Microgeneration of Renewables in Scotland

Microgeneration of Renewables in Scotland Feasibility study into the potential for market entry by third-sector companies Aberdeen, November 2011 Centre for Understanding Sustainable Practice Robert Gordon University, Aberdeen, Scotland

Microgeneration of Renewables in Scotland Feasibility study into the potential for market entry by third-sector companies Images at the cover: Potential growth of microgeneration installers in Scotland. (CUSP, 2011) Contact details Dr Joanneke Kruijsen Centre for Understanding Sustainable Practice (CUSP) Robert Gordon University Schoolhill Aberdeen AB10 1FR Scotland +44(0)1224 262 362 cusp@rgu.ac.uk

Executive Summary This report provides the findings of a review of the microgeneration market in Scotland for renewables. This review aims to enable the Consortium to determine whether they would like to explore and develop a business case for microgeneration of renewables in more detail. The report has the following outline: in Chapter 2 an overview is given of the available technologies for microgeneration of renewables as well as a market assessment in terms of installed capacity and number of certified installers. Chapter 3 explores six important market drivers for future development and provides an assessment of the different technologies versus these market drivers. Finally, Chapter 4 gives the main conclusions and recommendations. Conclusions The general conclusion is that microgeneration of renewable energy will grow significantly in the near future. However, because of the uncertainties about governmental incentives, the choice for a specific technology, and thus business opportunity, cannot be made. The numbers of MCS installers in combination with an assessment of the market drivers provide an indication of where opportunities are. In general, the heat generating technologies will grow relatively quickly in the near future where the electricity generating technologies already have shown an increase in installed capacity over the last one-and-a-half year. Recommendations Based on the conclusions of the review of the Scottish market for microrenewables, the following recommendations are given to the Consortium for consideration: The Consortium could develop a business in providing holistic and independent advise to individual households, small communities and businesses on energy use and microrenewables. The market for heat generating micro-renewables will grow relatively quicker than the electricity generating micro-renewables and is therefore a more attractive market segment in the short term if the Consortium would consider to enter the market as an installer. The Consortium could provide required training for installers, constructors and planning staff of local authorities. The UK and Scottish Government will have to give certainty about their (financial) incentives as soon as possible to provide the microgeneration industry with a long-term perspective and clarity for future developments. A coordinated lobby in both Westminster and Holyrood is advised. Acknowledgements This report contains the findings of a feasibility study by Robert Gordon University into the potential for market entry in microgeneration of renewables by third-sector companies in Scotland. This study has been funded by a Consortium of social enterprises in Scotland. i

Table of contents Executive Summary Acknowledgements i i 1. Introduction 1 2. Microgeneration of renewables in Scotland 2 2.1 Available technologies 2 Energy need, saving and storing 3 Hydro (generate electricity) 3 Solar PV (generate electricity) 4 Wind (generate electricity) 4 Biomass (generate heat) 5 Heat pumps, air or ground source (generate heat) 5 Solar thermal (generate heat) 6 Combined Heat & Power (generate heat and power) 7 2.2 Installed capacity 7 2.3 Market players 9 Number of MCS installers 9 Training and skills 11 3. Future market shaping issues 12 3.1 Drivers for future development 12 Awareness of options 12 Incentives 13 Investment 14 Requirements 15 Availability of the resource 15 Certification 15 3.2 Assessment of micro-renewables versus market drivers 15 4. What the future might bring 18 4.1 Conclusions 18 4.2 Recommendations 18 5. References 20 ii

1. Introduction A consortium of social enterprises 1 [the Consortium] initiated the study into the possibilities for these social enterprises to enter the microgeneration sector of renewables. The consortium recognised the potential growth of the microgeneration sector but acknowledged the need for a deeper understanding of the existing market and future market drivers, and therefore the need for a feasibility study. This report provides the findings of this feasibility study of the micro-generation market in Scotland for renewables. This review started with a brief by the consortium and was followed by a teleconference and further face-to-face meeting between David Maxwell of McSence, Chris Harris of Argentix and Joanneke Kruijsen of the Centre for Understanding Sustainable Practice of the Robert Gordon University after which the later performed the research and produced the report. This review aims to enable the Consortium to determine whether they would like to explore and develop a business case for microgeneration of renewables in more detail. This report has the following outline: in Chapter 2 an overview is given of the available technologies for microgeneration of renewables as well as a market assessment in terms of installed capacity and number of certified installers. Chapter 3 explores six important market drivers for future development and provides an assessment of the different technologies versus these market drivers. Finally, Chapter 4 gives the main conclusions and recommendations. 1 The consortium of social enterprises is formed by McSense, Argentix, Aberdeen Foyer, Community Energy Scotland, Forth Sector and the Wise Group. 1

