Dalavich Improvement Group (DIG)

DIG River Avich Hydro Project v 1.4 June 2014

River Avich Hydro Project

Business Plan

June 2014

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DIG River Avich Hydro Project v 1.4 June 2014

1 Executive Summary Dalavich Improvement Group (DIG), a charitable organisation supporting the communities of Inverinan, Dalavich, Lochavich, and Kilmaha, is proposing to develop a community hydro- electric power scheme on the River Avich, on land currently owned by Forestry Commission Scotland (FCS). The scheme is a long-term income generating project. The money generated by the scheme, after deducting operating costs, will be used to fund a range of projects, not currently funded by national or regional organisations, that will benefit both residents and visitors and improve the long-term viability of the communities. The intention is to establish a trading subsidiary of DIG, known as River Avich Community Hydro (RACH). RACH will be an Energy Supply Company and will own and operate the hydro-electric system. As a trading subsidiary, any surplus made will be gifted to DIG free of corporation tax, for distribution to approved community projects. There will be two distinct committees: One will manage the implementation of the Project, formation of the Operating Company, and initial start-up of the Hydro Scheme. The second will be the Committee that oversees the allocation of funds, this sub-committee will be an integral part of DIG. The project has 65.1% support from within the community. A postal ballot of all those on the electoral roll in the operating area covered by DIG demonstrates that 89.9% of the 72.5% who voted are in favour of the project. A total of 109 papers were distributed, with 79 papers being returned. The Hydro Scheme is located on the River Avich, just above the outskirts of Dalavich, and is a run of river system not requiring a dam. The proposed design will involve constructing a new intake weir beside the existing intake weir on the river. The new turbine house will be located alongside the ruins of an earlier turbine house and will utilise a similar pipeline route as the earlier scheme with due consideration for the heritage of the area. The hydro turbine is expected to be rated at 350kW subject to variation in the proportion to flow of water down the river. In the unlikely event of water shortage (none has been recorded in the last 25 years) priority will always be given to the private domestic water supply that extracts water from the existing intake weir. Power produced by the turbine will be sold to the National Grid via a buried power cable connecting to existing power lines which are approximately 150 m from the turbine house. A feasibility study has been commissioned from Gregor Cameron Consultancy Ltd who are a project management consultancy specialising in hydropower schemes. They have produced the Environmental statement as required by the Scottish Environmental Protection Agency (SEPA). This includes a full environmental assessment of the impact on local ecology. This study has not identified any showstopper problems for the scheme. The cost estimate for the project is in the region of £900,000. The current proposal (subject to negotiation) is that capital costs will be paid off over 12 years. It is estimated that from year 2 there would be £40-60,000 per annum available for community projects during the payback period; this would increase to £180,000 after the finance costs have been repaid.

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DIG River Avich Hydro Project v 1.4 June 2014

Table of Contents 1 Executive Summary ...... 2 Table of Contents ...... 3 2 Business Objectives ...... 5 3 Project Objectives ...... 5 4 Introduction ...... 5 4.1 Background Information ...... 5 4.2 Geography of the Site ...... 6 4.3 Local Community ...... 6 4.4 Avich Hydro Community Fund ...... 7 5 Organisation and Management ...... 8 5.1 Stakeholders & Partners ...... 9 5.2 Supporters ...... 9 5.3 On-going management ...... 10 6 Financial Assessment ...... 10 6.1 Assumptions ...... 11 6.2 Income & Expenditure ...... 11 6.3 Procurement Strategy ...... 13 6.3.1 Feasibility, Outline Design and Consenting ...... 13 6.3.2 Detailed Design and Management ...... 13 6.3.3 Supply, Installation, and Commissioning of Plant ...... 13 6.3.4 Startup Operation of RACH ...... 13 7 Project Resources ...... 14 8 Project Delivery ...... 14 9 Risk Assessment ...... 14 9.1 Major Risks ...... 14 9.2 Risk Register ...... 15 10 Summary of Benefits ...... 15 10.1 Long Term benefits ...... 15 10.2 Short Term and specific benefits ...... 15 10.3 Employment Opportunities ...... 16 10.4 Green Energy ...... 16 10.5 Other Benefits ...... 17

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11 Managing the Land ...... 17 12 Communication Strategy ...... 17 13 Project Timescales ...... 18 14 Appendices ...... 20 14.1 Map of Area ...... 20 14.2 Project Team Experience ...... 21 Ronald ‘Ronnie” Maceachen ...... 21 Christine ‘Chrissie’ Sugden ...... 21 Sheila Clark ...... 21 Maggie Wright ...... 22 Carol Thomas ...... 22 Gillian ‘Gill’ Stolton ...... 23 Chris Bruce ...... 23 Alan Mitchell ...... 23 Ylva Champion ...... 23 Jeff Kingsbury –Smith ...... 24 Peter Thomas ...... 24 Adrian Shaw ...... 24 14.3 Confirmation of Electoral Roll ...... 25 14.4 Report of Voting ...... 25 14.5 References and Sources ...... 26

