The renewable energy market in Scotland is in transition as projects started under the last subsidy regime are completed. The end of the Renewable Obligation Certificate (ROC) scheme by the UK Government has had a major impact, according to Andy Macfarlane, partner at Wright, Johnston & Mackenzie.
“Lots of big onshore wind projects are coming to an end after ROC and [for] those lucky enough to get a contract for difference in the first couple of rounds,” he says.
“There was a rush by developers to meet the deadline and all those involved pulled out the stops to get the necessary subsidy. A lot of our work has been finishing those projects but we’re confident there will still be good work for high-quality, experienced firms, even in a smaller onshore wind market. We are also diversifying into areas like energy storage and have put a lot of effort into skilling up in that area.”
Macfarlane continues: “There is still development activity in onshore wind, from bigger, slower businesses waiting for the market to equalise and from independents who saw the no-subsidy days coming.
“Some of them went to the wall, others are pressing ahead. The key question is: who will purchase your power? Without subsidy and a route to market, it’s very difficult. Unless you have a corporate power purchasing agreement or an alternative use, you are in a position that if you complete in 2019-20, you literally don’t know how you will sell your electricity.”
WJM has been instructed by GFG Alliance, which plans to site 54 wind turbines near Laggan to power its aluminium smelter near Fort William. Macfarlane sees it as a positive sign: “This is an international company who thinks wind power is efficient and environmentally friendly.”
James Wood-Robertson, a partner at Shoosmiths, sees more activity in Scotland than elsewhere in the UK in a “generally subdued market”. He says: “There are developers looking at subsidy-free projects. To work, they need very clear and secure energy off-take arrangements.
“What can help is large corporates who, for energy security, price certainty and their green energy credentials, will commit to long-term power purchase arrangements with renewable energy generators.”
Although Macfarlane senses “more positive noises” from Westminster about support for onshore wind, both men agree that developers will continue looking overseas unless things improve.
Wood-Robertson thinks there is “still plenty to go at” with offshore wind and Macfarlane agrees that offshore wind is now looking “more competitive and interesting”.
Briefing: Renewables, by Andy McFarlane
In a transitional year for the industry, WJM’s renewables team has had a very successful year, completing some of the largest single project transactions the firm has undertaken, involving property, planning, corporate and tax expertise from across our energy team.
Both transactions were onshore wind projects with individual complexities. Both required extensive private wire connections and had to be delivered within critical timescales.
In the case of Freasdail wind farm in Argyll, the challenges were to finalise the development to be Renewables Obligation Certificate compliant, complete the financing ahead of the European Union referendum and conclude a sale before the client’s year end.
For Bad a Cheo in Caithness, documentation had to be in place to comply with contract for difference deadlines.
We also completed the first commercial sale of a battery storage facility project in Scotland and were delighted to be instructed on a new generation of windfarm in Fort Augustus, which we hope will be developed to power the local aluminium smelter.
Renewables is a sector in transition but we remain convinced it will be a key pillar of the Scottish economy for decades to come and we look forward to working with our clients on many more exciting projects.
Andy McFarlane Partner and head of the renewables team, Wright, Johnston & Mackenzie
This article appeared in the Scotsman’s annual legal review 2017
The Scotsman’s annual legal review looks at some of the most active areas of legal practice in Scotland. Informed by comprehensive data published by Chambers and Partners and Legal 500, the articles give exclusive insight into the work of more than 11,000 practising solicitors and over 460 practising advocates.