2. Microgeneration of renewables in Scotland Microgeneration of renewables is very topical. Renewable energy sources provide the opportunity to realise a more sustainable energy supply by reducing the need for fossil fuels and thus a reduction in CO2 emissions. Individual households, communities and small businesses are enabled to make a difference towards a more sustainable energy use. Microgeneration of renewables also create job opportunities and further business development. The Scottish Government aims to generate 100% of Scotland's gross annual electricity consumption by renewable energy sources by 2020 (SG, 2011a). The introduction of the Feed-in-Tariff (FiT) has led to a large increase in the installation of microgeneration of renewables (Scottish Renewables, 2011a). In the case of small-scale solar photovoltaic (PV), this increase has already led to a review of the FiT scheme, the FiT for new solar PV installations will be reduced for installations installed on or after the 12th of December (DECC, 2011a; EST, 2011a). Before we look into the drivers for future developments (Chapter 3), this Chapter first provides an overview of the existing sector for microgeneration of renewables in Scotland. After a short description of each of the different technologies for microgeneration of renewables, the installed capacity of renewables and in particular those for microgeneration in Scotland is given as well as a summary of Scottish installers and their development in numbers over the past few months and the demand for training. 2.1 Available technologies Renewable energy sources are sources that are essentially inexhaustible. The technologies to use these renewable energy sources for useful purposes such as electricity, transport and heat are in different stages of development. Solar PV cells, solar thermal panels, as well as wind turbines, are all well proven technologies, whereas marine turbines are still in a developing stage. The technologies for microgeneration described in this section are all proven technologies and can be categorised under three headings: generating electricity, generating heat and a combination of heat and power generation. Several benefits of microgenerated renewables can be identified. It will cut electricity and heat bills, people can cut their carbon footprint, in some cases the owners get paid for the electricity they generate and they might get paid in the future for the heat they generate, and in the case of electricity generation, a generated surplus can be sold back to the grid. Before using renewable energy sources, it is essential to explore the potential to reduce the need for energy. Saving the need for energy, saves the need to generate it. An assessment of energy use and the possibilities for energy saving should always be the first step in the process of installing renewable energy sources. The following sections will describe the available technologies and their specific characteristics. These descriptions are given from the consumer perspective. When offering a product and/or service, the supplier needs to start with the consumer needs and the possibilities 2

they have in terms of site and budget. Any successful future business will have to be able to address these needs. Energy need, saving and storing The process of installing renewables starts with knowing what energy is needed, how much is needed, when the energy is needed and what options are available to save energy. Although not part of the review of microgeneration of renewables in Scotland, it is strongly advised to include these issues in the package provided by the partners in the consortium. Technologies that are available to support this are smart metering, energy efficient appliances and low energy bulbs, insulation and other energy saving measures, and energy storage. Hydro (generate electricity) Small-scale hydro installations enable people to harness the power of running water and generate electricity. A small-scale installation can generate enough electricity for lighting and electrical appliances in an average house. Micro-hydro might be of more interest as a community project rather than to individual households. Depending on the site, a variety of technologies is available. A site with a high head might be better off with a Pelton or Turgo turbine, where Francis and crossflow turbines are better for medium heads. Archimedean screw and Kaplan/propeller turbines are best for low head, also because these are more fish-friendly. Site requirements Access is needed to running water with the right combination of flow and head. Assessing a site requires a professional as well as year-round data of water flows. The lowest water level/flow will define the capacity of the installation. Planning issues Planning permission is needed from the local authority and an Abstraction License from SEPA. Costs Costs vary depending on location and amount of electricity generated. The costs for a typical 5kW average home scheme is around 25,000, including installation. FiT generated The Feed-in-Tariff (FiT) for every kwh generated depends on the scale of the installation. The Generation Tariff for hydro amounts between 20.9 p/kwh for small installations (up 15kW) to 4.7 p/kwh for large installations (2-5 MW) (Ofgem, 2011). FiT exported For every kwh exported to the grid, the Export Tariff is 3.1 p/kwh. Running costs A yearly License fee for abstraction. Maintenance Usually, maintenance is low as hydro systems are very reliable, but costs may vary. Installer issues The installer should have MCS (Microgeneration Certification Scheme) to qualify for the Feed-in-Tariff. 3