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2 Business Objectives The object of the new Energy Supply Company (RACH) is to produce a sustainable form of electricity that can be sold to the national grid and/or the local community. The income from sales will be used in the form of grants and/or loans to a range of good causes and projects that are in keeping with the objective of improving the long-term viability of the community. In addition a proportion of the funds will be used to assist in financing the core business of DIG, which is to improve the quality of life for the residents of, and visitors to, the area. Once this scheme is operational, it will be possible to fund community projects that will help to revitalise and stabilise a currently fragile local economy. Once the financing debts have been cleared and the annual amounts available are significantly larger it will be possible to finance larger projects that will really make a difference to the viability of the area, creating employment, and ensuring that the economy is sustainable for the foreseeable future. 3 Project Objectives The primary objective of the project is to generate electricity from a sustainable source and to raise significant amounts of money to be used for the benefit of the local community. This project will make a modest contribution to the target of the Scottish Government to generate the equivalent of 100% of Scotland’s electricity use by 2020. The Project will also, as a secondary objective, ensure that a robust and effective Company (RACH) is created to manage the electricity generation and delivery of surplus funds to DIG for distribution to qualifying projects. Thirdly, the project will ensure that a clear mandate for fund allocation is established, along with an advisory sub-committee, who will be qualified to assess the feasibility and merits of potential projects and initiatives. This will ensure that the Board is equipped and qualified to manage fund allocation on the scale envisaged. The final approval will rest with the DIG Board. Finally the project will look into creating an educational resource based around both the old and new Hydro Schemes, enabling visitors, residents, and local schools to learn about the benefits of such schemes, changes in eco-awareness, and advances in modern technology. 4 Introduction This section positions this business plan, presenting key background information and mapping out the events that led to this initiative. 4.1 Background Information The idea of a community Hydro project was first mooted in 2009 and this was investigated by the DIG Board. Advice was taken from Local Energy Scotland and a loan was obtained from CARES to finance the initial stages of the project. In 2012 the DIG Board approved the commissioning of a Feasibility Study. Gregor Cameron Consultancy Ltd published their findings in July 2013. Based upon the findings and recommendations of this report, the DIG Board agreed to progress the Scheme to the next phase. The Hydro Scheme was put to a postal ballot in June 2014. The project is being supported by Iona MacDonald of Local Energy Scotland who provides advice and support; access to the appropriate advisors; and manages the CARES loan. The scheme is planned to be a run of river hydropower scheme on the River Avich, Dalavich, Argyll. The total pipe length required is 420m and no river crossings are required. Following

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DIG River Avich Hydro Project v 1.4 June 2014 the initial investigations, it was proposed that the intake for the new scheme be located at the site of the existing intake which is at 80m elevation and would result in a gross head of 26m. This is a low head, however the River Avich is a relatively large watercourse with good flow rate. The key parameters are: Head (m) 26 Penstock Length (m) 420 Affected channel length (m) 400 Channel slope (m/m) 0.07 Upstream catchment area (km2) 31.43

A hydro turbine will be installed which will run a generator to produce electricity that will be put onto the local grid, via underground cables. This will then be distributed onto the National Grid or used locally depending on the results of the expert evaluation of options should the transmission capacity not be immediately available. The income generated from the sale of electricity from the scheme will be used to support projects and community based initiatives identified by the projects committee and approved by the DIG Board. 4.2 Geography of the Site The site for the proposed hydro-electric scheme is centred on Grid Reference: NM969 138. The setting is within an area of Riparian Woodland, comprising assorted native broadleaves with oak predominant. Within this setting there are certain environmental considerations involving both flora and fauna which need to be taken into account. However, consultation with SNH has confirmed that these can be managed during the project through appropriate levels of habitat survey and approved method statements. See Feasibility Study P. 15 in appendices in Section 14. The River Avich connects Loch Avich (110m OD) with Loch Awe (40m OD) flowing over a distance of some 2.5 km with a drop of some 70m. The course of the river tumbles between rocky crags and promontories, over shingle banks and broad cascading waterfalls, drops through a deep, narrow waterworn chasm in the native rock, then broadens as it flows between earthen banks for a short way to tumble over the final series of rapids under the road bridge, and a weir, before finally emerging via a small delta into Loch Awe. The entire length of the watercourse, from where it leaves Loch Avich at NM955 144, to its emergence into Loch Awe at NM974 137 is punctuated with significant waterfalls. The first significant waterfall upstream from the river’s outfall to Loch Awe is approximately 10 metres in height and is located approximately 1 kilometre upstream from the outfall to Loch Awe at NM9671 1394. River Morphology has been assessed to be of SEPA River Type A (bedrock, cascade) with solid exposed rock on the channel and banks. 4.3 Local Community Dalavich Improvement Group’s operating area is designated by the postcode areas PA35 1HN, PA35 1HL, PA35 1HS, PA35 1HJ, PA35 1HH and includes the remote and isolated communities of Dalavich, Inverinan and Kilmaha on the NW shore of Loch Awe, and Lochavich on the North shore of Loch Avich. Within the bounds of that area the resident population comprises, 106 adults, of whom 60 are of working age and 46 are retired, and 14 children – a total population of 120. Seasonal spikes within the local population are heavily influenced by the presence of a Holiday Cabin Park adjacent to the edge of Dalavich and a number of holiday

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DIG River Avich Hydro Project v 1.4 June 2014 cottages/second homes nearby. The local economy of the villages is dependent on forestry and tourism. Alternative employment can be found in Oban (27 miles/55 minutes) or Lochgilphead (22 miles/40 minutes). The area is accessed by three single track roads leading to the neighbouring villages of Ford (10 miles); Taynuilt (15 miles); and Kilmelford (10miles). The main local issues are:

