FAQ

Frequently Asked Questions

What are the benefits of Whalley Hydro?

It will:

  • generate green electricity.
  • contribute to energy security, helping us to be more resilient in the face of problems of energy supply.
  • contribute to reducing our reliance on fossil fuels and carbon emissions.
  • be owned and run by local people as a social enterprise.
  • provide income which will be distributed locally to increase renewable energy supplies e.g. for community buildings and people in fuel poverty.
  • be available for parties of school children to visit where they can see working machinery which is an unusual experience these days.
  • provide internet links for schools to use information online, such as power output, for use in the curriculum.
  • be a visitor attraction bringing tourists to the area.
  • preserve the historic 600 year old weir, built by the monks who built the abbey.
  • facilitate the movement of fish upriver through the fish pass.
  • provide share interest for investors of 3-5%, rising to 6.9% for tax payers eligible to claim tax relief under the Enterprise Investment Scheme (EIS).
Are shares still available for purchase?

As we have now reached our target of £750,000 the share offer is now closed but for information the share offer document is available here.

Will the public be able to visit?

As the site is private farmland the public are not permitted access apart from scheduled parties including by arrangement with schools. We hope to provide an interpretation board beside the footpath on the Whalley side of the river.

How long will the project last?

The Archimedean screw is long established technology, simple, well proven and robust. It is expected to last at least 40 years.

Will grants be included in the funding mix?

We are constantly on the lookout for grants but with the recent international financial crisis there are fewer grants available.

What local support is there?

Local support for the scheme has been overwhelmingly positive.

  • The parish councils of Whalley and Billington and Langho have shown their support by providing grants to help us in the early stages of development.
  • Ribble Valley Borough Council councillors voted unanimously to approve our planning application at the meeting of the Planning Committee with warm expressions of support being expressed in favour of the hydro scheme.
  • Whalley Chamber of Trade members including over 30 local traders have written in support of the scheme.
  • Local residents expressed support at a public meeting held in 2010. A few local residents have expressed worries about flooding and noise from the equipment (see notes above).
  • Some anglers have made representations to the Environment Agency with concerns about the effects on fish movement. The Agency, as the guardian of river wildlife, has approved the design of the fish pass to be installed alongside the Archimedean screw.
Has a ‘community share offer’ been tried before?

Yes. This sort of community share offer is now becoming an established way of raising finance for renewable energy projects that go on to generate a benefit for the community.

Several community hydro schemes part-financed through share offers are also successfully running in other parts of the country. These include:

  • Stockport Hydro in Greater Manchester
  • Torrs Mill Hydro in Derbyshire
  • Osney Lock Hydro, Oxford

Successful solar PV community share schemes include Oxford North Community Renewables which, in 2011, raised £150,000 in four weeks to finance the installation of a community-owned solar panel array at the Cherwell School

Who owns the land?

The hydro site belongs to Hole House Farm with whom we have a 99 year lease.

What is the current status of the project?

After four years in development the hydro scheme began operating in November 2014 and is now feeding electricity into the national grid.

What is the lifespan of the hydro scheme?

The concrete footings have been built to last well beyond the initial 99-year lease we have on the land. The screw within the concrete hydro casing has a 25 to 40 year lifespan, so should only need to be replaced once during this time.

Why have we chosen an Archimedean screw?

This technology is widely used in micro hydro schemes for its efficiency, robust design and fish-friendliness. It has been used for pumping water for over 2,000 years. The hydro scheme uses the technology in reverse to generate power from water. It’s advantages include:

  • high overall efficiency, of up to 77%. Efficiency maintained across a large flow variation by virtue of a variable speed drive.
  • fish-friendly
  • robust, simple machinery requiring low maintenance.
How much electricity will the hydro scheme generate?

The 100kW hydro installation is estimated to generate, on average, 345,000 kWh of electricity a year. The amount of electricity generated at any one time will depend on the flow of the river. The performance figures quoted are an average estimate based on over 30 years of actual measured flow data from the measurement weir 400m downstream and take into account restrictions imposed by the Environment Agency during negotiations regarding the granting of an Abstraction Licence.

What will be the hydro’s operating costs once it is up and running?

The direct operating costs will include:

  • day-to-day checking and maintenance: This will ensure that the screens at the intake to the screw is clear of debris.  This work is done by local volunteers, suitably trained and equipped with the right gear. We therefore do not expect this to be a cost to the project.
  • periodic maintenance checks: These will be carried out through a contract with the supplier.
  • rent: This will be payable for the lease of the land and for access to the site.
  • business rates: a provisional estimate of business rates has been obtained from the Valuation Office Agency. We qualify for small business rates relief.
  • insurances: Material Damage, Business Interruption, Public Liability, Directors’ and Officers’ Liability
  • administration: We have allowed an amount to cover administration and accountancy costs, to include registration with the Financial Conduct Authority.
  • decommissioning reserve: as part of the lease we have agreed to set up a decommissioning reserve to restore the land to its former state, in the very unlikely event that the plant needs to be removed.
  • In addition to the above, we have allowed a further amount for sundry costs.

The total direct running costs listed amount to around £23,000 per annum.

Once direct costs have been met, how will the remaining revenue be spent by WCH once the hydro is fully operational?

