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«Lochbroom Community Renewables Limited a community benefit society number 7126 Lochbroom Community Renewables Limited Business Plan April 2016 ...»

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Lochbroom Community Renewables Limited

a community benefit society number 7126

Lochbroom Community

Renewables Limited

Business Plan

April 2016

Lochbroom Community Renewables Limited

The Village Hall

7 Market Street


IV26 2XE

Page |1 Registered address: The Village Hall, 7 Market Street, Ullapool. IV26 2XE

Lochbroom Community Renewables Limited

a community benefit society number 7126

Executive Summary

Lochbroom Community Renewables Limited is a new Society set up to look at the possibilities for renewable energy generation in the Loch Broom area. Its first project is a small hydro-electric scheme at Lael.

The Society proposes to build and run the scheme based on the Allt a’ Mhuilinn burn, with a generating capacity of 100kW producing an estimated 479,000 kWh of electricity annually. This will all be exported directly to the grid.

Development finance to date of around £95,000 has been through a Scottish Government loan from the Community and Renewable Energy Scheme (CARES). The Society has successfully obtained all the relevant permissions to build and operate the scheme and is currently raising the capital finance. The proposal is that this will come mainly from an issue of shares in the Society. A Community Share Option will be launched in the spring of 2016 with the aim of raising sufficient funds to build the scheme during 2017 and to cash flow the scheme for its first year of operation. The total cost of the scheme is £900,000 and this will be the target set for raising share capital. After that, the scheme will be self-financing and will produce, after payment of share interest and running costs, a small surplus which will be used to set up a Community Benefit Fund (CBF). The interest payable on shares is proposed to be 4% per annum after the first year of operation but will be dependent on the performance of the scheme.

It is expected that the scheme will generate, through sales of electricity to the grid and Government incentives through the Feed in Tariffs (FiTs), around £100,000 per annum in gross revenue, rising in line with inflation for the 20 years of the FiT guarantee. It is also anticipated that the hydro plant will last at least 40 years, producing in excess of £20,000 gross per annum after the first 20 years. Total revenue over the 40 years will be in excess of £2.5m with a surplus of £1.5m available for the CBF.

The Community Benefit Fund will have funds available to support community projects on the basis of a simple application process. Applications will be assessed by an independent Project Evaluation Group. The process of running the CBF will be formalised nearer the time when funds become available and in full consultation with the wider community in the area.

–  –  –

INDEX Introduction

The Proposed Scheme

Community Consultation

Technical Summary

Project Timeline



Community Benefit Fund

Community Shares


Steering Group



1. Extract from the LCR Rules (showing link to UCT)................ 26

2. Community Shares – the basics

3. Financials

–  –  –

Introduction Background Lochbroom Community Renewables Limited (LCR) was set up by Ullapool Community Trust (UCT) to progress projects in renewable energy. LCR’s initial project to establish a small scale hydro-electric scheme on the Allt a’ Mhuilinn was initiated because of strong local support for community-owned renewable energy projects. An opportunity arose from an invitation from Forestry Commission Scotland (FCS) for communities to express an interest in developing hydro projects on local state owned woodland through the National Forest Land Scheme. Two sites were identified and, after initial feasibility work, the Allt a’ Mhuilinn burn offered the most potentially viable location for a small-scale hydro scheme. The burn is on the A835 at Lael almost 10 miles south of Ullapool and flows into Loch Broom.

The relationship between UCT and LCR LCR operates as a project of UCT although, by law, both companies are independent. Ties between UCT and LCR are described in the Rules of LCR.

(see Appendix 1). Essentially LCR have agreed to develop and operate renewable energy schemes and to donate any surplus to UCT. UCT agrees to use any donations to set up a Community Benefit Fund which will make grants available under a simple application process to community organisations for community development projects.

History of the project

UCT’s Development Officer at the time led the hydro project and babyHydro (http://www.babyhydro.co.uk), a Society specialising in the development of small hydro projects, were engaged late in 2012 to produce a preliminary assessment. The work was supported and funded by the Scottish Government’s Community and Renewable Energy Loan Scheme (CARES).

In 2013 a community ballot was then carried out. Over 58% of residents voted in the ballot and 96.5% voted in favour of the project.

The project was initially managed on behalf of UCT by Project Officers, Ewan Young then Jan Breckenridge, supported by a volunteer Sub-Group who brought a wide range of skills from the community.

At the time FCS praised the quality of the application saying that the proposal from UCT was a textbook example of a National Forest Land Scheme application. The community benefits that could arise from the project as well as the technical feasibility were clearly demonstrated.

–  –  –

In 2013/14 detailed feasibility and viability studies were commissioned through babyHydro. At this stage both the Allt a' Mhuilinn and the neighbouring Allt a’ Braighe burn were thought to have hydro potential.

The most viable scheme was found to be a small run-of-river system on the Allt a' Mhuilinn burn at 100kW size. This was after careful consideration of the risks involved balanced against the best financial return for the community and cash flow in the early years of the project. This burn had a hydro scheme on it in the past which powered a saw-mill.

During this time discussions were had with SSE regarding a potential grid connection, legal advisors were selected and appointed in February 2015 and a lease with Forestry Commission Scotland was negotiated. Local Lael residents were contacted as part of the planning process and their feedback has been very positive.

