Delivering Your Project

This section of the resource is about giving you the essential information required for you to proceed further with your project

Project Delivery
Funding and finance secured
Geotechnical Survey
Procurement - equipment and construction services
Trading subsidiary set up
Due diligence
Construction
Contracts
Commissioning
Energisation
Resource Monitoring Equipment
Operation
Maintenance
The sale of electricity and incentives
Monitoring
Snagging evaluation

Funding and Finance Secured

Types of Funding & Finance

‘Funding’ is usually taken to mean grant, whereas ‘finance’ usually means loan or more advanced forms of investment such as a shareholding. Finance is usually only appropriate for a project if it likely to generate a significant financial surplus, which can then be used to pay off a loan plus interest or to pay dividends and interest on shareholdings.

Public Grant Funding

The main points about grant funding from any source are:

  • It is usually discretionary – there is rarely any right to a grant;
  • Funders will normally make it clear what costs in a project are eligible for grant aid. Any non-eligible costs will have to be excluded – but make sure you know how these will be paid for.
  • Grants are often conditional – ensure your group can meet these conditions.
  • It is unusual to get a grant for 100% of the costs of a project from one source– 50% or less is the more common amount.
  • You must never commit expenditure for a project if you have not had a formal, written offer from the funding body. This will expose your group to a high financial risk if a grant application fails.
  • State Aids – Public funders may approve funding within State Aid regulations depending on the type of project.

Most funding bodies (especially public bodies) will only provide grant if their funding has an additional impact – i.e. their funding means that the project will go ahead, or will be better, or achieve more. If you have already started a project prior to seeking grant aid, or it appears that the project could proceed without the grant, most grant giving bodies will conclude that grant was not required and therefore there is no ‘additionality’.

It is essential to check and plan for funders’ deadlines (i.e. when they will make a decision on your application) across all your potential funders. Try to ensure these work for your project as differences in these dates can cause delays.

If a community has a charitable organisation with a trading subsidiary it is not normally possible to fund the trading body through grant. Funds can be passed from charitable body to subsidiary at commercial loan rates in keeping with the Office of the Scottish Charity Register (OSCR) on charity regulations. Communities wishing to action developments or improvements that require grant funding through a trading arm subsidiary are advised to discuss the matter with OSCR- www.oscr.org.uk.

Contributions in Kind

In approaching a grant funding body, you should always check whether the funder recognises ‘contribution in kind’ as match funding. A contribution in kind is a financial quantification of voluntary time undertaken by members of a project group. It can also be a donation such as a piece of equipment from a local firm. The work on a project undertaken by community group members is likely to have a value because it is offsetting what would have been a larger cost (for example of employing consultants). It is important that the total cost of a project includes any contribution in kind as it is the total cost which determines the actual cash value of the grant. If you exclude the voluntary time necessary to develop a project from its total cost, you are undervaluing your voluntary contribution and may get less grant than would otherwise be the case. Indicative values to ascribe to contributions in kind are summarised below:

State Aid

Funding of income generating projects from public grant money must be compliant with EU State Aid regulations. State Aid is funding from a public body, or publicly-funded body, to undertakings (organisations involved in economic activity). State Aid must not distort competition and affect trade between Member States of the European Union, and may have to be approved by the European Commission. State aid is illegal under EU rules except under designated exemptions and within certain limits. Public bodies awarding grants must ensure any award is compliant with state aid rules.

Funding a project which results in the sale of electricity through a grid connection is seen as a State Aid as it has the potential to distort competition in the electricity market, however, funding may still be approved under designated exemptions and within certain limits.

A hydro or turbine project can be split into different elements which may be fundable under different exemptions. For example research and development costs such as feasibility studies are generally not considered a State Aid. Community engagement is not an economic activity and is therefore not considered to be a State Aid.

Funding for development stages such as gaining planning permission and undertaking anemometry may be deemed a State Aid as they are considered to be part of a normal commercial investment in a wind project. Funding for these elements of a community project can be considered under a temporary framework for State Aid.

Funding for the capital elements of a project (such as grid connection, civils and the turbine) can be considered under the Regional Aid Block Exemption. For more information on State Aid regulations contact the Scottish Government State Aid Unit www.stateaidscotland.gov.uk.

