Scottish Islands Renewable Project Final Report
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Scottish Islands Renewable Project Final Report CLIENT: DECC/ Scottish Government DATE: 14/05/2013 Confidentiality and Limitation Statement This document: (a) is proprietary and confidential to Baringa Partners LLP (“Baringa”) and should not be disclosed without our consent; (b) is subject to contract and shall not form part of any contract nor constitute an offer capable of acceptance or an acceptance; (c) excludes all conditions and warranties whether express or implied by statute, law or otherwise; (d) places no responsibility on Baringa Partners for any inaccuracy or error herein as a result of following instructions and information provided by the requesting party; (e) places no responsibility for accuracy and completeness on Baringa Partners for any comments on, or opinions regarding the functional and technical capabilities of any products mentioned where based on information provided by the product vendors; and (f) may be withdrawn by Baringa Partners upon written notice. Where specific clients are mentioned by name, please do not contact them without our prior written approval. Scottish Islands Renewable Project –Final Report 2/106 Baringa Partners LLP is a Limited Liability Partnership registered in England and Wales with registration number OC303471 and with registered offices at 3rd Floor, Dominican Court, 17 Hatfields, London SE1 8DJ UK. Copyright © Baringa Partners LLP 2013. All rights reserved. This document is subject to contract and contains confidential and proprietary information. TABLE OF CONTENTS 1. EXECUTIVE SUMMARY ................................................................................. 5 2. INTRODUCTION ............................................................................................. 9 2.1. Context ......................................................................................................................................... 9 2.2. Objectives ................................................................................................................................... 10 2.3. Approach .................................................................................................................................... 11 2.3.1. LCoE modelling methodology ..................................................................................... 11 2.3.2. Socio-economic methodology .................................................................................... 12 2.4. Structure of the report ............................................................................................................... 12 3. OPPORTUNITIES AND CHALLENGES ........................................................ 13 3.1. Scottish Islands renewable resource potential .......................................................................... 13 3.1.1. Scottish Island onshore wind resource potential ....................................................... 13 3.1.2. Scottish Island wave and tidal resource potential ...................................................... 14 3.2. Grid Access ................................................................................................................................. 17 3.3. Central deployment scenario ..................................................................................................... 23 3.4. Key challenges ............................................................................................................................ 25 4. KEY DRIVERS FOR COST AND REVENUE DIFFERENCES ....................... 27 4.1. Summary LCoE modelling results ............................................................................................... 27 4.2. LCoE modelling results by Island (onshore wind) ....................................................................... 31 4.3. Key drivers for revenue differences ........................................................................................... 33 4.3.1. Wind yields ................................................................................................................. 33 4.3.2. Wave and tidal yields .................................................................................................. 34 4.3.3. Support regimes ......................................................................................................... 34 4.4. Key drivers for cost differences .................................................................................................. 35 4.4.1. Development .............................................................................................................. 35 4.4.2. Construction ............................................................................................................... 36 4.4.3. Operation .................................................................................................................... 37 4.5. Key drivers for risk differences ................................................................................................... 39 4.5.1. Grid access risks .......................................................................................................... 39 4.5.2. Grid charging risks ...................................................................................................... 41 4.5.3. Grid availability risks ................................................................................................... 44 4.5.4. Dependency on wider grid works in Scotland ............................................................ 45 4.5.5. Security and liability requirements ............................................................................. 46 4.5.6. Loss of diversity benefits under the CfD policy framework ........................................ 50 4.5.7. Currency and commodity price risks .......................................................................... 53 4.5.8. Technology risk – wave/tidal ...................................................................................... 53 4.6. Impact of cost and risk differences ............................................................................................ 54 5. SOCIO-ECONOMIC BENEFITS .................................................................... 55 5.1.1. Local benefits .............................................................................................................. 55 5.1.2. Summary of socio-economic benefits ........................................................................ 70 6. WIDER BENEFITS ........................................................................................ 71 Scottish Islands Renewable Project –Final Report 3/106 Baringa Partners LLP is a Limited Liability Partnership registered in England and Wales with registration number OC303471 and with registered offices at 3rd Floor, Dominican Court, 17 Hatfields, London SE1 8DJ UK. Copyright © Baringa Partners LLP 2013. All rights reserved. This document is subject to contract and contains confidential and proprietary information. 6.1.1. Potential Wider Benefits to UK Marine Energy Industry ............................................ 71 6.1.2. Likely Cost Reductions from Marine Technologies ..................................................... 72 6.1.3. Fuel poverty ................................................................................................................ 75 6.1.4. Increasing security of supply ...................................................................................... 75 7. POLICY OPTIONS ........................................................................................ 78 7.1. Issues to be addressed ............................................................................................................... 78 7.2. Addressing fund gap for Scottish Islands wind ........................................................................... 78 7.2.1. Rationale ..................................................................................................................... 78 7.2.2. Options ....................................................................................................................... 79 7.2.3. Summary ..................................................................................................................... 81 7.3. Financial support for marine technologies ................................................................................. 82 7.3.1. Rationale ..................................................................................................................... 82 7.3.2. Options ....................................................................................................................... 82 7.3.3. Summary ..................................................................................................................... 83 7.4. Greater support for marine R&D ................................................................................................ 83 7.4.1. Rationale ..................................................................................................................... 83 7.4.2. Options ....................................................................................................................... 84 7.4.3. Summary ..................................................................................................................... 84 7.5. De-risking Scottish Island transmission ...................................................................................... 85 7.5.1. Rationale ....................................................................................................................