Small and medium sized hydro projects are being abandoned across Scotland following controversial changes in subsidy arrangements by Whitehall since the General Election.

It will mean many millions of pounds of investment being lost and the potential for much needed jobs in rural communities.

In July the Department of Energy and Climate Consultation (DECC) shocked the renewable energy sector by announcing a consultation on removing preliminary accreditation from its main subsidy vehicle, the Feed in Tariff (FIT) scheme. Pre-accreditation provided developers with the security of knowing what they would be paid for the power they generated from their new development, as long as it was built within two years.

The consultation only lasted a month. A few weeks later the UK Government announced “We will remove the ability to pre-accredit under the FIT scheme, effective from October 1 2015.”

It meant that developers only had a few weeks to get all their paperwork in place, including planning permission, grid connection and a licence from the Scottish Environment Protection Agency.

For many this was simply impossible; and after October 1 they would have to gamble on what they would earn. Business and energy minister Fergus Ewing says he is shocked and knows of at least a dozen schemes that will not go ahead as a direct result.

Luke Milner, a director of Blairgowrie-based developers/consultants Glen Hydro, is not surprised. “This huge new risk and uncertainty that has been introduced, is the biggest issue for hydro because it really does take us two years to build a scheme.“ He feared many would not now be economically viable.

DECC also announced another consultation, due to close this week, on the future of the whole FIT scheme. Its funding has been progressively cut in recent years, but the UK government is now mooting its total closure to new entrants from January. The new approach has shocked the sector as Terry Stebbings of Proterra Energy Ltd, based on Loch Ness-side made clear:

“We are a micro hydro designer and installer, a business with five staff, based in Drumnadrochit and we work mainly on schemes below 100kW, so very much micro. Our clients are typically individuals, communities, crofters, farmers and maybe small estates.

“The publication of DECCs consultation was nearly catastrophic in content. The inclusion in their consultation of the potential to close the FIT system to new entrants so soon in January caused considerable uncertainty amongst our clients, those whose schemes are undergoing design and have not been registered for FITs, resulting in the majority of them requesting work be stopped. “

They included a community scheme in north Skye, one on a small Caithness estate, a business in Perthshire and another a domestic client also on Skye.

“This represents a loss in earning for our small company of £42,000 in the final four months of the year and potential loss of £420,000 in construction over the next two years. In addition, five new projects we had just acquired at the Black Isle Show in August, will no longer start. That was just as a result of the publication of the consultation never mind the outcome.”

Mr Ewing said:

“Recent decisions on renewable energy by the UK Government can only be described as anti-business, anti-environment and anti-energy security. The impacts are spreading right across Scotland and the UK.

"The UK Government needs to consider what urgent actions it can take to restore confidence in the sector with investors. Scotland has over 70% of small scale hydro projects in operation across the UK, any changes will therefore have a disproportionate impact on Scotland, and in areas where these projects bring much needed jobs to fragile economic areas.”

But a DECC spokeswoman said there was a projected overspend of £1.5 billion on the £7.6 billion allocated for renewables by 2020/21.

“Our priority is to keep bills as low as possible for hardworking families and businesses, while reducing our emissions in the most cost-effective way. Government subsidies have driven down the cost of renewable technologies significantly and we delivered more than the promised subsidy amount to the industry. Our action will protect existing investment whilst also protecting bill payers from rising energy bills.”