Solar PV (generate electricity) Photovoltaic (PV) panels convert sunlight into electricity. Panels or roof tiles consist of monocrystalline, polycrystalline or hybrid photovoltaic cells. Depending on the need for electricity, the number of panels installed may vary. Site requirements A large area of un-shaded space, either on a roof or in open space, typically about 15 square meter, facing between south-east and south-west. In the case of a roof, the construction of the roof should be tested on whether it is able to carry the weight of the panels. Planning issues In most locations, PV is permitted but local councils might have specific exceptions and limitations. Costs Installation costs for a PV system are between 3,500 to 4,500 per kwp installed. Smaller systems are relatively more expensive than large systems. FiT generated The FiT for every kwh generated depends on the scale of the installation and will be changed on 12 December 2011 and again on 1 April 2012. The Generation Tariff for PV up to 4kW installed before the 12 th of December is 43.3 p/kwh and will be lower depending on the scale, to 8.5 p/kwh for 2-5MW systems. Installations realised after the 12 th of December but before the 1 st of April 2012 will have 43.3 p/kwh till the 1 st of April and after the 1 st of April 2012, the FiT will be 21 p/kwh. Installations installed on or after the 1 st of April 2012 will also need to demonstrated that the building to which the installation is attached meets specific energy efficiency requirements. If these requirements are met, FiT will be 21 p/kwh for small scale to 8.5 p/kwh for the larger scale systems. If the requirements are not met, the FiT will be 9 p/kwh (EST, 2011a). FiT exported For every kwh exported to the grid, the Export Tariff is 3.1 p/kwh. Running costs None Maintenance Maintenance is limited to ensuring the panels are not overshadowed by trees. Panels will last for about 25 years, however, the inverter might need to be changed halfway this period, currently costing appr. 1,000. Installer issues The installer should have MCS (Microgeneration Certification Scheme) to qualify for the Feed-in-Tariff. Wind (generate electricity) Wind turbines use the wind to generate electricity. Small-scale wind systems for microgeneration can have horizontal or vertical axis turbines, and are either pole mounted or building mounted. The pole-mounted turbines are usually bigger, 5 to 6 kw, and should be applied in an exposed position. The building mounted turbines are smaller, 1-2 kw. Site requirements A wind turbine performs better when there is no nearby obstruction from the wind, either by trees or other buildings. 4

Planning issues Costs FiT generated FiT exported Running costs Maintenance Installer issues The installation of a wind turbine will require planning permission from the local authority. A small, building mounted 1kW system is around 2,000, where a typical 6kW pole mounted system costs about 22,500. The FiT for every kwh generated depends on the scale of the installation. The Generation Tariff for wind amounts 36.2 p/kwh for very small installations (up to 1.5kW) to 4.7 p/kwh for large installations (larger than 1.5 MW) (Ofgem, 2011). For every kwh exported to the grid, the Export Tariff is 3.1 p/kwh. None An annual check for maintenance is needed, 100-200 per year. The installer should have MCS (Microgeneration Certification Scheme) to qualify for the Feed-in-Tariff. Biomass (generate heat) Biomass or wood-fuelled stoves and boilers can provide heat and hot water. These systems burn wood pellets, chips or logs. Stoves usually provide heat for a single room and might be combined with a back boiler to provide hot water. Boilers can provide heat and hot water for an entire property. Log systems require regular refuelling by hand. Site requirements An existing flue might lower the costs. The bigger the system, the more space is needed for fuel storage. Planning issues If a new flue is needed, planning permission may be needed, especially in conservation areas. Costs Costs will depend on the type of system and vary between 3,000 for a stove up to 11,500 for a pellet boiler. Until the 31 st of March 2012, people can apply for a voucher under the Renewable Heat Premium Payment (RHPP) for the value of 950 for a pellet boiler. Stoves are not eligible for this premium payment. RHI Not known yet what the Renewable Heat Incentive (RHI) will provide for. Running costs The costs for wood fuel. Maintenance Flue sweeping and ash removal. Installer issues The installer should have MCS (Microgeneration Certification Scheme) to enable the application of financial incentives such as the Renewable Heat Premium Payment. Heat pumps, air or ground source (generate heat) Heat pumps absorb the heat from either the air (air source heat pump) or from the ground (ground source heat pump) at low temperatures into a fluid. The fluid will then pass through a compressor to bring it to a higher temperature, which then will heat water for heating the 5

property or hot water. The cooled water is run back to either the air or ground source to reheat again. Site requirements Planning issues Costs RHI Running costs Maintenance Installer issues The ground source heat pump can be either horizontal if enough space is available (e.g. a large garden) or a vertical loop down into the ground up to a 100 meters deep. Ground source heat pumps are permitted, air source heat pumps will require permission. Costs will depend on the type of system and vary between 6,000 to 10,000 for an air source heat pump and 9,000 to 17,000 for a ground source heat pump. Until 31 March 2012, people can apply for a voucher under the Renewable Heat Premium Payment for the value of 850 for an air source heat pump and 1,250 for a ground source heat pump. Not known yet what the Renewable Heat Incentive will provide for. Heat pumps require electricity to run, appr. 700 per year. An annual check for maintenance will lead to a longer lifespan of the system. The installer should have MCS (Microgeneration Certification Scheme) to enable the application of financial incentives. Solar thermal (generate heat) Solar thermal systems use the heat from the sun to warm water. Usually there is a conventional boiler as back up to provide hot water when the sun heat is not enough. A solar thermal system consists of flat plate collectors or evacuated tubes. Site requirements A tilted roof (30-45º) facing between southeast and southwest and enough space for the hot water cylinder. Some combi-boilers will not work with a solar thermal system. Planning issues In most locations, solar thermal is permitted but local councils might have specific exceptions and limitations. Costs Costs will depend on the type of system and vary between 4,000 and 6,000. Until the 31 st of March 2012, people can apply for a voucher under the Renewable Heat Premium Payment for the value of 300 for a solar thermal hot water system. RHI Not known yet what the Renewable Heat Incentive will provide for. Running costs A small electric pump is needed and this will lead to some minor running costs. Maintenance Most solar thermal systems require little maintenance and come with a five-year or ten-year warranty. Installer issues The installer should have MCS (Microgeneration Certification Scheme) to enable the application of financial incentives. 6

