Small-scale hydro plant and machinery review: report

Other Issues

Transparency

96. One recurring issue for the group was the complexity of the non-domestic rates system including a lack of transparency regarding both the evidence provided by scheme occupiers as ratepayers and by assessors in calculating rateable values. While aspects of non-domestic rates are unavoidably complex, including the application of receipts and expenditure methodology, the group supports the recommendations of the Barclay Review of Non-Domestic Rates that the rating system needs to be more transparent and relevant information flows between stakeholders must improve.

97. As examples, the hydro sector would point to the opacity of the valuation process, particularly the assumptions applied to which plant is deemed rateable and which isn't. While this information was openly discussed and shared at the Review group, this information was apparently not available to the sector prior to the group's establishment. Conversely assessors contend that the sector as a whole failed to provide sufficient evidence on both the total construction costs of hydro schemes and the apportionment of those costs between the different elements of a hydro scheme.

98. Following the conclusion of the group's deliberations, the group was made aware of recent efforts by the hydro sector to share more project cost data with the assessor. These are matters of valuation and are therefore beyond the remit of the review group but the group agrees that continued engagement and discussion between the hydro sector and assessors should be encouraged and that assessors should continue to reflect on the valuation process to ensure they accurately reflect the reality – as it existed at the tone date and beyond.

The Closure of the FIT regime to new entrants

99. During the review group it became apparent that existing practice notes for hydro (and other renewable subjects) may not reflect the changes to UK Government's FIT schemes that were confirmed following the 2015 Review outlined in paragraph 19. Since this information was not available at the 1 April 2015 tone date, the group agrees that this is a change in circumstances rather than a simple change in rental values and that the significant degression and subsequent closure of the FIT regime to new entrants should therefore be reflected in rateable values for new subjects. The group encourages the Scottish Assessors Association to correct this anomaly as quickly as possible so as not to unnecessarily deter future investment in the sector.

Valuation Roll Coverage

100. Evidence presented by the hydro sector indicates that there are over 400 hydro schemes of less than 5MW in Scotland, 70 per cent of which have been commissioned since 2010. At the onset of the review, assessors had identified 168 small scale hydro schemes on the valuation roll. That figure is now estimated at 441 entries.