The Proposed Hydro Scheme for the Allt a’ Mhuilinn In 2015 the necessary geo-technical, topography, ecology and other survey work commenced with the onset of spring weather. The best of two options for a high head hydro scheme on the Allt a’ Mhuilinn was selected and the necessary consents were

obtained. These are:

Water Environment (Controlled Activities) (Scotland) Regulations 2011; (The “CAR” License) reference CAR/L/1137084 was obtained on 21 July 2015 from the Scottish Environment Protection Agency (SEPA) Scottish Hydro Electric Power Distribution (SHEPD) provided on 15 September 2015 an offer of grid connection for 30 September 2017 reference EDY 615. This is for the full 100kW. Initial discussions with SSE had indicated that any connection would be limited in capacity but more recent discussions had given some informal indication that the 100kW scheme would get full approval Planning permission (Highland Council) was obtained on 29 September 2015 reference 15/02527/FUL Feed in Tariff (FiT) pre-accreditation was acknowledged on 29 September 2015 and confirmed in February 2016 This ended a particularly difficult period of the project. Although the planning application was submitted in sufficient time, two things happened to give cause for concern. The UK Government’s Minister for Energy & Climate Change announced a consultation on the ending of pre-accreditation arrangements for community projects, so our planned date for pre-accreditation (because after 30 September the rate would drop and our potential income would also drop), became an absolute deadline for the project to survive. Without pre-accreditation the uncertainty over the rate of FiT would remain and the project would not be viable Page |5 Registered address: The Village Hall, 7 Market Street, Ullapool. IV26 2XE Lochbroom Community Renewables Limited a community benefit society number 7126 The expected two month determination on planning was extended into late September due to several exchanges of further information and requests from statutory consultees. One month after the planning application was validated, HC responded

with a request for further information regarding the following:

1. Visibility splays from both access points (which required further topographic surveys)

2. Tree information including full scale tree protection plans, trees scheduled for removal (also requiring further topographic information)

3. Borrow-pit sections required further topographic data.

These were all resolved and planning permission was granted on 29th Sept 2015 only one day before the deadline for FiT pre-accreditation. This remains valid for three years from this date, by which point works must have completion.

Current Status The current stage of the project up to about April 2016 will cover the following key


1. The design specification, project management and design

2. Financial planning

3. The marketing and sale of Community Shares The project covered by this business plan will cost around £900,000 to deliver and the profit distribution for community benefit, after other provisions and interest payments to community shareholders, is expected to be approximately £1m over the first 20 years.

The Future for Lael Hydro Lochbroom Community Renewables Ltd will oversee the fundraising, and construction of the Hydro through to the anticipated date of October 2017, when the hydro scheme will convert water into electricity and provide finance for community benefit.

Construction Impacts When the scheme is developed there will be some short-term disruption to traffic on the A835, alongside some construction and additional traffic noise. Longer term impacts will include new road entrances for construction and powerhouse access, visibility of the powerhouse (which is around 6 by 6 metres) and potentially some very low level background noise from the turbine.

An environmental project officer will be appointed as part of the build contract to oversee the development.

Financing the Project Community renewable energy projects are normally funded by  Loans  Grants  Equity (investment from the community and/or social investors)  Community fundraising  A mix of the above

–  –  –

The reason for setting up a Community Benefit Society is to raise money through selling shares to the community. The more money we can raise through selling shares the less the project will borrow from the bank and therefore more money will remain within the local community.

The FIT payments and income from selling electricity to the grid will be used to repay the loan and shares. After the loan has been repaid the profit and income should increase.

Project Income What will it be spent on and how will it be distributed? Income will be used to support local groups and initiatives. Generating income could mean that the community is less reliant on grants or public funding. There will be no financial gain for the UCT or LCR directors (unless they are investors), both of which are volunteer boards. Local groups will be invited to apply for funding from the hydro project with applications considered by an independent panel.

Community Consultation UCT was formed in 2009 and funded as part of HIE’s Growth at the Edge Programme. Funding continues through HIE’s evolving programme of Community Account Management, supporting a Development Manager until 2017. The original agreement included an extensive consultation exercise to draw up a “Growth Plan” ( http://ullapoolcommunity.org/?page_id=693 ). The main areas of focus in the plan were Housing, Transport, Young people and Apprenticeships, Renewable Energy and Sustainability, Community Assets and Local Food. As a result of this various projects were initiated and these raised over £1m for projects over the first five years of UCT, although some projects were not advanced. Successful projects included the setting up of Lochbroom Woodfuels, the Ullaspool Solar project, Powerdown and Pure Power, Edible Ullapool and Lochbroom Community Renewables. Although funding a district heating scheme was agreed, this did not progress.

The community were asked in 2013 if they would support the investigation of a small scale hydro scheme or schemes and a formal ballot (reported above) was undertaken.

Near the time when revenue is being generated, UCT and LCR will work together to fully consult the community in the setting up of the Community Benefit Fund and the rules and process for community groups to apply for funding. This is likely to be early in 2018.

Demographics The community as defined by both UCT and LCR in their respective “rules” is from Elphin to Dundonnel, including Elphin, Strathcaniard, Rhue, Leckmelm, Braemore, Lochside, Dundonnell, Scoraig, Badcaul and Gruinard and the largest settlement Ullapool. With a population of around 2200 in total in 1200 households, the area is rural and remote. Tourism and service industries are the main employers, although Ullapool has an active harbour, providing, as it does, the main link by ferry to the Western Isles. Fishing, aquaculture, agriculture and crofting and craft industries are also important.

Page |7 Registered address: The Village Hall, 7 Market Street, Ullapool. IV26 2XE Lochbroom Community Renewables Limited a community benefit society number 7126 Any community share issue will prioritise the defined area, but will also be open to anyone who has an interest in supporting the scheme and the local community. It is hoped that at least 500 people locally will buy shares at an average investment of £1,000 per investor (although the median will be nearer the minimum investment of £300), making up considerably more than half of the investment from local sources.

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