Commercial Finance

If the community has significant reserves that it is willing to invest, or has been successful in securing significant grant for the project a loan may still be required. If the project is likely to be highly profitable mainstream banks are likely to be interested in providing loan finance. In this situation, a number of potential providers should be invited to review your project and propose their terms for a loan. Communities should look carefully at the full range of services a bank may provide – not just the headline interest rate. A bank that understands community organisations may prove a better choice than a bank more used to dealing with commercial companies if the financing offers are somewhat similar.

If it is proving difficult to secure a loan from a mainstream bank, or the terms are too onerous, it may be possible to source finance from certain financial institution specifically established to support social enterprise development. Social Investment Scotland was established with this purpose and have produced a clear guide on taking out a loan ‘Taking a Loan of Finance’, www.socialinvestmentscotland.com. Triodos, Charity Bank and Unity Bank also offer loans /equity capital.

If the community has limited funding of its own which is not enough to provide security for a loan provider, it will need to find other potential investors who would be interested in the project. In all cases this will entail giving up some ownership and probably some control over the project. There are several ways of doing this:

1. Identify a like-minded organisation who would be interested in undertaking a ‘joint venture’ and is able to bring cash to the project;
2. Issue a share offer to attract shareholders. see section 9.3 of the Community Renewable Energy Toolkit – The Co-operative Model;
3. Identify social investors who would be willing to invest in a project in a way which does not involve taking control of it as a means of helping the project construct a viable financial structure. For established social enterprises, the Scottish Investment Fund managed by Social Investment Scotland may be an appropriate way forward.

The Highlands and Islands Community Energy Company (now Community Energy Scotland) developed a general ‘step by step’ guide to financing which aims to help community groups understand the financing process. A copy of the guide is available from Community Energy Scotland’s website www.communityenergyscotland.org.uk. An interactive CD ROM is also available from Community Energy Scotland, which enables the user to consider the implications of different equity and loan mixes under differing site conditions.

Relevant documents and links:
www.oscr.org.uk
www.stateaidscotland.gov.uk
www.socialinvestmentscotland.com
www.communityenergyscotland.org.uk

 

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Geotechnical Survey

A geotechnical survey is necessary to assess the physical characteristics of your chosen site. The purpose of the surveyor’s investigation is to design earthworks and foundations for any equipment involved in your project, and to execute earthwork repairs necessitated due to changes in the subsurface environment.


Carrying out these investigations prior to site development prevents risk to human health and material damage due to foundation cracks. Geotechnical surveys are, therefore, important in the development of any wind project and funders will expect to see one prior to approving finance for your project. The survey carried out on your site could involve detailed computer-aided studies of the soil using laboratory tests or could simply involve a visual assessment.


In order to have a geotechnical survey carried out on your site, your group first need to create a geotechnical brief. Writing the brief is relatively straight forward, but you can use our Geotechnical Brief Template to get started. The brief can then be sent to consultants. If you are using grant funding to pay for the work you will probably need to follow a tender process. For further information on the brief, contact us.  


Relevant documents and links:
Geotechnical Brief Template
Contact us

 

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Procurement – Equipment and Construction Services

The following information is relevant if your group is developing a wind project. To get information on the procurement of hydro turbines, skip to the bottom of this section.

The details of purchasing and installing a wind turbine will vary depending on the scale and budget of the project, and e.g. whether the wind turbine(s) will be grid-connected or stand-alone.  In the following sections it is assumed that the project involves direct grid connection of one or more medium-sized wind turbines, with total installed capacity typically in the range 300kW to 3MW.

Choice of turbine

In choosing the most appropriate turbine for your site you will need to consider the following:

  • Site wind conditions
  • Planning size restrictions
  • Available grid export capacity
  • Willingness of manufacturers to supply to small projects
  • Ability of manufactures to provide maintenance and support to your area
  • Acceptability to lenders

A wind assessment will indicate the characteristic conditions at the site in terms of annual mean and extreme wind speed, turbulence, and wind shear.  The site can then be categorized according to the IEC Wind Classification system, indicating which wind turbines are suitable.

Finance providers usually require evidence that the chosen wind turbine is compatible with the relevant IEC Wind Class for the site.  Lenders tend to be conservative and may not approve financing for all turbine types.  In addition, the turbine manufacturer will offer a warranty only if site conditions are shown to be within the design envelope of the machine.

The willingness of manufacturers to offer their turbines also varies depending on the scale and location of the project.  There is reluctance from some major suppliers to sell small numbers of turbines so not all commercial models may be available for community projects.