• An aging population

• A lack of social housing

• A lack of accessible employment to attract and retain young families

• Fuel poverty

• Isolation

• Distance to high schools The area is serviced by private water schemes; Dalavich has a twice daily bus service, and a Post office. The communities are dependent on electricity or oil for heating as there is no mains gas. Dalavich has a Community Centre owned by DIG and run by Dalavich Social Club, which provides a focal point for the Community and hosts a bar and seasonal restaurant. It also hosts occasional events such as Loch, Stock, Rock and Row music festival. 4.4 Avich Hydro Community Fund The Avich Hydro Community Fund (AHCF), which is yet to be formalised, is expected to be managed in a two-step process. Step One will be assessment by a team of experts, who will determine the feasibility, economic merits, and long-term sustainability of the proposals. Step Two will be for the Fund Management Committee (DIG Board) to determine which proposals are to receive funding from the available funds each year. Although not yet fully determined, it is likely that project assessments will be based on some or all of the following requirements. For a project to be considered it should:

• Be community based and located in the DIG operating area. If the project is outside the DIG operating area it will be subject to strict conditions, see below.

• Improve community life for a significant proportion of the population (25% or more).

• Address a specific need or issue.

• Demonstrate clear evidence of need, i.e. no comparable facility or project exists in the near vicinity.

• Have the support of the local community and other organisations.

• Have green credentials and be environmentally positive.

• Not be for individual commercial gain and should demonstrate value for money.

• Be self-funding and sustainable once the initial fund allocation has been consumed.

• Demonstrate an attempt to secure alternative funding from other sources, where applicable

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• Applicants can demonstrate added value to the project such as: o Minimal environmental impact o Training opportunities o Use of volunteers o Building a local asset o Quality design o Adding value to the community o Promoting tourism o Creating employment In certain, specific circumstances, applications for funding of projects outside the DIG operating area will be considered but only if some or all of the following criteria are met:

o They can show benefit to the DIG operating area community o They are in communities adjoining the DIG operating area o They support approved charities o They have a positive environmental impact o They are not projects attempting to compensate for shortfalls in local, regional, or national organisation obligations

o They can demonstrate matched funding o They are promoting tourism in the wider area, which could be advantageous to the DIG operating area It is not expected that all projects will meet all criteria, or indeed that all criteria will be relevant to all projects. However, the application must be able to demonstrate specific and measurable benefits, must have a sound and robust finance case, and must meet the, yet to be finalised, core objectives of the fund. These are likely to be ecologically, environmentally, and socially based. 5 Organisation and Management DIG was incorporated in 2002 as a Scottish Charity and Company Limited by Guarantee. It is run by a board of 9 voluntary elected Directors. The Directors are drawn from the Ordinary Members of DIG all of whom are on the electoral roll of the Operating Area. The Directors include lifelong residents of the area, small business owners, and recent incomers. Between them they provide a broad mix of experience including entrepreneurial skills, geological skills, forestry management, language skills, archaeological, environmental, large scale project management, charitable management, voluntary services, hospitality, finance, and administration. The project has been steered by DIG and DIG will retain overall control of the project through the process leading to commissioning. DIG has secured loan funding of £66,000 for development costs, and is currently seeking grant funding of £12,000 from the Infrastructure and Innovation Fund to identify alternative solutions should the transmission constraints remain an issue. Funding will also be sought

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DIG River Avich Hydro Project v 1.4 June 2014 for the construction and implementation phase, see Section 6. DIG intends to progress this project through to financial completion using staff with a strong track record of project management and community consultation. Achieving financial completion assumes that a land leasing agreement will be reached with FCS; that planning permission, and SEPA CAR Licence will be granted; that transmission capacity will become available or an alternative use for the power will be found; and finally that the project remains financially viable and that no insurmountable blocks arise. The Energy Supply Company (RACH), which will be a trading subsidiary of DIG, will own and operate the hydro-electric facility. As a trading subsidiary, any surpluses will be gifted to DIG, free of corporation tax, for distribution to community projects approved in accordance with Section 4.4. The Project will be managed by a sub-committee drawn from the DIG Board using existing project management experience and appointed sub-contractors, engineers, and other experts with support from Local Energy Scotland. A list of biographies of the DIG Board and main volunteer team is listed in the appendices Section 14.2. 5.1 Stakeholders & Partners The following organisations and people are Project Stakeholders and their input will be sought at every key stage. 1. DIG ordinary members 2. Avich and Kilchrenan Community Council 3. Lochaweside Management Company 4. FCS The following people and organisations are partners and active contributors to the success of the Project. 1. Gregor Cameron of Gregor Cameron Consulting Limited, project managing the development of the hydro scheme. 2. EnviroCentre Ltd, who completed the Hydrology assessment, Ecology Assessment and outline Design of Phase 1 3. Local Energy Scotland 4. Scottish Government via CARES loan 5.2 Supporters The major supporters of this project are the residents of Inverinan, Dalavich, Lochavich, and Kilmaha, as has been seen from the postal ballot. It is further supported by

• Avich and Kilchrenan Community Council

• Mike Russell MSP

• Argyll & Bute Councillor Elaine Robertson

• Reverend Robert E. Brookes – Church of Scotland Minister

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• Local Energy Scotland 5.3 On-going management Although this is yet to be finalised, it is expected that once the scheme is commissioned it will be handed over to RACH. At this point a management team made up from the build committee, representatives of DIG, and other interested parties/experts will take over the operational side of the business. It is envisaged that there will be one salaried member of staff employed by RACH and it will be their responsibility to ensure the smooth running of the hydro system, with the support of the volunteer board. 6 Financial Assessment From the costs provided by Gregor Cameron Consultancy Ltd, the amount required to achieve the scheme is estimated to be between £650,000 and £950,000. The minimum cost is £650,000 with the higher cost representing the worst case scenario, if all funding has to be borrowed and all contingencies consumed. The higher figure covers all expenditure required for leasing the land, construction and infrastructure costs, commissioning costs, and year 1 operating costs. Estimated annual income from the scheme:

• Once commissioned the scheme should achieve net income of approximately £200,000 per annum. This revenue will consist of Government Feed In Tariff (FIT) payments plus income from the sale of electricity.