Combined Heat & Power (generate heat and power) Using the same energy source, a Combined Heat and Power (CHP) system will generate heat and electricity simultaneously. Available technologies are a stirling engine micro-chp, a fuel cell CHP system and an internal combustion engine CHP. Site requirements A small-scale domestic CHP requires roughly the same space as a large domestic boiler. Planning issues A small-scale domestic CHP usually doesn t require planning permission, the flue should be covered under permitted development. Costs A typical micro-chp will cost from 5,500. FiT generated Micro-CHP is eligible for the FiT, for every kwh generated the owner will receive 10p. FiT exported For every kwh exported to the grid, the Export Tariff is 3.1 p/kwh. Maintenance A specialist is required, but maintenance costs will be similar to those of a conventional boiler. Installer issues The installer should have MCS (Microgeneration Certification Scheme) to qualify for the Feed-in-Tariff. A summary of the main characteristics for each of the microgeneration technologies as described above is given in Table 1. Table 1. Summary main characteristics of microgeneration technologies. Technology Planning Costs Incentive Maintenance Hydro Local Authority 25,000 (5kW) FiT (20.9 p/kwh 4.7 Low SEPA p/kwh) Solar PV Depending 12,500 (2.2kWp) Changing! Low FiT (21 p/kwh) Wind Local Authority 2,000 (1kW) - 22,500 (6kW) FiT (36.2 p/kwh) Medium Biomass Depending 3,000 (stove) 11,500 (pellet boiler) Heat pumps Air Source need permission, Ground Source don t 10,000 (air source) - 17,000 (ground source) Solar thermal Generally no, but depending Between 4,000 and 6,000 RHPP voucher 950 (pellet boiler only) RHPP voucher 850 (air source), 1,250 (ground source) RHPP voucher 300 Medium CHP Generally no From 5,500 FiT (10 p/kwh) Medium Low Low 2.2 Installed capacity The installed capacity of the various technologies for microgeneration of renewables showed a large increase after the FiT scheme was introduced. Over the period of 1 April 2010 to 31 March 7

2011, a total of 1,373 microgeneration installations with an installed capacity of 21.7 MWe applied for Feed-in-Tariff registration (AEA/SCDI, 2011). Figure 1 shows the installed capacity under the FiT scheme for the different technologies and Figure 2 shows the number of installations installed under the FiT scheme for the different technologies. Wind installations take more than half of the installed capacity (55%), with hydro following in second place (33%) and PV in third (12%). Only 5 CHP installations applied for FiT registration. However, in terms of number of installations, PV takes 60%, with wind in second place with 35%, hydro in third place with 5% and CHP at the last place with 0.4%. Figure 1. Scottish installed microgeneration capacity by technology in kwe under the FiT scheme, 1 April 2010 to 31 March 2011 (AEA/SCDI, 2011). Figure 2. Number of installations installed under the FiT scheme for the different technologies, 1 April 2010 to 31 March 2011 (AEA/SCDI, 2011). 8

Compared to the United Kingdom as a whole, the installed capacity of microgeneration installations for renewables over the first 12 months after the introduction of the FiT scheme is 13,48%. Figure 3 shows the comparison between the figures for Scotland and those for the UK as a whole, both in percentage of the total installed capacity. Figure 3. Scottish installed microgeneration capacity by technology compared to that in the UK as a whole (AEA/SCDI, 2011). 2.3 Market players For individual households, communities or businesses to qualify for FiT and other grants, it is necessary that microgeneration installations and the installers of these installations are certified by the Microgeneration Certification Scheme (MCS). The number of MCS certified installers gives a good indication of the current market players. MCS is an independent certification scheme for the certification of microgeneration products and installers (Microgeneration Certification Scheme, 2011). The MCS certifies microgeneration technologies, which are used to generate electricity and heat from renewable sources. MCS is a quality assurance scheme that has been internationally recognised and provides customers with the assurance that the installations as well as the installation is meeting rigorous and tested standards. Number of MCS installers Based on the membership list of the MCS, the Energy Saving Trust is keeping a regularly updated record of certified installers who are based in or operating in Scotland (EST, 2011b). Table 2 and Figure 4 give an overview of the installers per technology and the numbers of those based in Scotland or those whose head office is based outwith Scotland but who operate from or in Scotland. 9