Approaching the turbine manufacturers

Those turbine manufacturers who are prepared to supply smaller projects can be approached at an early stage. They will be more interested in your site, if the community can supply good background information on the proposed project, demonstrating that it is competent and progressing on a realistic timescale. The following information is usually sought by the supplier:

  • Site wind measurements
  • Planning consent
  • Grid connection agreement
  • Maps, plans and details of ground conditions
  • Evidence of finance

Not all of the above need be fully in place, and turbine suppliers understand (better than most) the timescales and delays involved in project development.  The community should, however, provide as much hard information as possible.  This allows the supplier to prepare a detailed offer, and propose a production and delivery schedule for the machine(s).

Scope of supply

A standard wind turbine supply contract will normally include the following items as part of the price:

  • The wind turbine
  • Transport to site
  • Erection and commissioning, including crane hire
  • Insurance up until formal handover

In addition, some, though not all, manufacturers will include the following items in their scope of supply:

  • Foundation excavation and construction
  • Electrical transformer and switchgear (in tower base)
  • UK-specific grid conditioning equipment and protection relays

In general, the following items are not offered by the turbine supplier, and fall under the category of ‘Balance of Plant’.  These must be sourced from other contractors:

  • Site access tracks
  • Crane hardstanding
  • Substation and grid connection
  • Underground cabling within the windfarm

It is preferable to include as much as possible within the turbine supply contract, and the inclusion of the foundation by some manufacturers (e.g. Enercon) can be a great advantage in regard to contractual simplicity and avoidance of risk.  Similarly it may be an advantage to bundle the Balance of Plant works into a single contract, though there is always some trade-off between contractual simplicity and keeping costs down.

In some cases a complete turnkey installation may be possible, although these are rarely offered by the wind turbine manufacturer.  Instead the turnkey installer may be a large construction or electrical company, which will manage the turbine procurement and Balance of Plant works in a single contract.  This is a very simple arrangement for the customer.  The main drawback is generally the higher cost, largely due to the markup or handling charge that the contractor applies to the wind turbine purchase.

Service and warranty agreements

New turbines typically come with a warranty and performance guarantee which ensures a certain level of availability per year, with compensation for missed revenue if technical reasons prevent this. Warranties of this kind, sometimes called ‘availability guarantees’ are a welcome innovation, and may be offered for up to 12 years from commissioning. 

Banks and other lenders are particularly keen on availability guarantees as they reduce financial risk; in addition the cost of the necessary 3rd party insurance for a wind turbine is greatly reduced when it is covered by an availability guarantee (as most potential failure events are already covered).  As a rough guide, the annual cost of an availability guarantee equates to about 10% of turbine revenue.

Availability warranties incorporate both scheduled and unscheduled maintenance and servicing in their price.  Such guarantees depend, however, on the ready availability of maintenance crews, and in remote locations distant from maintenance bases a full warranty may not be available - this has been the case for some community projects recently negotiating turbine supply.

When selecting a wind turbine it may therefore be pertinent to see which types are already supported in the area.  If there are particular models already installed it is likely there is a service crew located nearby, or service provision from a regional base.   Sourcing turbines from the same manufacturer may prove easier in terms of service provision and local service personnel. 

Possible payment terms

The wind turbine supply contract will usually be based on a staged payment schedule.  The down payment may range from as low as 5% of contract value up to 35%, to be paid on signing the contract.  Thereafter payments will be scheduled against contract milestones, with the bulk of the cost to be met by the time of turbine delivery.  The final payment (typically 5%) is made after successful operation of the turbine for an agreed period, typically 120 hours.

A typical contract payment schedule might be:

Milestone % Cost
Contract signing 25
Turbine ready for shipment 35
Delivery to site 25
Mechanical completion 10
Customer takeover following test period 5

Milestone % Cost
Contract signing 25
Turbine ready for shipment 35
Delivery to site 25
Mechanical completion 10
Customer takeover following test period 5

Technical considerations

Site wind conditions

Commercial wind turbines are designed against specific wind conditions as prescribed by the IEC Wind Classification system.  The Wind Class indicates the average wind speed and other key parameters such as turbulence intensity and maximum gust, with Class IA indicating the most aggressive sites and e.g. Class II or III for lower wind, possibly inland sites.  Most Scottish sites are Class I or II.

