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APPENDIX II: REVIEW OF SMALL SCALE RENEWABLES FUNDING SOURCES
1. A number of schemes are funded by various sources which directly and indirectly support the development of small scale renewable projects in Scotland. Some of the main funding sources that are relevant to SCHRI are discussed below. The section also discusses the structure of the Low Carbon Buildings Programme which will become the main source of funding for small scale renewable energy projects in the rest of the UK from next year.
2. Community Energy Fund is funded by the Department for the Environment, Food, and Rural Affairs ( DEFRA) and administered by EST. Applications for funding are assessed on a competitive basis. The last funding round supported a total of nine projects in Scotland, awarding over £4.1 million in funding, twenty eight per cent of total UK funding. It has supported the development of a number of district heating systems in Scotland, with local authorities, universities and housing associations being the main beneficiaries. The systems supported included the energy from waste district heating system in Lerwick, whereby connection costs for householders are eligible for SCHRI funding. The next round of funding is unlikely to include Scotland, and so there is an issue of whether alternative funds need to be provided through the Scottish Executive for the development of other district heating systems in Scotland
3. Bioenergy Capital Grants Scheme is a joint initiative funded by the Department for Trade and Industry ( DTI) and the National Lottery New Opportunities Fund [now called the Big Lottery Fund]. Its main aim is to support project developers and organisations to invest in heat and electricity generating projects fuelled by energy crops and other biomass feedstocks. A total of £66 million has been allocated to the scheme, with £30 million from the DTI and £36 million lottery funding. The scheme is open to both public and private sector organisations. Community Guidelines on State Aid for Environmental Protection, adopted in December 2000, allow private sector businesses to access funding of forty per cent of eligible costs under the scheme. Higher levels of funding are potentially available for public bodies and non-profit organisations. Projects funded through this scheme are unlikely to qualify for funding through SCHRI and vice-versa.
4. Major Photovoltaic Demonstration Programme is funded by the DTI and administered through the EST. It supports the installation of on and off grid photovoltaic ( PV) systems in households, community organisations and the private sector. A total of £31 million has been allocated to the programme, which provides funding up to half of capital costs. SCHRI will generally not fund PV systems, although a combination of PV and other renewable technologies will be considered. The PV programme will continue in the current format until March 2006. After this time, a low carbon buildings programme will be developed which will supersede both this programme and Clear Skies - the equivalent of SCHRI in the rest of the UK.
5. Energy Efficiency Grants. A small fund is managed by EST to support energy efficiency measures in community groups. This was worth £130,000 in the current financial year, increased from £85,000 in the previous year. This has been important in ensuring that community groups have the capacity to undertake related energy efficiency measures if they are going forward with a renewable energy project. Community groups are unable to access funding for energy efficiency measures through other funds administered by EST which are targeted at households and businesses. In terms of the wider issue of integrating energy efficiency measures with renewable energy projects, there was a feeling both among a number of beneficiaries and HIE that this needs to be better integrated. This is less relevant in the lowlands area, where both activities are delivered through the EST.
6. Scottish Power Green Energy Trust: This is one of the few private sector funds which are supporting the development of small scale renewable projects. The fund is generated by Scottish Power customers that switch to a green electricity tariff, which includes a small levy which goes towards supporting the fund. There is a strong overlap with the aims and objectives of SCHRI and many supported projects have also sought funding from this source.
7. Central Heating Programme is funded by the Scottish Executive and delivered by the Energy Action Grants Agency ( EAGA). The fund is designed to eliminate fuel poverty by 2016, by providing a package of energy efficiency measures and central heating systems to those people who rent their home from a registered social landlord and for people over sixty who own their home or rent it from a private landlord. Over 30,000 central heating systems have been installed since the programme was launched in 2001, the vast majority of which are gas fired central heating systems. There is potential for the programme to be better aligned with wider sustainable development goals within the Executive, with a higher priority given to the development of renewable energy alternatives such as solar water heating, biomass and ground source heat pumps. The strong linkages between renewables and fuel poverty are already been recognised in the combined DEFRA/ DTI Fuel Poverty Strategy, which includes a £5 million budget for renewables in remote locations that are off-grid or without mains gas connections.
8. European Funding: A number of projects in the Highlands and Islands have received match funding from the European Regional Development Fund ( ERDF). In these circumstances it was reported that confirmation of SCHRI funding was very important in levering in funding from this source. This has meant that the level of leverage in the Highlands and Islands has been significantly higher than in the rest of Scotland.
9. Low Carbon Buildings Programme will supersede the two DTI capital grant schemes for small-scale renewable energy technologies (Clear Skies and Major PV Demonstration programmes).
10. The objectives for the programme are -
- To support a more holistic approach to reducing carbon emissions from buildings, by demonstrating innovative combinations of both energy efficiency measures and micro-renewable technologies in a single development
- To demonstrate on a wider scale emerging micro-renewable technologies (with a focus on building integrated technologies)
- To see micro-renewable technology costs reduce over the lifetime of the programme against a 2005 baseline (the baseline and percentage reduction to be agreed with the industry)
- To raise awareness by linking demonstration projects to a wider programme of activities including developing skills and project replication.
11. The LCB programme proposes to provide a combination of practical advice on energy efficiency measures, and practical advice and capital grants for the installation of small-scale renewables. It aims to develop a market for small-scale renewable technologies and proposes focussing support on a more limited number of large scale projects to help generate economies of scale and reduce manufacturing costs.
12. It is proposed that the LCB programme will operate for a 6-year period from 1 April 2006. There will be periodic calls for proposals, and applications will be assessed against a set of published criteria by a panel of experts, and selected on a competitive basis. There will be two streams of funding - stream 1 for individual and community projects and stream 2 for larger scale developments.
13. The specific objective for stream one is -
- To fund on a tapering basis innovative individual and community based projects which meet the agreed standards for the programme (such as the Code for Sustainable Buildings)
14. The specific objectives for stream two are -
- To support a number of high profile, large scale, low carbon building developments - including both new build and refurbishment - in the areas of household, commercial and public sector buildings.
- To expand the expertise of the construction sector in developing, constructing and operating large scale developments of low carbon buildings by demonstrating innovative combinations of micro-renewable and energy efficiency measures.
15. Stream one is proposed to smooth the transition between the LCB programme and the current funding under the Clear Skies and Major PV Demonstration Programmes.
16. The programme will be "technology blind", meaning no technology will be favoured over another. This is intended to allow architects, developers and the construction industry the flexibility to use the most appropriate technology or combination of technologies to deliver optimum carbon savings for the building. The programme will be designed to ensure a good representation across the range of eligible technologies.
17. Capital grants under the scheme will be available for the renewable energy technologies only, but projects will be expected to demonstrate an integrated design approach incorporating energy efficiency measures. Successful applicants under the stream two will be allocated a carbon manager/technical adviser to ensure the proposed carbon reductions are delivered.
18. The technologies supported under the programme will include solar (thermal and photovoltaic), ground-source and air-source heat pumps, bio-energy, micro-wind, micro-hydro, renewable micro- CHP and fuel cells.
19. The grants will be available for a defined percentage of eligible costs for all the technologies, with a maximum amount of grant available to a single project. The consultation is seeking feedback on whether there should be a variable level of grant for different technologies.
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