Hydro abstraction charges have been disputed by the British Hydropower Association (BHA) and Alba Energy since they were first applied in 2017, with SEPA struggling to justify the amounts being levied from the Small Hydro sector.
Key Issue
Does SEPA’s charging system make sense?
In December 2020 SEPA opened the second of two consultations on the charges to which the combined BHA and Alba Scottish membership were strongly encouraged to respond. However, on Christmas Eve a cyber-attack rendered SEPA inoperable. While the consultation was still open and responses were logged, the damage to the environment agency’s systems was so severe, it was only in May 2021 that they were functional again. The Consultation itself was extended from mid-February until the end of April last year and this, combined with SEPA’s disfunction, has meant the results were only published at the end of April, 2022, nearly a year after the consultation closed.
Two consultations later, does SEPA’s charging system make sense?
The last five years of negotiations with SEPA have been a joint effort, headed up by Simon Hamlyn, CEO of the British Hydropower Association (BHA), Luke Milner of Glen Hydro and BHA and Alba director John Lithgow. This has been a long and often unrewarding process, with SEPA making it difficult to gather accurate information and to correct an unsuitable charging scheme. The results of the negotiation have fallen short of its goal: to establish fair, transparent and justifiable charges. However, thanks to the persistence of the negotiating team, the charges now being adopted by SEPA represent, for most sub-2MW operators, a significant improvement from the previous scheme, are more consistent and easier to understand.
There has been a rebalancing of charges, so that some schemes of 100kW-500kW will see increases from the minor fees previously charged. But charges for this band will remain, at most, a matter of a few hundred pounds – approximately proportionate to direct SEPA administration costs. Alba has always argued that charges at this level were acceptable.
The major concerns over SEPA charges have related to schemes in the range of 0.5MW – 2MW. Depending on the capacity of the scheme and SEPA’s internal measure of “environmental impact”, schemes within this range will now see reductions in their charges of between 38%-92%, representing an overall reduction of 50%. The resulting proposal for the new charging scheme is as follows:
|
Power Band |
Environmental Impact Category |
|||
|
|
Minor |
Moderate |
Unknown |
Large |
|
>0.1MW and <=0.5MW |
£200 |
£220 |
£220 |
£600 |
|
>0.5MW and <=1MW |
£500 |
£1,000 |
£1,000 |
£2,100 |
|
>1MW and <=1.5MW |
£1,000 |
£1,500 |
£1,500 |
£3,200 |
|
>1.5MW and <=2MW |
£1,500 |
£2,200 |
£2,200 |
£4,500 |
Both the BHA and Alba continue to have fundamental issues with these charges. Among these disagreements are:
- They do not relate directly to SEPA costs
- They do not reflect value in terms of the services provided by SEPA
- The categories of environmental impact are questionable
- Schemes between 2MW-5MW have seen unjustified increases in charges
- Small Hydro has already covered the environmental cost of construction with CAR licenses
- The data that SEPA holds on individual schemes is often inaccurate
- Most problematic of all, Big Hydro – greater than 5MW – uses 87% of the water abstracted by all hydropower schemes in Scotland but, even in the revised scheme, will pay just 73% of the overall charges being levied by SEPA
We may continue to disagree over the detail, but SEPA has nevertheless listened to the concerns of the sector, acknowledged problems, proposed improvements, consulted with the industry and now adopted a more reasonable charging methodology overall. It should be remembered that SEPA and Small Hydro remain active partners in the project of developing renewable energy and a sustainable environment.
The BHA-Alba negotiating team is to be congratulated for winning significant concessions and reducing bills for the 0.5MW – 2MW band by 50 per cent. The changed charging scheme may be far from perfect, but it is significantly better than what was in operation previously.
It is worth noting that there is currently no right of appeal to individual charges or means of questioning whether SEPA has correctly classified the environmental impact of a scheme. This is a key point that the BHA and Alba will continue to press with SEPA as we continue to seek:
- Transparency in methodology and invoicing
- Parity between schemes of similar size
- Affordability
The fundamental disagreement with SEPA continues is in respect to the distribution of charges within the overall hydro sector as we believe that it remains unfairly beneficial to the >5MW sector.
The following table sets out proposed reductions to existing charges.
Difference between the previous scheme and the new charges
|
|
Impact class |
No of Licences |
Total Abstraction Charges (current) |
Proposed Abstraction Charges |
% Change |
|
>0.1MW and <=0.5MW |
Large |
30 |
£6,218 |
£18,000 |
189% |
|
|
Moderate |
106 |
£21,971 |
£23,320 |
6% |
|
|
Minor |
18 |
£3,731 |
£3,600 |
-4% |
|
>0.5MW and <=1MW |
Large |
34 |
£150,949 |
£71,400 |
-53% |
|
|
Moderate |
33 |
£121,224 |
£33,000 |
-73% |
|
|
Minor |
7 |
£43,558 |
£3,500 |
-92% |
|
>1MW and <=1.5MW |
Large |
22 |
£117,926 |
£70,400 |
-40% |
|
|
Moderate |
7 |
£29,918 |
£10,500 |
-65% |
|
|
Minor |
6 |
£19,990 |
£6,000 |
-70% |
|
>1.5MW and <=2MW |
Large |
19 |
£137,999 |
£85,500 |
-38% |
|
|
Moderate |
4 |
£25,357 |
£8,800 |
-65% |
|
|
Minor |
4 |
£22,469 |
£6,000 |
-73% |
|
>2MW and <=5MW |
Large |
16 |
£151,565 |
£193,705 |
28% |
|
|
Moderate |
1 |
£7,076 |
£7,076 |
0% |
|
>5MW |
Large |
21 |
£1,119,841 |
£1,428,465 |
28% |
|
Total |
|
328 |
£1,979,792 |
£1,969,266 |
-1% |
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