Table 2. Overview MCS installers in Scotland on 21 st October 2011 (based on EST, 2011b). Hydro Solar PV Wind Biomass Heat Pumps (Air Source) Heat Pumps (All) Solar Thermal Based in Scotland 3 142 35 24 7 59 82 Operate in Scotland (headoffice outwith 5 153 24 19 4 56 68 Scotland) Total 8 295 59 43 11 115 150 Hydro Solar PV Wind Biomass fuelled Heat pump Solar thermal CHP Figure 4. MCS installers in Scotland on 21 October 2011 (based on EST, 2011b). To obtain an indication of market developments, Figure 5 gives the development in numbers of installers between 8 July and 21 October 2011 (based on EST, 2011b and EST, 2011c). The figures show that in particular the number of solar PV installers has risen sharply. With the accelerated review of the FiT scheme for solar PV and the reduction in the Feed in Tariff for installations installed after 12 December, it will be more likely that this growth will come to a halt. Hydro Solar PV Wind Biomass fuelled 8 July 2011 21 October 2011 Heat pump Solar thermal 0 50 100 150 200 250 300 350 Figure 5. MCS installers in Scotland, development between 8 th July and 21 st October 2011. 10

Training and skills The Scottish Government indicated a shortage in both the number of suitably qualified workers and, where there are sufficient numbers of workers, a gap in knowledge or skills (SG, 2011b). To be able to meet Governmental targets by 2020, these shortages will have to be addressed in the very near future and create great opportunities for training-providing institutions and companies. New roles, such as Energy Advisor, will require different skills than those who make Energy Assessments, and different microgeneration technologies will require different installation skills. It is to be expected that the need for plumbing and HVAC (heating, ventilation, and air conditioning) training demand will be higher than that for electrical trades. The peak will be around 2013 where in the early years the training demand will be with heat pumps and biomass boiler system, while in the later years, from 2016 onwards, the demand will be higher for training related to combined heat and power, micro wind and micro hydro systems. For the insulation sector, the training demand will mainly focus on solid wall insulation, however, not huge in numbers. Loft and cavity wall insulation sectors have already an established skills base. Not only the installers are in need of (top up) training in knowledge and skills, also local authority planners and planning committees are in need of updating their knowledge. This need also creates great opportunities for training-providing institutions and companies. 11

3. Future market shaping issues Future developments in the sector of microgeneration of renewables are shaped by a variety of issues. This Chapter will describe the most important drivers for future developments. Already mentioned in Chapter 2 are financial incentives provided by the Government, such as the Feed-in- Tariff. A change in these incentives will have an important impact on market developments, as became clear after the announced change in the Feed-in-Tariff for solar PV. Other market shaping factors are awareness of options, required investments, other requirements such as planning and alterations, availability of the resource and trust-worthiness of suppliers or certification. Two other issues are the current market situation and motivation for installing microrenewables. The current market situation in terms of installed capacity and number of players has already been described in Chapter 2. Motivation is an issue that might influence some customers, but doesn t have a great impact relatively compared to the other issues, it will have very limited impact as a driver for future market developments. When people decide to go green and would like their neighbours or clients to know, they might prefer solar thermal above a ground source heat pump because of its visibility. Another motivational factor is whether the site is grid connected or not. However, since all microgeneration technologies described in Chapter 2 can be used both grid connected and off-grid, this issue will not be of influence when assessing the different technologies compared to each other. The six most important market drivers are described in the following section. 3.1 Drivers for future development Property owners will have to decide whether to invest in microgeneration or not. The chosen perspective for this section is again that of the consumer. Government incentives, such as the Feed-in-Tariff can be considered as market push, most of the development will be market pull driven, it is the property owner who decides whether or not to go for installation of microrenewables. Awareness of options If consumers are not aware of a certain possibility they won t be able to choose it. Awareness is a prerequisite for adopting new technologies. Therefore, awareness of microgeneration of renewables among potential customers is an important market driver. Promotion campaigns such as performed by the Energy Saving Trust and Community Energy Scotland contribute to a greater awareness. Awareness of micro-renewables can be split into awareness in general and awareness of specific technologies. Unfortunately, no specific data of awareness of micro-renewables in Scotland are available. However, an extensive study has been done in the Republic of Ireland (Claudy et.al., 2010). Nearly 80% was aware of PV, more than 70% was aware of solar thermal, 65% was aware of wood pellet boilers and nearly 55% of micro wind turbines. Heat pumps and micro CHP showed a different 12