• In the first 12 years, o £80,000, will be used to repay loan capital. o A further £113,000 will be consumed by running costs, including salary and administration, and interest on loans

o £44,000 will be available for community projects in year 1, this will rise year on year by the reduction in interest payments until the debts are cleared.

• From Year 13 onwards o The whole amount less operational and administrative costs will be available for community projects. Current projections, allowing for tariff changes, provisioning, and cost of living increases are that the minimum funding available for community projects will be £190,000. Methods of finance being investigated are:

• Loan Financing o Initial options under consideration are Triodos Bank, Social Investment Scotland, Bank of Scotland; others will be investigated if necessary

• Social Impact Bonds o It is proposed that an alternative method of raising some of the finance will be by the offer of bonds to local residents and interested parties. This bond will offer a return on investment equal to a savings account. Depending on the take up of this offer it may be offered to non- or ex-residents of the area.

• Private Shares and/or Angel Investors o Controlling interest of RACH will be retained by DIG

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6.1 Assumptions The following assumptions underpin this plan:

• FCS continues to give assistance and advice relating to this site and the surrounding area, with particular regard to their operations and the local infrastructure

• Sufficient volunteers are available to offer expert services

• Capital costs will be repaid with 12 years of the scheme starting to generate. While these charges are being repaid the community will receive a gifted annual income of £40-60,000 and £27,750 will be retained by RACH for operating costs.

• The scheme will have a capacity of 242 – 336.3kW and could generate in the region of 1,073Mwh of electricity annually

• Interest rates for repayments of 7%

• FCS lease costs @ 5% of income

• Inflation in electricity prices of 3%

• Expected FIT rate of 14.03p per kilowatt

• Power purchase price assumed at 4.6p/kWh and will be subject to market conditions

• Contingency for planning stage of 10% and for construction phase of 15% 6.2 Income & Expenditure The following table is based upon the Initial Feasibility Study revised in January 2014 and reviewed in June 2014. The numbers will be reviewed as each stage completes, however at this stage confidence in the figures is such that we have applied a contingency on works costs of just 10% and a further 5% against the total project costs. All costs exclude VAT and are either actual costs incurred or best estimates from industry experts.

Construction & Start Up Costs

Pre- Contract Costs £32,000

Marketing & Communication Costs £5,000

Turbine, Generator, Gearbox & Controls £250,000

Design, commissioning, project £67,000 management, & administration

Civil Works including access, penstock, £238,000 intake & powerhouse*

£78,000 Grid Connection (of which £12,000 deposit

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Contingency £25,100

£695,100.00

1st Year Operating costs £113,000

Sub Total £808,100

Contingency allowing for potential £127,555 additional costs

Total £935,655

Annual Operating Costs

Lease (assumed 5% of income) £10,000

Bank loan repayment (capital & interest £72,000 assumed @ 7%)

Marketing & Communication Costs** £2,000

Maintenance and Operational Costs, £27,750 including salaries.

Provisioning (decommissioning & major repairs) £1,250

Total £113,000.00

Income (ex Inflation)

From Feed in Tariff £154,276

From Power Sales £49,930

Total £200,359

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6.3 Procurement Strategy There are various options being considered and discussed with regard to how to fund the construction phase of the project. Each phase of the project will be subject to tender procedures to ensure that the companies with the correct skills are employed for the various stages along with a procedure to assess and demonstrate value for money. All tendering procedures will be adopted under the guidance of Scottish Government Procurement Procedures and will be conditional upon the gating criteria for the previous phase having been met. The overall project has 4 distinct stages: 6.3.1 Feasibility, Outline Design and Consenting Through the appointed Project Managers (Gregor Cameron Consultancy Ltd) a tender procedure was undertaken to appoint an experienced hydro company to undertake in conjunction with the Project Managers initial hydrology, habitat surveys, outline design and work to prepare for a Planning and SEPA CAR Licence Application in relation to the project. The completion of this stage of work will be when the necessary consents for the project are secured. This part of the work is being funded under the current CARES loan agreement with Local Energy Scotland. 6.3.2 Detailed Design and Management The Design and Management tender would include the detailed design of the scheme, the specification of civil engineering and infrastructure required to enable the safe operation of the facility. This tender would include all Engineering Services and associated construction Project Management functions throughout the project, including regular site visits to ensure compliance with regulations and quality standards. The stage may also require the appointment of Environmental Consultants to provide Environmental Clerk of Works Services throughout the project depending on conditions relating to any Planning or SEPA consents. This phase would also include the preparation of tenders for the installation civil engineering, mechanical and electrical equipment, connection to the grid, and ongoing quality assurance. 6.3.3 Supply, Installation, and Commissioning of Plant This tender would cover all aspects of physical construction and commissioning of an operational facility that is fully compliant with all conditions raised by external agencies such as Planning Authority, SEPA, FCS, and others. This will be undertaken by a competent Civil Construction Company with experience of constructing similar scale hydro schemes. 6.3.4 Startup Operation of RACH This phase is likely to fall to the appointed management team of RACH. It will include the creation of operating procedures, the establishment of administrative and financial processes and systems, and the recruitment of the required paid and voluntary staff. 7 Project Resources The scheme will be managed by RACH, although as yet uncreated this will be the Energy Supply Company. The Company will be a trading subsidiary of DIG and will consist of a team of volunteers who are experienced in the fields of project management, accounting, renewable energy, fund management, and employment law.