The wind turbine manufacturer will warrant its turbines for a particular wind regime, and it is the responsibility of the customer to provide a site wind assessment, or in some cases raw wind data, to enable this to be done.  Some manufacturers (e.g. Enercon) supply different models for different wind classes (E44 for Class IA sites, E48 for Class IIA).  Others (e.g. Vestas) may supply Class IA turbines as standard.

Where there is uncertainty over the wind regime at a site, it may be necessary to carry out more detailed wind measurements than normal to satisfy both the turbine supplier and finance provider.  In some cases, however, the risk is simply managed by a conservative choice of machine (for instance if a site is borderline Class I/II it may be decided to select a Class I machine).  

Second-hand equipment

Some communities (e.g. Isle of Gigha, Findhorn) have sourced second hand turbines for their projects. There is a healthy second hand turbine market as older sites are re-powered with newer, generally larger, turbines, releasing the older machines for re-use.  There is an obvious cost advantage with used turbines, but balanced against this is a potentially higher maintenance need, reduced warranty, and greater difficulty of sourcing bank finance as the project may be perceived as riskier.

It can also be quite difficult to source turbines that match the site conditions - many of the turbines currently available on the second hand market are from European sites and as such are designed for lower wind speeds, so may not be suitable for Scottish sites: design specifications should therefore be carefully checked.  It may also be more difficult to integrate an older turbine into a weak grid network (though see above). 

As second hand turbines will be older models, communities should ensure there will be a good supply of spare parts to cover repair and maintenance needs over the project lifetime.   It is therefore best to select a turbine whose manufacturer is still active and willing to offer service and spares.  Some manufacturers (eg Vestas) have shown they are prepared to offer full service support for used machines on a time-and-cost basis, though without the warranty cover that accompanies a new machine.

Current second hand turbine availability includes models of rated output from 150kW to 1.5MW. Further information on second hand turbines is available here:

http://www.windbrokers.com 
http://www.danishusedwindturbines.com 
http://www.mainwind.eu 
http://www.repoweringsolutions.com 
http://gebrauchtewindkraftanlagen.com/ 
http://www.pjwindpower.com/

Procuring a Hydro Turbine

Hydro turbines are generally supplied as part of a turnkey contract with provision of site design and site works construction. See “Contracts”. Experience from hydro projects less than 500kW has shown that it is easier to source turbines and services than in the wind turbine sector. The design of the site and the hydro resource will drive the selection of turbine.

Relevant documents and links:
http://www.windbrokers.com 
http://www.danishusedwindturbines.com 
http://www.mainwind.eu 
http://www.repoweringsolutions.com 
http://gebrauchtewindkraftanlagen.com/ 
http://www.pjwindpower.com/

 

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Trading Subsidiary Setup

Setting your organisation up as a charity offers favourable charity tax benefits but does, however, pose legal issues if you are developing a revenue generating project. Charity law dictates that a charity is not allowed to carry out non-charitable trading. This law exists to protect the charity’s assets as non-charitable trading could put these at risk.


Charities can set up wholly-owned subsidiary companies to conduct any trading on their behalf. This company is owned or controlled by the charity, and is usually set up to generate income. This revenue is then donated to the charity.


A subsidiary trading company can present many benefits to your charity. Including the following:

  • Due to fewer restrictions imposed on the trading of non-charitable organisations, a subsidiary company is able to trade on a much larger scale than your charity would be allowed to.
  • Setting up a subsidiary trading company offers protection of your charity's assets from the risks of trading.  If the turnover from the business venture doesn’t cover the costs of the trade, then the company fails and not the charity or its assets.

For more information on charity subsidiary trading companies, visit HM revenue & Custom’s webpage on the topic.

Relevant documents and links:
http://www.hmrc.gov.uk/charities/tax/trading/subsidiary.htm

 

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Due Diligence

Before a community proceeds with a project, it is very likely that any external organizations it works with or is involved with will carry out an investigation into the community. This investigation is known as Due Diligence and occurs prior to any contract signings. Performing such an investigation allows for a significantly more informed decision to be made by the external body and enhances the amount and quality of information available to them. It allows them to deliberate in a reflexive manner on any decisions, weighing up all its costs, benefits and risks. Such investigations are carried out by banks and suppliers. To conduct their study into your organisation, they require a high level of detail about the organisation itself and the project it is hoping to develop.  It is up to you to provide this information.