image, a greater percentage was not aware of the option instead of being aware of the option. Even 80% of people were not aware of the option of micro CHP. Other factors, such as gender, environmental awareness, internet access and regional differences were also investigated. Data for Scotland will be different. We have made an adjusted assessment of current awareness of the various available technologies in Scotland and rated the awareness from relatively low ( -- ) till relatively high ( ++ ). Solar thermal and wind technologies will score relatively highest ( ++ ). More people are aware than not aware of solar PV, pellet boilers and wood stove burners, therefore they will score relatively positive as well ( + ). Compared to Ireland, more people in Scotland will be aware of hydro, but still a minority compare to those who don t know about hydro, especially for microgeneration ( - ), but like in Ireland, few people are aware of the options of heat pumps and micro CHP ( -- ). All partners in a sector have a responsibility to make sure consumers are aware of the options and that high quality solutions can be delivered in a trustworthy way (see also paragraph on Certification). Incentives When major change is needed in a relative short period of time, a governmental (financial) incentive has proven to be very successful. A 2010 study into the motivation of homeowners to invest in micro-renewables showed that 71% of homeowners in Britain were likely to install microrenewables if paid enough incentives (REF, 2010). Since the introduction of the high Feed-in-Tariff for solar PV, the number of PV installations and installed capacity in the UK has shown a large increase (see Chapter 2). However, a consultation process that started 31 October and runs till the 23 rd of December caused great uncertainty. The consultation proposes to more than half the incentive to 21 p/kwh for small-scale solar PV systems. Thousands of jobs could be under threat if the proposals become reality according to the Scottish renewable sector, no further investments will be made in future developments as long as this uncertainty remains. The Scottish Government is committed to increase the amount of electricity and heat generated from renewable sources. The aim is to generate the equivalent of 100 per cent of Scotland's gross annual electricity consumption and the equivalent of 11% of Scotland's heat demand from renewable sources by 2020 (SG, 2011c). Enabling an increase in the installation of microgeneration forms an important part of Scottish policy. An example is the introduction of legislation to introduce permitted development rights for microgeneration equipment on nondomestic buildings, which came into force on March 18, 2011. The most important governmental incentives are: The Feed-in-Tariff (TiF) was introduced in April 2010 to help businesses and householders to install microgeneration installations for renewable energy sources. The different technologies and different scales of systems receive different tariffs with the aim of providing a 5-8% rate of return on investment (details of the tariffs are given in Chapter 2). 13

The Renewable Heat Incentive (RHI) is being designed to encourage individual households, communities and businesses to change from traditional fossil fuel heating systems to more environmentally friendly and sustainable renewable heat systems. The scheme for commercial and industrial application was supposed to be introduced in October 2011 that for domestic use by October 2012, but the introduction is being delayed. This delay has had an effect on the industry, which is still in uncertainty about what the scheme will bring. Due to the delay, an interim incentive has been developed, the Renewable Heat Premium Payments (RHPP) scheme, which provides interested householders an upfront payment for their installation (details of the vouchers are given in Chapter 2). The RHI Premium Payment scheme will run from 1st August 2011 to 31st March 2012. The introduction of the RHI for domestic use would have been in line with the introduction of the Green Deal (DECC, 2011b). The Green Deal, to be introduced late 2012, aims to provide a framework to enable private firms to offer consumers energy efficiency improvements to their homes, community spaces and businesses at no upfront cost, and to recoup payments through a charge in instalments on the energy bill. These energy efficiency improvements may include insulation, installation of A-rated boilers, double-glazing, solar thermal and PV panels or heat pumps. Details of the Green Deal are not known yet. For market players to decide on their future developments, certainty about governmental incentives is critical. This makes incentives a very important driver for the future of microrenewables. We have made an assessment of the incentives against the various available technologies and rated them from relatively uncertain ( -- ) till relatively certain ( ++ ). All technologies scored low ( - ) due to the uncertainty about FiTs, RHI and the Green Deal, but solar PV scored even lower ( -- ) because of the recent review of the FiT for PV. Investment A third important driver for market development is the required investment by the property owner. Not only the question whether the property owner will receive financial governmental incentives to reduce the payback time, also the total investment required for the installation is an important driver. A relative big required investment will reduce the attractiveness of that technology compared to other, relative low cost installations. Based on the description of the various technologies as given in Chapter 2, we have made an assessment of the investment costs against the various available technologies and rated these costs from relatively high ( -- ) till relatively low ( ++ ). Hydro and pole mounted wind scored the lowest ( --'), solar PV, wood pellet boilers and heat pumps scored slightly better ( - ), solar thermal and CHP second best ( + ) and building mounted wind and wood stoves scored as best with the lowest required investment ( ++ ). 14

