Comment: Generation location, location, location

Miles Thomas, Savills Energy

The debate surrounding renewable energy and the security of the UK’s power supplies is less about ‘what’ and more about ‘where’ and ‘when.

The UK Government is committed to delivering energy security while accelerating the transition to a low carbon economy - all against a backdrop of a changing planning system with an increasingly local focus. Security of energy supply is potentially at risk as our existing capacity is exposed to more stringent standards and older plants reach the end of their operational life. Significant investment is needed in new generation capacity to meet our needs. But where can we put it?

Strip away the rhetoric, the debates over feed-in tariffs (FiTs), Renewable Obligation Certificates (ROC)s and the Electricity Market Reform (EMR) and you are left with a very complex real-estate playing field for large plants, within one of the most tightly regulated development arenas in the western world. The consenting regime under the Infrastructure Planning Commission (IPC), as it currently stands, and how it will sit when absorbed into the Planning Inspectorate, is now presided over by planners rather than engineers, as it once was under Section 36 (of The Electricity Act), a factor that demands a different approach.

Successful generation investment is all about location, location, location. No-longer can developers shoe-horn large plants into technically superior windfall sites. The new world must take a strategic approach in screening for new projects, meaning that the ‘why’ and the ‘who’ will define the ‘where’.

As well as costs, power companies have to factor in Government strategy, capacity, and financial incentives and levies which, depending on your adopted technology, make locating in certain parts of the UK more expensive and challenging than others. The ability on the part of the acquiring agent to understand and balance these issues to the advantage of its client is imperative. What may on paper look like the correct location for a particular type of power plant, could end up costing power generators millions of pounds.

You also have to know where in the country you can connect your plant - where the grid both exists and where there is capacity to put power into it. The supply chain for fuel and construction is also key, focussed as it is on pipelines, road, rail or sea and indeed, where it isn’t prohibitive to move large components of plant around and secure easements and wayleaves through sites of special scientific interest (SSSI) or other areas of specific protection. Coming close to housing or over miles of sensitive UK countryside from the chosen site, are potential project-killing issues.

Once locations have been identified, political blessing is in place and tariffs have been agreed, the ‘when’ and ‘how’ can be managed in terms of community issues, the environmental lobby, the landowners and the energy company in question.

In the case of biomass plants, you introduce an additional dimension including the security of supply issues around global feed-stocks of woody biomass – a factor that has held up many larger plants. At a smaller scale, the availability and long term stability of maize and other energy crops vs the price volatility of wheat and the whole food /feed -stock agenda and its impact on agricultural land-use, requires expert agribusiness consultancy to find a solution that works for growers whilst at the same time providing the security that energy companies and their financiers need.

Savills Energy is a dedicated real estate service created to specifically assist the inception, planning, development and continued operation of assets and infrastructure connected to the energy production and storage sector.

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