In the case of banks, it is common that they will carry out the investigation before signing contracts in relation to any loans they are providing. You are required to carry out a great deal of work before the loan is agreed, so the bank can check that the project is well planned, and that it can actually make the necessary repayments by the required date. Their investigation will most likely look into all planning; financing; permits and contract documents (which you will need to supply copies of). You should be able to provide evidence to answer the following:

  • Is the project feasible?
  • What will be the project's impact?
  • What is the organisational structure?
  • Does the project meet environmental and social standards?
  • What are the projected costs and are they realistic?
  • What is the project status?
  • How is the finance to be distributed?
  • Will the project be profitable?
  • When is the project to be completed and is it on schedule?
  • Will the project meet operational requirements?

Similar due diligence studies are generally performed even if you plan to finance your project using your current assets rather than turning to an external party like a bank. In summary, it is good business practice, and much of the information required for due diligence is also required for other stages of a project's life - securing construction contracts for example.

 

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Contracts

There are two main project contract structures that communities could use when progressing a hydro or wind project.

  • A Turnkey contract is one where a company contracts with the community to deliver the entire project.
  • A Balance of Plant contract is with various parties contributing to the construction. For example; the turbine manufacturers for installation of turbine, the district network operator for the supply of the non–contestable (and perhaps contestable) grid connection works, and contract with a Balance of Plant (BOP) supplier for the remainder of the works (civils and perhaps contestable electrical).
  • Alternatively the community can undertake the contracts with all suppliers and project manage the installation. This would increase the risks exposed to the community organisation and it could prove difficult to get financial lenders to fund such a structure.

Hydro Contracts

Hydro turbines are normally supplied as part of a turnkey contract with provision of site design and site works construction. Crucial to a hydropower project is the match between project design and installation, as the power production will depend very much on the design of the water intake and delivery system. If the project has been designed by a company separate to that constructing and installing the infrastructure and turbine, then it is essential that there is a good handover between designer and installer.

Wind Contracts

There are three options for wind projects:

  • A turnkey contract incorporates full project management of the entire construction phase, and deals with turbine supply, infrastructure requirements, transport issues etc.
  • The community contract with turbine manufacturers for installation of turbine, the district network operator for the supply of the non–contestable (and perhaps contestable) grid connection works, and contract with a balance of plant (BOP) supplier for the remainder of the works (civils and perhaps contestable electrical).
  • The community undertakes the contracts with all suppliers and project manages the installation. This would increase the risks exposed to the community organisation it could prove difficult to get financial lenders to fund such a structure.

As most wind turbine manufacturers will only provide a warranty if the installation and commissioning is completed by their own engineers it is likely the turbine company will be on site for the construction phase. If a turnkey contract is provided by a company other than the wind turbine company, then the turbine manufacturer would act as a subcontractor to the turnkey company. The project management and risk cover costs for the turbine elements can therefore be quite high and can increase the total project cost compared to a project installed under separate turbine supply BOP contracts. However, this increase in cost may offset the increased risk that the community may be exposed to under the second and third structures. The community involved should discuss and ensure they understand the details of each structure before deciding which option best suits their project. Communities should also be aware of their requirements under health and safety legislation during construction – please see http://www.bwea.com/safety/index.html for more detail.

Maintenance and servicing of the technologies and infrastructure will be required for the lifetime of the project. It is essential that there is provision for these included in the supply of a turbine, and that this is accounted for in business and financial planning. This may be provided under warranty for the first few years of the project, and can sometimes be extended throughout the lifetime of the project. It is also possible to source such Operation and Maintenance (O&M) services from other independent companies operating in the sector. It is essential to have local support available for minor technical issues, so that these can be managed and rectified quickly without the need to call out the full maintenance team. Many turbine manufacturers are willing to train local people in basic skills needed to identify minor issues and to rectify these. Having this resource locally will ensure that there is little down time in generation for the project, and also increase opportunities for local employment.

Collateral Warranties

A collateral warranty is a contract which gives the funder step in rights to the contracts entered into by the community and third parties. This ensures that contractors will be obliged to fulfil their contract for the lender if the community is unable to proceed with the project build. This applies to construction contracts such as the following:

  • geotechnical investigation
  • design functions
  • turbine supplier
  • balance of plant / civils
  • on-site electricals
  • grid connection
  • project management
  • insurance agreements

Step in Agreements

If the community defaults under a project agreement (other than a bank document) which endangers the future of the project, the lender is given the opportunity to “step in” and remedy the default to protect the project. This applies mainly to ongoing contracts such as the following:

  • turbine supply / operation & maintenance (warranties)
  • land lease
  • Power Purchase Agreement
  • Supply of electricity to the turbine (for lighting etc)
  • Meter contract (meter needed to measure electricity used and produced by turbine)
  • Insurance agreements

Ranking Agreements

If there are more than one lender or funder then there may be several parties requiring Step in Agreements. The lender/bank will usually have first charge on security followed by the public funding organisation. There needs to be some agreement over who takes priority, usually drawn up by lawyers, and this is called a ranking agreement. When there are a number of parties wanting rights it can be difficult to come to an agreement.