Requirements The question whether it is easy to install a certain installation or whether major alterations to the property are required will also impact the decision on the purchase of a certain technology and therefore the potential of (future) market developments. Solar PV is in most cases relatively easy to install, a ground source heat pump or a pellet boiler require more work. For this fourth market driver, we have made an assessment of the requirements for installation versus the various available technologies and rated these requirements from relatively complicated ( -- ) till relatively easy ( ++ ). Hydro, pole mounted wind, wood pellet boilers, heat pumps and CHP scored relatively low ( - ), solar PV, building mounted wind, wood stoves and solar thermal scored better ( + ). Availability of the resource The wind doesn t blow all the time, nor will the sun provide enough heat to warm up solar thermal panels whole year round. On the other hand, the depth of the ground will provide a relative stable source of heat throughout the year. Availability of the resource during the year is of importance while deciding on what type of micro-renewable property owners will choose. This fifth market driver is used to assess whether the resource for the microgeneration installation is seasonal or irregular ( --') or year-round ( ++ ). Solar PV, building mounted and pole mounted wind and solar thermal score relatively low ( - ), hydro, wood stoves, wood pellet boilers, heat pumps and CHP scored better ( + ). Certification Trustworthiness of the supply chain is of great importance. When making an investment in a micro-renewables installation, one needs to be certain the installation will take place according to high quality, independently tested standards. The introduction of the Microgeneration Certification Scheme was a major step in assuring a high quality sector (MCS, 2011). The number of MCS installers in the market gives an indication of the available choice for an installer by the property owners. We have made an assessment of the different microgeneration technologies versus the number of MCS certified installers. A limited number of MCS installers scores low ( --'), a high number scores high ( ++ ). For every microgeneration technology, MCS certified installers are available, for hydro, building mounted and pole mounted wind, wood stoves and wood pellet boilers as well as CHP only a limited number of MCS certified installers is available, they all score relatively low ( - ), the number of certified installers for heat pumps is higher (scoring + ) and for solar PV and solar thermal the highest ( ++ ). 3.2 Assessment of micro-renewables versus market drivers Table 3 gives the summary of the assessment of the available technologies for microgeneration of renewables versus the above mentioned market drivers for future 15

development. The future is full of uncertainties, not the least about the development of the Feedin-Tariff and the Renewable Heat Incentive. However, based on the 6 above mentioned market drivers, an indication of what technologies might be relatively more attractive than other options is given in Table 3. Table 3. Summary of assessment of market drivers for microgeneration technologies. Technology Awareness Incentive Investment Requirements Availability Certification Score Solar thermal ++ - + + - ++ 1 st Biomass stove + - ++ + + - 2 nd Wind building mounted ++ - ++ + - - 3 rd Solar PV + -- - + - ++ 4 th Biomass pellet boiler + - - - + - 5 th Heat pumps -- - - - + + 6 th CHP -- - + - + - 7 th Wind pole mounted ++ - -- - - - 8 th Hydro - - -- - + - 9 th Legend Awareness from - relatively low to ++ relatively high Incentive from - relatively uncertain to ++ relatively certain Investment from - relatively high to ++ relatively low Requirements from - relatively complicated to ++ relatively easy ( plug & play ) Availability from - seasonal or irregular to ++ year-round Certification from - limited MCS installers to ++ many MCS installers Since the request from the Consortium is to assess whether micro-renewables might form a good business opportunity (see Chapter 1), we would like to give an indication of potential market growth for each of the different microgeneration technologies. The starting point is the number of MCS installers by 21 October. The relative potential for growth is given in the relative shape of the arrows in Figure 6. 16

Figure 6. Potential growth of microgeneration installers in Scotland. 17

4. What the future might bring 4.1 Conclusions The general conclusion is that microgeneration of renewable energy will grow significantly in the near future. However, because of the uncertainties about governmental incentives, the choice for a specific technology, and thus business opportunity, cannot be made. The numbers of MCS installers in combination with an assessment of the market drivers (see Figure 6) provide an indication of where opportunities are. In general, the heat generating technologies will grow relatively quickly in the near future where the electricity generating technologies already have shown an increase in installed capacity over the last one-and-a-half year. Potential business opportunities can be found when looking at the needs of property owners, of installers, in particular in the heat generating micro-renewables, and of local authorities. Property owners, whether individual households, communities or businesses, have difficulty in assessing what technology is best for them, based on their specific needs, their location, their financial means and other factors. Property owners who would like to install PV after 1 April 2012, also need to make sure their building meets certain energy efficiency standards. Towards the introduction of the RHI, an increase in the training demand for plumbing and HVAC for microgeneration of renewables is expected, and once the RHI is introduced, an increase in the market for heat-generating renewables. Some local authorities will have a need for training of their planning staff and installers. 4.2 Recommendations Based on the conclusions of the review of the Scottish market for micro-renewables, the following recommendations are given to the Consortium for consideration: There is a growing need of individual house owners, small communities and businesses for support in assessing their energy needs, assessing the options for energy saving measures and advising them on the installation of microgeneration of renewables. The Consortium could develop a business in providing holistic and independent advise to individual households, small communities and businesses on energy use and micro-renewables. This advice would include the development of an energy plan for the site, recommendations for energy efficiency and for installation of micro-renewables. The market for heat generating micro-renewables will grow relatively quicker than the electricity generating micro-renewables and is therefore a more attractive market segment in the short term if the Consortium would consider to enter the market as an installer. When offering the installation of micro-renewables, the service should also include energy efficiency measures and smart metering to enable the property owners to assess their energy use and reduce their use where possible. 18

