Due diligence helps wind turbines meet expectations
Proposed cuts to the Feed-in Tariff for wind power due to come into effect this autumn (Farmers Weekly, 17 February) are likely to result in a rush of installations coming on stream over the next few months. But a recent survey by Bank of Scotland has highlighted the potential difficulties of investing in wind power and the need for careful research before investing, rather than getting carried away by flashy sales pitches.
It found that almost a quarter of the 465 respondents planned to invest in wind power in 2012; however 41% of existing wind power projects had failed to live up to expectations. While 45% were in line with expectations, that was well below the 80% for those that had invested in solar.
The biggest problem was planning consent, as 65% of those investing in wind power rated obtaining planning consent as difficult or very difficult. Grid connection was also highlighted as a problem.
Separate work by consultants Samuel Rose shows that the main risk involved in investing in a wind turbine is the uncertainty over wind speed on the proposed site. While this can be mitigated by wind monitoring prior to installing a turbine, the costs of this are often difficult to justify for smaller scale schemes.
However, the firm says many other risks involved in investing in a turbine can be controlled, as shown below:
| Get on top of the risks | |
|---|---|
| Potential risk area | Solution |
| Lack of wind | *Initial analysis of NOABL wind speed database, site visit by an independent wind consultant. Anemometers are normally topo expensive for smaller schemes |
| Local unpopularity | *Be honest and open with locals from an early stage and attend any open meetings to explain plans |
| Failure to obtain planning permission | *Ensure the turbine meets all planning guidance (distance from dwellings, topple distance, flicker etc) *Consult with – MOD, Civil Aviation Authority, Natural England, telecom operators, OFCOM, parish council*Consider offering the parish council an incentive (improved public access, wildlife area, low cost housing plot) in return for their support*Employ a specialist planning consultant to oversee and submit the application |
| Obtaining finance | *Open discussions with your bank at the beginning of the project to gauge their support and ascertain lending criteria *Ensure budgets are realistic. Banks are cautious and may cut anticipated income and look to core farm business to make up any shortfall..*Ensure your turbine is on the lenders approved list*Ensure all agreements and consents are in place |
| Selling power | *Consider how much power you will use. Put a Power Purchase Agreement in place if you intend to sell direct to a purchaser. This PPA should ideally cover at least the finance period |
| Faulty turbine | *For sub-50kW turbines ensure they are Microgeneration Certification Scheme accredited otherwise they may fail to qualify for the FiTs |
| Failure of turbine manufacturer | *Credit check the manufacturer *Try to obtain a directors guarantee*Ensure that procurement contract identifies your individual turbine during the production process |
| Construction problems | *Ensure contractors are fully insured and take responsibility for the Construction Design and Management regulations *Ensure a written contract is in place*Use a JCT Contract or similar, setting out clear timescales and payment conditions |
| Obtaining FiTs | *If the turbine is less than 50kW ensure it is signed off by an MCS-accredited engineer*If turbine is greater than 50kW liaise with OFCOM to ensure accreditation takes place ASAP. *Ensure the FiT contract is completed and returned ASAP |
| Warranty | *Analyse what is included in any warranty (parts, labour, loss of earnings), together with its length and the covenant of the guarantor. Ideally the warranty should at least cover the finance period |
| Insurance | *Put insurance in place to cover all normal risks – contact specialist broker to discuss *Consider business disruption insurance to cover loss of earnings if the machine breaks down for a sustained period of time if not included in the warranty |
| Servicing contract | *Put in place a service contract if not already included in the warranty |
| Source: Samuel Rose | |