Relevant documents and links:
http://www.bwea.com/safety/index.html

 

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Commissioning

Once your wind turbine/hydro scheme is fully installed it has to be commissioned by a qualified installer to confirm that it is performing to regulatory standards. It is important to obtain instructions on how to operate the renewable properly along with contact details in case problems occur with the renewable after it has been commissioned.

Do not pay the installer in full before it has been commissioned. This is to ensure the renewables work properly.

 

 

 

 

 

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Energisation

Once the final invoice has been paid and as soon as SSE signs off, an output is recorded to earn ROCs etc.

A theoretical example of a perfect timetable for commissioning and energisation would be as follows:

  • 4 Days Before Energisation - The turbine crew travels to site to install G59 relay and begins pre-commissioning of the turbine (using a diesel generator).
  • 1 Day Before Energisation - The G59 relay is to be commissioned by supplier's contractor.
  • Energisation Day ceiling - The G59 relay is to be witness tested by the contractor and SSE engineer. The turbine is to be connected to grid by SHEPD; the turbine crew is to begin turbine commissioning.
  • 2-3 Days After Energisation - The turbine is ready for operation and exporting power; the turbine crew leave site. 

NOTE:  For pre-commissioning, the turbine team will need a diesel generator on site (3-phase, approx 15KVA) until the energisation day.

 

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Resource Monitoring Equipment

Monitoring for wind turbine projects can vary greatly but it’s important we endeavour to standardise monitoring wherever possible. Most turbine installations will include a basic level of metering, usually in the form of a cumulative three phase kWh meter, hidden in the plant room out of view.

We should consider two types of monitoring for a turbine, a basic cumulative kWh meter assessed remotely via the GSM network, and an advanced internet based monitoring system some of which will incorporate weather data.


Remote GSM Cumulative meter (SmartMeter):

The SmartMeter measures the conditioned output of the turbine on a cumulative basis and sends a reading daily via GSM to a web-host. We currently use a company called Meter Manager, they charge approximately £60 per annum for daily readings accessible online, the data is automatically emailed to Dingwall in text format where it is processed and presented in a standard CES template.
The meter itself is very similar to a standard domestic type electric meter, just with a built in GSM device. It’s worth mentioning in low signal areas a small signal boosting antenna can be easily attached. However if you are considering this sort of system, you should always check signal with your mobile phone.

Advanced Wind Turbine monitoring systems

Advanced internet based monitoring systems monitor not only turbine output, but wind-speed and direction, other weather data, and more in depth turbine parameters such as blade speed and current. Outputs from other meters can be incorporated to give for example a percentage of total building consumption generated by the turbine. All of this information can be accessed online and linked to a bespoke display in public areas to raise awareness of the turbine performance.
Logic Energy specialises in turbine monitoring and this is the equipment manufacturer we prefer to use, they can offer systems of various specification. We are currently working on a large project in the Western isles to fit an advanced internet based monitoring system to over twenty projects and have agreed packages of monitoring as outlined below;
All packages should be based around the LeNet system for measurement parameters of small scale wind turbines up to 20kW and to be connected via broadband unless otherwise stated

Package 1

  • Instantaneous power output (averaged over 1 minute intervals)
  • Instantaneous wind speed and direction (averaged over 1 minute intervals)
  • Cumulative energy production via pulse detection of external meter (updated every 1kWh of production)

Package 2

As package 1 with the addition of the following:
 Turbine rotational speed (averaged over 1 minute intervals)
 Turbine DC voltage (averaged over 1 minute intervals)
 Turbine DC current (averaged over 1 minute intervals)

Package 3

As package 1 with the addition of the following: (In order to be able to display balance of power to building – i.e. 15% of building energy is green)

  • Cumulative Import energy via pulse detection of external meter (updated every 1kWh of import)
  • Cumulative Export energy via pulse detection of external meter (updated every 1kWh of export)

Additional Costs

  • GSM module for connection of LeNet to mobile phone network?
  • Minimum and maximum value for any given 1 minute averaged period, cost per channel?