There is a growing training demand with installers, in particular in plumbing and HVAC for heat generating micro-renewables installations. The Consortium could provide the required training. There will be an increase in solid wall insulation, however, top-up training with constructors is needed. The Consortium could provide the required training. Some local authorities have a training demand for their planning staff. The Consortium could provide the required training. The UK and Scottish Government will have to give certainty about their (financial) incentives as soon as possible to provide the microgeneration industry with a long-term perspective and clarity for future developments. A coordinated lobby in both Westminster and Holyrood is advised. 19

5. References AEA/SCDI, 2011. The AEA Scottish Microgeneration Index, Tracking the progress of microgeneration in Scotland, April 2010 to March 2011. [online] http://www.aeat.com/microgenerationindex/ [Accessed 20 October 2011]. Claudy, M., Michelsen, C., O'Driscoll, A. and Mullen, M., 2010. Consumer Awareness in the Adoption of Microgeneration Technologies: an Empirical Investigation in the Republic of Ireland. Renewable and Sustainable Energy Reviews, Vol. 14, (7), 2010 pp.2154 2160. DECC (Department of Energy and Climate Change), 2011a. FiTs Review. [online] http://www.decc.gov.uk/en/content/cms/meeting_energy/renewable_ener/feedin_tariff/fits_ review/fits_review.aspx [Accessed 1 November 2011]. DECC (Department of Energy and Climate Change), 2011b. Green Deal. [online] http://www.decc.gov.uk/en/content/cms/tackling/green_deal/green_deal.aspx [Accessed 1 November 2011]. EST (Energy Saving Trust), 2011a. Energy Saving Trust FIT review fact sheet Scotland v2 31/10/2011. [online] http://www.energysavingtrust.org.uk/scotland/publications2/generateyour-own-energy/energy-saving-trust-fit-review-fact-sheet-for-scotland [Accessed 1 November 2011] EST (Energy Saving Trust), 2011b. List of Certified Installers Based in or Operating in Scotland, 21 October 2011. [online] http://www.energysavingtrust.org.uk/scotland/publications2/ Communities/Files-not-publications/Scottish-Installer-List [Accessed 11 October 2011] EST (Energy Saving Trust), 2011c. List of Certified Installers Based in or Operating in Scotland, 8 July 2011. [online] http://www.energysavingtrust.org.uk/scotland/publications2/communities/ Files-not-publications/Scottish-Installer-List [Accessed 1 November 2011] Microgeneration Certification Scheme, 2011. The Microgeneration Certification Scheme. [online] http://microgenerationcertification.org/installers/what-is-the-mcs [Accessed 20 October 2011]. Ofgem, 2011. FiT Payment rate table. [online] http://www.ofgem.gov.uk/sustainability/environment/fits/documents1/feedin%20tariff%20table%201%20august%202011.pdf [Accessed 20 October 2011] REF (Renewable Energy Focus), 2011. Most UK homeowners would adopt microgeneration [online] http://www.renewableenergyfocus.com/view/6839/most-uk-homeowners-would-adoptmicrogeneration/ [Accessed 20 October 2011]. Scottish Renewables, 2011a. Microgeneration. [online] http://www.scottishrenewables.com/technologies/microgeneration/ [Accessed 20 October 2011]. Scottish Renewables, 2011b. Scottish Renewable Energy statistics at a glance. [online] http://www.scottishrenewables.com/ [Accessed 20 October 2011]. SG (Scottish Government), 2011a. Renewable Energy. [online] http://www.scotland.gov.uk/topics/business-industry/energy/energy-sources/19185 [Accessed 20 October 2011]. SG (Scottish Government), 2011b. Skills Forecast. [online] http://www.scotland.gov.uk/publications/2011/10/04142122/13 [Accessed 20 October 2011]. SG (Scottish Government), 2011c. Renewable Energy [online] http://www.scotland.gov.uk/topics/built-environment/planning/national-planning- Policy/themes/renewables [Accessed 20 October 2011]. 20