How much is a community hydro – the risky bit

Risk funding. asking a community to stick its neck out.

Risk funding. asking a community to stick its neck out.

We are now 20 months into the development phase of the 500kw Anafon Community hydro. As ever hydros involve quite a bit of “fleet-of-foot” thinking as we find out more and more through the surveys. One issue which has come back on quite a few occasions has been that of ‘how do we finance the risky development stage?’ – A hydro can be unviable quite quickly as you learn more and more about the ecology, archaeology and technical aspects. At any time up to planning permission and grid offer you could lose your research and feasibility investment. Something rare, fragile, unacceptable or the Government move the support mechanisms could throw the project completely. The factors and context can and does shift in the development of this form of renewable. In financial terms this is not small beer and can be as much as 10% of the capital costs and if your building a £1.5m community hydro it can be risky especially for a community.

How have we approached this at Anafon with the community of Abergwyngregyn? We firstly did not launch into a full on feasibility with the high costs associated but sat down with everybody and looked at what we thought were the main risk factors for the site (at Anafon it was archeology, fish and then bryophytes) and instead of doing everything in one go we started with the riskiest and went down the list so as to not over commit and be able to pull out quickly. But of course until you look for something you don’t know it’s there and this was the case for some rare grassland fungus which no one knew was there. Some deft re-routing of the pipe and we were back in business. This example is perfect and highlighting the early investment risk. what if we could not move the pipe?

The good people from the waterloo foundation have helped us bridge the gap from feasibility to planning permission

The good people from the Waterloo foundation have helped us bridge the gap from feasibility to planning permission

Funding for this pre-planning aspect has been kindly provided by the Welsh Government via their Ynni’r Fro funding. But this did bring in a new risk which is something called ‘state aid’ and could mean, if not managed correctly, the FIT income can be put at risk as any public grant on anything to do with generation and not research would mean the project would be ineligible for Feed In tariff. We are currently committed to £17k of research on everything from geomorphology to archeology and quite a few other …ologies. From here we then apply for our abstraction licence. We did have a shortfall in funding to get us from research to the first major milestone which is planning permission. But through a combination of the £10k from Cooperative community energy challenge, National Trust support and as of last week the £9300 grant Waterloo foundation we now have sufficient funding to take us to the planning stage.

Good example of support financial and technical but is hamstrung by state aid interpretation

Good example of supporting financial and technical aspects but is hamstrung by state aid interpretation and short term funding

From here it gets to legal contracts, partnership agreements, options agreements and leases and finally we can look at actually looking for the finance …oh yes then there is the small mater of building it.

If the Government want to help with community renewables this is the place where it is needed. This ‘at risk’ phase can put off many a project. Tackling it could be very straight forward. Interpretation of state aid rules for feasibility stages, revolving feasibility fund, long-term technical support (rather than grant program to grant program) one stop shop with statutory bodies, due diligence support for funding and the list goes one. We don’t need a grant to build it but support in getting a community to the start line is what is needed.

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3 Responses to How much is a community hydro – the risky bit

  1. Tom Jones says:

    This is what we want in all of our communities where possible far cleaner easy on the eye nothing much to be seen. Of coarse there is lot of work involved even after setting up who’s going to look after the mechanics of things,is the national grid going to let you do what you want or there way?
    I do hope that everything goes your way and good luck.

    • Keith Jones says:

      thanks for the reply. The District Network Operator is king. if they say it costs XXX then thats what you pay. It is a lot of work but in the long term this is a bit of a no brainer for a community. Agree that every community should have one

  2. Pingback: Show me the money. Community energy financing. The BIG money | National Trust Going Green

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