It should be noted that the site will require a broadband connection, although this system can be used with a GSM device which is considerably more expensive. Advanced monitoring systems can cost up to £3000 installed.

Some typical displays from Logic energy are shown below.

 

Relevant documents and links:

http://www.logic-energy.com/index.php?option=com_frontpage&Itemid=1

 

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Maintenance

For revenue generating projects maintenance and servicing of the technologies and infrastructure will be required for the lifetime of the project. It is essential that there is provision for these included in the supply of a turbine, and that this is accounted for in business and financial planning. This may be provided under warranty for the first few years of the project, and can sometimes be extended throughout the lifetime of the project. It is also possible to source such operation and maintenance (O&M) services from other independent companies operating in the sector.


It is also essential to have local support available for minor technical issues, so that these can be managed and rectified quickly without the need to call out the full maintenance team. Many turbine manufacturers are willing to train local people in basic skills needed to identify minor issues and to rectify these. Having this resource locally will ensure that there is little down time in generation for the project, and also increase opportunities for local employment.


It is important that the owners of a wind farm recognise their responsibilities under the Health and Safety and Work Act and how it applies to wind farms. BWEA have published specific guidance on this on their website.

Relevant documents and links:
http://www.bwea.com/pdf/HSGuidelines.pdf
http://www.bwea.com/safety/index.html

 

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The Sale of Electricity and Incentives

Many of the communities in Scotland currently taking revenue generating projects forward are financing their projects with a mix of debt (bank), grant and equity (investment from the community and social investors). It is likely that most large scale community projects will require a mix of finance to become viable.

The initial stages of pre-development and planning preparation are the riskiest stages, and will most likely require secure funding for these stages. The final phase, once planning consent and a grid connection have been confirmed, should attract commercial finance from banks and other lenders, if the project can be shown to be financially viable and offer a suitable rate of return for investors.

For accessing funding for the final phase from all types of lenders and grantors the community involved will need to have up to date and accurate business plans, cash flow projections for operational project, and projected Profit & Loss and balance sheets. If there is a mix of investors in the project, it is likely there will be differing funding requirements from each which will need to be addressed. Each funder will wish to see their investment safeguarded if the project defaults at any point, and may want to 'step in' and secure the value of their investment if this does happen. Therefore in a project that has a number of financial investors (bank, social investors, and grant funders) it may be necessary to gain agreement between funders (prior to financial closure) with regard to the joint 'step in' rights if the project defaults at any point.

As the project progresses in terms of financing all funders will perform some due diligence on the project - i.e. an independent assessment of the viability of the project. The community will need to be able to supply requested information to help complete this review, and information such as resource assessment certification, turbine contracts, land rights etc will most likely be required. It will be essential for communities to have access to informed legal advice to protect their rights.
For in depth information on Finance and Funding please refer to Section 9 Funding and Financing your own project.

Power Purchase Agreement

For most generation projects, the sale of electricity and ROCs is organised through the establishment of a Power Purchase Agreement (PPA) with a supplier of electricity to the general market. PPA values will vary between projects and can be supplied on a variety of terms, e.g. 1 year, 3 year or 5+ year PPA agreements. It will be necessary to register the site with OFGEM for ROCs to become payable. Communities developing a project should initiate PPA negotiations once wind monitoring has been well established and planning applications are underway, or earlier, so that an overview of potential project returns can be established.

A number of companies offer PPAs. All are UK licensed electricity suppliers. These include the integrated utility companies, plus a number of other niche businesses, of which some are focussed on the renewables market. The UK wholesale electricity market is a volatile commodity marketplace and as such PPA prices should be checked regularly before conclusion, to update inputs to financial models.

Currently the sale of electricity in conjunction with claiming or selling ROC's is the only option for communities wishing to generate income from renewable energy projects. The UK government is currently trying to simplify the processes for small scale electricity projects by introducing a form of Feed in Tariff (FIT) - which would mean less administrative burden on small generators and potentially a fixed tariff for energy generated.

What is a PPA?

A Power Purchase Agreement is a contract between the electricity generator (community group) and a power purchaser for the energy generated from the turbine, and sometimes capacity and ancillary services from the electricity generator.


What is the benefit of the PPA model?