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8 Project Delivery Using the estimate of 35%, it is expected that the scheme will generate 1,073MWh p.a. of electricity. Assuming, conservatively, that the scheme runs for 25 years a total of 26,825MWh of electricity will be generated, this will reduce CO2 emissions by 11,950 tons (Carbon Trust conversion figures used). The electricity will be sold to an electricity supplier, probably Scottish and Southern Electricity (SSE) or the local community. In addition the scheme will receive money in the form of a Feed in Tariff (FIT). The current FIT rate for this size of Hydro Project is 15.59p per kilowatt however this is anticipated to degress by 10% at the end of 2014. A power purchase price of 4.6p/kWh is anticipated and is subject to market conditions 9 Risk Assessment Risk Assessments have been, and will continue to be, carried out throughout the project. Currently there are two forms of Risk Assessment: the first covers major risks to the project and the second is a working or live risk register. The status of Risks is monitored using a RAG (Red, Amber, Green) Analysis and is reviewed at monthly DIG Board Meetings. 9.1 Major Risks The major risks have been identified as shown below.

Risk Prob Impact Severity Mitigation 1-5 The FCS Lease A ballot has been held to demonstrate Application is refused community support for the scheme resulting in an overwhelming “Yes” vote. (89.9% of 72.5% of ballot papers returned); Low High 5 Meetings with FCS representatives have indicated that FCS are in support of the project and will view the lease application favourably; Research has been carried out into similar successful applications. Planning permission is Local residents have been consulted at refused every stage of the project, resulting in any concerns or issues raised being Low High 5 addressed. Consultation is ongoing with Argyll & Bute Council to ensure that any issues they may have are addressed. The planning applications are in process. Costs escalate making Projected Costs are being reviewed by the scheme financially experienced business people; compared against similar projects; and reviewed non-viable with Local Energy Scotland. They are Medium High 5 being monitored through a spreadsheet supplied by Community Energy Scotland that allows DIG to understand the impact of cost variations at an early stage SEPA refuse The creation of a very thorough Low High 5 permission environmental statement Taynuilt Electricity Consultation with SSE and the National distribution facility Grid has ensured that they are aware of the need; they have provided assurances cannot provide that capacity will be available although transmission capacity possibly not until 2021. Alternative High Medium 4 and therefore the options for selling direct to the local electricity produced community, consumption by DIG owned cannot be transmitted facilities; and other contingency options are being investigated. beyond Taynuilt

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Feed in tariff is due to The DIG Board is operating a timeline reduce annually by as Critical Path Analysis at every stage of the project to ensure that all parties much as 20% understand the impact of any delay. depending on volume Further at each gating stage of the of FIT applications for High Medium 3 project financial projections are and will hydro projects. If be reviewed to ensure that the project commissioning is remains viable. delayed this may impact revenues.

9.2 Risk Register The live risk register has been created and will be reviewed at every DIG Board meeting as well as being used by the immediate project management team as part of the daily progress review sessions. This register will monitor progress against Critical Path, note any new risks and issues and establish mitigation and contingency actions. The register will be constantly available to DIG, RACH, the project manager and main contractors. It will be reviewed at weekly Project Status meetings. 10 Summary of Benefits The Hydro Scheme is a long term income generating project lasting for at least 40 years, probably significantly longer. The final life expectancy of the scheme will be determined by the operating life of the plant and equipment which will be managed to ensure maximum possible operating life. It is not possible to plan how funds arising from the scheme might be used in future decades as we cannot predict the social, ecological, political and environmental conditions that might prevail in the future. However, the Project Team has documented the criteria and processes by which funds will be allocated. This provides a fair and transparent process, which will be managed by AHCF, whose decisions and deliberations will be recorded and made available for public scrutiny. 10.1 Long Term benefits The long term benefits are expected to be in the following areas:

• Job creation

• Environmental improvements

• Ecological improvements

• Community quality of life benefits

• Sustainable tourism for the area 10.2 Short Term and specific benefits AHCF will be in constant consultation and communication with the community, members of whom will make up the majority of the committee. Currently DIG manages a number of fund allocations from existing renewable community funds, e.g. An Suidhe windfarm. This experience and expertise will be carried forward into the AHCF committee. DIG will continue to manage small grants and local community funds. It is intended that AHCF will look closely at the local community, the issues they face and areas where community run projects could make a significant difference to the quality of life of both residents and visitors. Initially AHCF will through community consultation, identify low cost, short-term projects that will address identified needs and improve the quality of life and long-term viability of the community.

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The list below outlines a number of possible projects that are not provided by statutory bodies nor national organisations and that DIG and AHCF could take the initiative to develop Potential areas for investigation include but are not limited to:

• Fund the next generation of renewable energy e.g. a second hydro scheme, air source heat pumps

• Create social enterprises that both create employment and benefit the community e.g. purchasing land for vegetable growing and delivery

• Develop a good neighbour hub to support elderly residents by providing free handyman, maintenance, and other support services.

