against the anticipated acceptability of associated environmental impact.
21. We have reflected on the potentially sensitive commercial and legal issues which could be involved in assessing and comparing the efficiency of individual applications, and the difficulties and delay which could be involved in addressing these.
22. Based on that further reflection, we have decided not to pursue the inclusion of efficiency as a material consideration in the section 36 consenting process. However, we will continue to invite applicants to explain clearly how environmental impacts have been balanced against energy yield during design iteration, and reported as part of the information provided in support of applications.
23. Many of our stakeholders equated or interpreted the concept of efficiency as strongly, if not wholly, related to the increasing size and power of wind turbines. We acknowledge that onshore wind technology and equipment manufacturers in the market are moving towards larger and more powerful (i.e. higher capacity) turbines, and that these - by necessity - will mean taller towers and blade tip heights.
24. The technology shift towards larger turbines may present challenges when identifying landscapes with the capacity to accommodate larger scale development, as not all will be suitable. However, fewer but larger wind turbines may also present an opportunity for landscape improvement, as well as increasing the amount of electricity generated
25. The Scottish Government acknowledges the way in which wind turbine technology and design is evolving, and fully supports the delivery of large wind turbines in landscapes judged to be capable of accommodating them without significant adverse impacts. Our planning policy already supports the development of appropriately sited wind turbines - we anticipate that this will enable a range of turbine sizes in the future. Individual decisions on wind turbines and wind farms will continue to be considered on a case by case basis.
26. There will continue to be an onus upon both developers and consenting authorities, to address fully and transparently the impacts associated with increasingly larger turbines. We will continue to monitor the challenges and opportunities arising from proposals with larger turbines as applications come forward, and to consider whether any future action might be required.
27. The Scottish Government believes that scope exists to continue improving the performance and contribution - thus lowering the cost - of onshore wind developments. Part of this will come from the learning available to developers from current developments, and the performance of existing turbines, blades and other components.
28. There is also the more focused innovation activity being carried out and supported by bodies such as the Offshore Renewable Energy Catapult (OREC) - which, despite the focus implied by its name, is supporting work on innovative blade erosion solutions, the components of which may be equally applicable to onshore wind turbines.
29. The Scottish Government intends to continue its support for innovation across the energy sector, exemplified not only by our contribution to the work of OREC, but also the projects and initiatives funded to date through our Low Carbon Infrastructure Transition Programme.
30. This continuing support for innovation - for example, the development of smarter networks, active management and storage technology - can have a positive effect on the integration and economics of onshore wind generation. Innovation in the onshore wind sector can help the Scottish supply chain to grow, creating jobs and opportunities, and securing Scotland's position as a hub for innovation and investment.
31. We believe that there is specific and increasing potential for energy storage, which could include Pumped Storage Hydro, to enhance the economics, performance and value, of onshore wind. Energy storage technology is experiencing considerable activity, innovation and cost reduction. The Batwind system being developed by Statoil at its Hywind floating offshore generating project illustrates the benefits and value of being able to capture generation which is surplus to demand or capacity, and which can be used or released when demand is high.
32. The Scottish Government welcomes the recent commitments in the UK Smart Systems and Flexibility Plan to simplify and smooth the integration of storage alongside new and existing energy developments. We believe that these proposals offer potential improve the ability of variable generators, such as onshore wind, to manage generation and demand. This will increase their potential to reduce network and curtailment costs, and offer valuable response and services to the network.
33. The Scottish Government will work collaboratively with the renewables sector, UK Government and Ofgem on ways to ensure that these benefits are fully extended to, and available across, Scotland.