The benefit of the PPA model for selling energy is that it is a predictable, bankable revenue for the project to find financing for the renewable energy installation. Funders will be looking for fixed term agreements with one of the main suppliers.

PPA contracts

PPA contracts can be signed with Electricity Suppliers such as:
• Smartest Energy
• Good Energy
• SSE
• Scottish Power

A long term PPA will be needed in order to secure debt and the bank will review the PPA in order to secure debt. The bank will probably want to have step in rights on the contract for PPA.

The PPA provider will carry out due diligence before agreeing the contract, this is similar to bank due diligence and they will operate this in tandem. It is important for PPA provider to know the date the project will become live in order to set the price.
The PPA usually covers 50% of the length of the bank loan period and it will be signed when bank reaches financial closure with the community.

Metering requirements

An Ofgem accredited meter is required to measure the output. Note that a further agreement for input will be required for the event that there is no generation and energy is required.

Accreditation for ROCS, LECs, REGOs, FITs

In order to be eligible for each of the revenue streams the renewable electricity generator must be accredited by Ofgem. There is an online registration process on Ofgem’s website (https://www.renewablesandchp.ofgem.gov.uk/Registration/Register.aspx).

Renewable Obligation Certificates (ROC)
A Renewables Obligation Certificate (ROC) is a green certificate issued to an accredited generator for eligible renewable electricity generated within the United Kingdom and supplied to customers within the United Kingdom by a licensed electricity supplier. One ROC is issued for each megawatt hour (MWh) of eligible renewable output generated.

Levy Exemption Certificates (LEC)

Renewables Levy Exemption Certificates (Renewables LECs) are electronic certificates. They are issued monthly to accredited generating stations for each Megawatt/hour (MWh) of renewable source electricity generated.  LECs identify renewable source electricity produced by accredited renewable generating stations.

Renewable Energy Guarantee Origin (REGO)

REGOs are issued as evidence that the electricity was generated from a ‘renewable source’ (as defined in the legislation) with one REGO representing one kilowatt/hour of electricity.

Feed In Tariffs  (FIT)

In April 2010 the UK Government plan on introducing a new scheme of revenue for renewable generators. Feed In Tariffs will be relevant to generating under 5MW. They will provide a revenue stream based on a fixed price per kWh which is guaranteed for 20 to 25 years. The price will depend on the size of generator installed.

 

How does the PPA work in practice?

At the end of month – details of meter (Ofgem accredited) readings and summary are given to the community group by the PPA provider. This data is taken off and invoiced to the PPA provider and to Ofgem for the ROC element.
For the ROC component of the PPA– The generator and Electricity Supplier have online accounts with Ofgem  https://www.renewablesandchp.ofgem.gov.uk/
An authorised meter reader (usually SSE) sends monthly meter readings directly to the PPA provider, who then sends an advice note to the generator. The generator has to notify Ofgem and do the electronic transfer of ROCs when they appear (confidentially) on the website.
The community group gets paid for about 80% of the ROCs based on a projected price (made by the Electricity supplier) for a ROC.

ROC recycle

The other 20% of the ROCs is known as the ‘recycle payment’. At the end of the year (March) Ofgem counts up the total ROCs accredited and works out the price of a ROC for the year that has just passed. The Electricity Suppliers can then pay the developer for the ‘Recycle Payment’ which has built up over the year. The price for each ROC in the Recycle Payment is the price given by Ofgem. Therefore the Recycle Payment will be paid yearly.

Relevant documnts and links:

https://www.renewablesandchp.ofgem.gov.uk/Registration/Register.aspx

https://www.renewablesandchp.ofgem.gov.uk/

 

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Evaluation

To evaluate your project, you first need to decide which benefits you want to measure. You are most likely interested in:

  • financial outcomes
  • environmental outcomes
  • social outcomes

By this stage in your project you will have spent some time carefully working out what benefits you expect to get from your renewables installation. Now though, you need to check that your community is actually seeing these benefits. Monitoring and evaluating the performance of your project is critical to its ongoing success and regular checks will ensure that your equipment runs efficiently; a dip in performance can indicate a fault with equipment or need for servicing.

For community groups developing a revenue generating project the financing of such a project is a large undertaking. Projects of this size can cost well over £1million to install, and have significant operational costs. Good business planning and financial skills, in-house or outsourced, will be required to ensure the project is successful.


There are different stages of financing a large project;

  • Pre development
  • Planning preparation
  • Post planning through to construction

 

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