• Fund a community “dial-a-ride” scheme (possibly by providing additional funding to existing volunteer driver schemes)

• Create a tourist attraction centred on the Hydro Scheme itself

• Support further education schemes e.g. scholarships

• Create and maintain signed walks and cycle routes

• Provide viewing areas for some of the local beauty spots

• Create information boards to explain views and areas of specific interest

• Install and maintain public conveniences in key spots

• Fund apprenticeships and youth voluntary schemes

• Develop local water activities 10.3 Employment Opportunities It is hoped that a number of jobs will be created either as a direct result of the Hydro Scheme construction and operation itself or as a result of improved tourism. 10.4 Green Energy The Scottish Government gives support to hydro developments in the push for 100% of electricity from renewable sources by 2020. It has made a policy statement in January 2010 that places emphasis on hydropower developments which can make a significant contribution to Scotland’s renewable targets whilst minimizing any adverse impacts on the water environment. In Ministers’ view, schemes of 100 kW or more are considered to make an important contribution to renewable energy targets. The community is keen to improve its self-sufficiency and reduce its reliance on fossil fuels. This scheme will, as previously discussed in Section 8, generate 1073 MWh of electricity per year. 10.5 Other Benefits It is hoped that other soft benefits will arise from improving the quality of life and general appeal of the area, such as improved community spirit, greater social awareness, and general well-being of the community.

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11 Managing the Land The importance of correctly managing the land on which the scheme will be built has not only been recognised but is of considerable importance to the DIG Board, many of whom are professionally involved in land and heritage management. Others are passionate conservationists and committed eco-activists. Currently it is deemed appropriate to lease the land from FCS, such that they continue to oversee the management of the area. DIG has worked closely with FCS throughout the project and intends to continue this throughout the construction and operation of the hydro-electric scheme. A study on the ecological impact of the scheme has been commissioned and this has not identified any specific issues. This ecological study is contained within the Ecology Summary Report produced by EnviroCentre Ltd. The following surveys have been commissioned to ensure the scheme will not cause an adverse impact to the local environment.

• Habitat survey

• Bryophyte survey

• Protected species (including otter, red squirrel, badger, pine marten, bats, and wildcat)

• Fish habitat survey and pearl mussel survey The outline Construction Method Statement (CMS) (see appendices) makes provision for protecting the environment of the area during construction. A detailed CMS will be produced by the appointed Contractor prior to construction. It is intended that members of the Project team will continue to walk the site with FCS at periodic intervals to ensure that the scheme meets the needs of all interested parties. Meetings have been held with the residents and owner of the local water supply, which is supplied by the River Avich, to ensure that continuity of supply is maintained at all times, and that any concerns regarding potential contamination are identified and prevented. It is essential that there is no disruption to or contamination of supply at any point during the construction or throughout the life of the scheme. Decommissioning costs have been built into the business model so that at the end of the lease period, the scheme can be decommissioned. 12 Communication Strategy Public consultations have been held in May 2013, and May 2014. Consultations have taken place with near neighbours. A website will be established that is dedicated to the project, providing background and as much detailed information as is available. This website will include a page listing all the questions raised and answers supplied at meetings and responses to enquiries received from individuals. The website will have associated social media presence on platforms such as Facebook, Twitter, and Pinterest. The application to the National Forest Land Scheme required a public ballot for a project of this size. The ballot was managed by Electoral Reform Services and was part funded by FCS. The electoral roll was obtained from the Dumbarton and Argyll & Bute Joint Valuation Board

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DIG River Avich Hydro Project v 1.4 June 2014 and it was confirmed in writing that we were provided with the Full Register and not the Edited Register. Refer Section 14.3 Progress of the Project and specifically the ballot, has been subject to public consultation, particularly the need to amend DIG’s Articles of Association which was subject to an Extraordinary General Meeting of the Ordinary Members. The DIG Board will issue bulletins, arrange public presentations, and issue specific communication to the local community at key stages in the Project. The Communication Workstream is a key part of the Project Plan. It is intended to appoint a volunteer Public Relations Officer, who will liaise with the Oban Times, provide regular updates for the website, and issue a regular newsletter which will be distributed to all properties in the Operating area. In addition, regular status reports and updates will be posted on social media and public noticeboards. Regular meetings will be held with interested parties to ensure that they are provided with every opportunity to raise concerns or issues they may have relating to the project. 13 Project Timescales The key milestones for the project are:

• Identification of potential scheme 2009

• DIG secure CARES Loan for development phase 2012

• Initial Feasibility Study Commissioned 2012

• Initial Feasibility Study Completed July 2013

• Initial Environmental/Hydrology Surveys September 2013

• Grid Connection Secured September 2013 o Distribution connection June 2016 o Transmission TBC Current Est 2021

• Complete Full Feasibility Study January 2014

• Outline Design Complete April 2014

• Agree preferred design with Community & FCS May 2014

• Conduct Community Ballot June 2014

• Submit application for IIF grant June 2014

• Draft Planning & SEPA CAR Licence Applications June 2014

• Submit NFLS Application July 2014

• Submit Planning & SEPA Applications July 2014

• Results of NFLS application September 2014

• Grant of CAR licence September 2014

• Determination of Planning Application September 2014

• FIT Registration September 2014

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• Review Funding Options September 2014

• Progress Land Negotiations and Legal Agreements September 2014

• Formal Financial review September 2014

• Initial Discussion with Financiers October 2014

• Detailed Design Complete December 2014

• IIF study starts December 2014

• IIF study completed March 2015

• Secure Funding March 2015

• Complete Land Negotiations and Legal Agreements March 2015 (DD 03/16)

• Prepare and Issue tenders March 2015

• Finalise Business Case April 2015

• Tender/Selection of Main Contractor June 2015

• Commit to Construct and Implement June 2015

• Construction Completed June 2016

• Commissioning June 2016

• Startup Phase July 2016

• RACH Operational and first Grants allocated July 2017 Where the activity spans a number of months the earliest start date has been used in the above table.

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14 Appendices 14. 1 Project Team Experience This section details the experience and expertise of the existing DIG Board members, Project Team members, and any advisors and Mentors that are concerned with the Project. Ronald ‘Ronnie” Maceachen Ronnie is a Director of the DIG Board, currently serving as Treasurer, and has been a Director since 2005. The Maceachen family have lived in the Dalavich area since 1938, when it was still a small hamlet. They were already resident when the Forestry Commission (FCS) built Dalavich Village in 1951. His family moved in to Dalavich Village in 1975 after FCS planted Barmaddy Farm, which his family worked for 37 years. Ronnie is a Harvester Operator for FCS and has, during the course of his employment, harvested trees around the proposed site of the River Avich Hydro Scheme. He was working at the proposed site when the old Turbine House was unearthed. His work as a Harvester Operator means that he has a depth and breadth of knowledge about environmental guidelines, water and soil considerations, and the importance of a low carbon footprint. He is a strong supporter of the River Avich Community Hydro Scheme, with a particular focus on reducing carbon emissions and protecting the surrounding environment. He is a well-respected member of the Community and his length of residency in the area means that he is well placed to ensure that the community is properly consulted and actively engaged with the Project. Christine ‘Chrissie’ Sugden Chrissie is a Director on the DIG Board, currently serving as Chair Person. She first joined the Board in February 2013. For 20 years, she was the Sole Proprietor of a successful knitwear company, which employed 12 people on a part-time basis. She designed children’s knitwear, which was manufactured by outworkers and distributed via market stalls and mail order. She ran and managed all aspects of the business from design to accounts, sales to procurement. In 1996, she moved to Scotland and in 2001, having given up the Knitwear business, she became a Mental Health Support Worker, a position she held for 9 years. She currently works for Lunga Estate as a book-keeper. She was appointed as a Director, then Chair of Craignish Community Company. She was employed by Craignish as a Project Worker and led a project to buy 120ha of forest for the community. Although the NFLS application was successful, they failed to get lottery grant funding. Chrissie is an ardent supporter of the Hydro Project, is well versed in the rigmarole of grant applications and working with the NFLS. She has a strong sense of community, is passionate about the environment and keen to see the area’s green credentials improved. Sheila Clark Sheila is a long-standing Director of the DIG Board, having served since DIG was incorporated in 2002. She first became involved as one of the founder members in 2000, when Dalavich was in danger of losing its Village Hall and access to the village shoreline to a commercial property developer. The need arose for Dalavich to look for survival as a community and a number of

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DIG River Avich Hydro Project v 1.4 June 2014 village residents put an enormous amount of effort into securing funding to enable the eventual purchase of the Village Hall and village shoreline in 2003. Sheila was one of the key people who were instrumental in securing a significant contribution from The Scottish Land Fund. This ideally places her to advise and support the funding applications needed for this project. Her background is in Modern Languages, curation of prehistoric artefacts in the museum environment, and Heritage Management. She is a field archaeologist working within the Heritage Management Team in Historic Scotland (the Scots equivalent of English Heritage and Cadw) and has almost 25 years’ experience in the area of producing field reports on Scheduled Monuments of National Importance, field survey projects, guidance papers on managing land to protect the historic environment, and archaeological management plans for Forestry Commission Scotland. She has worked extensively alongside FCS and private commercial forestry companies, as well as SEPA, SNH, RSPB, NTS and other organisations, and is a member of the Perth & Argyll Regional Forestry Forum, and has also on occasion attended meetings of the Scottish Forestry Forum. She is a supporter of the Hydro Project and is particularly keen to ensure that the ecological, environmental, and archaeological considerations are kept centre stage. Maggie Wright Maggie joined the DIG Board of Directors in 2014, having been resident at Kilmaha, near Dalavich, for almost 17 years. She initially, worked for Monklands District Council (now part of North Lanarkshire) for 3 years as a Library Assistant and for 6 years as a Community Librarian. She moved to Argyll from the Central Belt in 1992 and was employed by the Local Enterprise Company for over 12 years in various roles including Admin Assistant, Project Officer, PA to the Chief Executive, Press & Communications Officer. She went back to librarianship for 3 years with Highland Council as Area Libraries Officer for Lochaber, returning to Argyll in 2008. She is now working for Argyll & Bute Council's Community Services Department.

Maggie is educated to Degree level, ICT literate, has good oral and written communication, organisational and interpersonal skills. Having lived and worked in the West Highlands for many years, she understands the challenges of accessing and delivering services in remote and rural areas. She appreciates the value of social capital and of harnessing local commitment, enthusiasm and goodwill in order to strengthen and sustain the community.

Carol Thomas Carol joined the DIG Board of Directors in 2014, having taken up residency in Dalavich in 2012. She brings a wealth of Project and Business Management to the team, she:

1) Has Project Managed a multi-national cross-functional team implementing complex software in conjunction with building a second manufacturing plant in the highly regulated Nuclear Pharmaceutical Industry

2) Has Project Managed a series of process improvement projects and change management initiatives

3) Is a competent user of MS Project

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4) Is a skilled exponent of both Critical Path Analysis, Critical Chain Project Management, and familiar with, although not formally trained in, PRINCE2 methodologies

5) Has been a Project Management coach and trainer and experienced Project Management Consultant to blue chip companies in Food & Beverage, Pharmaceutical, Heavy Industrial, and Research companies

In addition to her work-based expertise, she is also a local business owner, a committed voluntary member of the Scout Association, in which capacity she has served as a trustee, become familiar with working within the guidelines of Charities Commissions and managing/influencing teams of volunteers.

She is a keen supporter of the River Avich Community Hydro Scheme, with a particular interest in developing sustainable tourism and securing the long-term success of the community.

She is well placed to ensure that the Project is properly managed, thoroughly documented, and held to account.

Gillian ‘Gill’ Stolton Gill joined the DIG Board of Directors in 2009, having taken up residency in Dalavich in 2008. She has been actively involved in various fund raising activities for DIG, has been a stalwart member of the Board, having served as Secretary for 3 years. She is now retired but in her professional life, she worked in retail and catering. She ran a boutique for 15 years and has worked in both the South of England and Scotland. She is a strong supporter of the scheme, having been actively involved since it was first proposed. She is well liked within the community and is therefore able to contribute to the communication plan, especially with regard to respecting the sensibilities of the older residents. Chris Bruce Chris is a current Director of DIG and a former Chair of DIG. He has served as a DIG Director for many years. He is an experienced Project Engineer and a trained electronics engineer. He has served on several Council Committees.

He is a long-standing member of the community and has been an ardent supporter of the Hydro Project since its inception in 2009.

Alan Mitchell Alan was appointed to the DIG board in 2013 Born in Leeds in the 50s, he spent 20 years as a primary school teacher including one year teacher exchange to New Zealand. More latterly he has worked in sales for industrial pipe and valve merchants and since moving to Argyll in 2011 has worked in sales for a local builder's merchants. He took early retirement in 2013. He and his wife now farm Alpacas in Dalavich. His wife, a Paediatric Occupational Therapist, was a founder member of the Gardening Club. Alan has a keen interest in history, wildlife, the countryside and water activities, particularly kayaking. He is a firm supporter of the Hydro Scheme with particular interest in ensuring that the village improves its eco-credentials.

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Ylva Champion Ylva lives in Inverinan and has been a DIG Director since 2013. She is keen to be a part of and co-create community projects which are sustainable. She enjoys helping the community and as an occupational therapist she is always focussing on enabling and maximising independence for an individual. She is keen to ensure that we enable the potential of our local resources and community, and is always looking for opportunities to facilitate and support such initiatives. She is married to a teacher and shares his passion for securing a sustainable and enjoyable lifestyle and environment for future generations.

Jeff Kingsbury –Smith Jeff is an ordinary member of DIG who has a keen interest in business ventures and is advising the board regarding financial analysis and business start-up. He is the co-owner and Director of an SME involved in Financial Information Technology Systems. Peter Thomas Peter is an Ordinary Member of DIG and is assisting the Hydro Project in an advisory capacity. Although a resident of the village, he is still commuting to his job down south, where he is a Process Engineer for Thames Water on the sewage side of the business. He is heavily involved in a professional capacity improving the generation of electricity from waste materials and has been actively involved in the commissioning of several CHP plants. He brings a wealth of technical expertise and capability. He is a Polymer Rheologist by background. Adrian Shaw Adrian is an Ordinary Member of DIG and is assisting the Hydro Project in an advisory capacity. Adrian Shaw is the Climate Change Officer for the Church of Scotland and Secretary of Eco- Congregation Scotland. He is a Director of Stop Climate Chaos Scotland, a NGO campaigning for action on climate change in Scotland. He previously worked in local government, including four years working on rural development for Argyll and Bute Council and has been a member of the board of Friends of the Earth Scotland and the Scottish Council of the Worlds Wide Fund for Nature (WWF Scotland). He lives in Dalavich, Argyll.

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14.2 Confirmation of Electoral Roll

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14.3 Report of Voting

The Election Centre, 33 Clarendon Road, London N8 0NW Tel: 020 8365 8909 | Fax: 020 8365 8587 www.electoralreform.co.uk | [email protected] Electoral Reform Services Limited | Registered No. 2263092 | Registered Office: 33 Clarendon Road, London N8 0NW

30 June 2014

DALAVICH IMPROVEMENT GROUP COMMUNITY HYDRO SCHEME BALLOT

Our report of voting for the above ballot which closed today at noon is as follows:

Question Are you in favour of building a hydro electric generator on the River Avich above Barnaline car park?

Number of eligible voters: 109 Total number of votes cast: 79 Turnout: 72.5% Number of votes found to be invalid: 0 Total number of valid votes to be counted: 79

Result

Number voting YES ...... 71 (89.9% of the valid vote)

Number voting NO ...... 8 (10.1% of the valid vote)

TOTAL 79 (100% of the valid vote)

Electoral Reform Services can confirm that, as far as reasonably practicable, every person whose name appeared on the electoral roll supplied to us for the purpose of the ballot:- a) was sent the details of the ballot and b) if they chose to participate in the ballot, had their vote fairly and accurately recorded. All voting material will be stored for six months.

Yours sincerely

Barnaby Ho Head of Community Sector

14.5 References and Sources The following documents, sources, and people have been consulted and/or drawn upon in the compilation of this report.

• Phase 1 – Initial Feasibility Report by Gregor Cameron Consultancy Ltd Published July 2013

• Phase 1 – Initial Feasibility Report Version 2 by Gregor Cameron Consultancy Ltd Published January 2014