After direct costs have been met, the surplus revenue will be put to a number of mandatory and discretionary uses:

  • Taxes on profits. We will be liable to corporation tax on our surplus income, though it is unlikely to feature for a number of years as we will qualify for substantial capital allowances.
  • Loan repayments. Payment of the interest and repayment of capital on any necessary loans.
  • Depreciation. We need to make an allowance for depreciation before we can calculate what level of profit is available for distribution to shareholders and for use in other carbon saving projects. We intend to depreciate the plant at 2½ % per annum over 40 years.
  • Reserves. A limited number of defined reserves will be needed. In addition to the decommissioning reserve already mentioned (which will rise to £2,500pa for 20 years after 2020) we will need to build up an engineering reserve for significant repairs and replacements for the generating equipment, electrical inverters etc. In the medium term we also intend to establish a reserve fund In order to assist shareholders who need to withdraw their money at relatively short notice and would otherwise suffer undue hardship in cases where there is no new investor ready to replace them. However, the directors reserve the right to restrict withdrawal of capital on occasions if this would harm the society.
  • Share interest. Members will be paid a return on their investment in the form of interest.
  • Environmental and other carbon saving projects. One of the principal declared objects of the Society is to use its surplus income, once all other claims have been met, to invest in other schemes which directly address the major challenges of energy security and combating climate change in ways that are environmentally sustainable. This could include other forms of renewable energy generation but is not restricted to such schemes. The major criteria will be that they lead to further carbon reductions.
Who gets the electricity?

The electricity is exported to the national grid and sold to one of the utilities. Unfortunately electricity cannot be supplied directly to local houses or other buildings as the cost of cabling would be prohibitive.

What about any potential negative impact from the project?

As well as aiming to maximise the environmental benefits from the project, we have taken great care to minimise possible negative impacts of the scheme, with expert assessments looking at its potential impact on biodiversity, noise and flooding. This information formed a key part of the rigorous process we have been through in order to be granted planning permission and for our application to be supported by the Environment Agency.

The site has been designed to minimise noise. Any noise from the screw or generator will be masked by the noise of the weir.

Won’t it be visually intrusive?

The site is on farmland on the south side of the weir. It will not be built on the weir. It will be visible from 80 metres away across the weir from the public footpath on the Whalley side of the river and also from the bridge.  The power house has been planted for screening on the river side.

Will it affect the risk of flooding?

We are assured by the Environment Agency who are responsible for flood prevention that the project will not affect flood risk as water is only being removed from the river above the weir before being returned below the weir.

There will be no extra flow down river as a result of the scheme being in place, although there may be a very localised effect to water flows, in that less water will flow over the main weir when the screw is operating, as water will be diverted down the Archimedean screw.

Permission to divert water over the hydro scheme has been granted by the Environment Agency in the form of a Transfer Licence. The conditions of such licences deal with the potential impact on flooding. The Licence requires the system to shut down if the water level falls too low.

What happens when the river is low during a drought?

The screw will be shut down when the river is low. Priority is given to keeping the weir wet and to the fish pass. During flood conditions the screw will shut down as there will not be enough head of water to turn it.

How will it affect fish?

A fish pass, approved by the Environment Agency, has been built beside the screw to allow migrating fish to get up river. The River Calder was dead from pollution until recent years. A major effort has been made to clean it up so that salmon, trout and other fish are now returning but they still have to negotiate the weir. The fish pass will make it easier for them to get up to their breeding grounds. Archimedean screws have been demonstrated to be fish friendly.

The Environment Agency has to make sure that the ecological qualities of UK rivers are maintained or enhanced when new hydro schemes are built. One of its main concerns is to make sure that fish can swim up and down the river as they need, particularly migrating fish like salmon, so the Environment Agency made it a requirement of supporting our hydro scheme that a fish pass was built.

Who will manage the project?

The project will be owned by Whalley Community Hydro (WCH). The WCH Board will manage the on-going operations and maintenance, working with the developer for the annual maintenance checks.

How do I participate in WCH?

Through purchasing shares you become a member of WCH, giving you the right to participate in its decision-making. WCH will operate for the benefit of the community on a ‘one member, one vote’ principle, irrespective of the size of a member’s shareholding. Members will elect the Board of Directors at the Annual General Meeting (AGM) annually, to manage WCH’s affairs.

How will WCH deliver its community benefit?

A key part of our vision for the project is the creation of an on-going income stream to support environmental projects to achieve even greater energy savings and carbon reduction.

In the initial years of the project, we will need to focus income on paying off any loans and delivering financial returns to investors, without whom the project would not be possible, as well as building up a maintenance and decommissioning reserve.

During this phase, community investment will be delivered through the donation of surplus income to support environmental projects.

Once our loan has been repaid, the amount available for community benefit will increase. We estimate that over the first 40 years of the project, the total value of this benefit will be at least £1.2 million at current prices and considerably more if the electricity price goes up.

What happens to my shares if I die?

If a Member dies, the repaid value of the shares will normally be added to the estate for probate purposes. The application form at the end of the share offer document offers the option for you to nominate a recipient for the value of the shares in the event of your death. If you have claimed EIS tax relief, you will be able to avoid Inheritance Tax on the shares if you include them in your will.

Can I hold shares on behalf of children?

Members must be at least 16 years of age. You have the option of holding shares on behalf of someone who is under 16. There is a form for this purpose at the end of the share offer document.

Does my investment qualify for Enterprise Investment Scheme (EIS) tax relief?

The directors of WCH have been given advance assurance from HM Revenue and Customs that shares in WCH are eligible for tax relief under the EIS.

EIS gives individual investors 30% income tax relief on the amount paid for shares if shareholders pay enough tax and the shares are held for a minimum of three years.

The availability of any UK tax relief, including EIS depends on the individual circumstances of each investor. No guarantee or other assurance is given that the activities of the Society will be such as to attract or retain any qualifying status for tax purposes and any person who is in doubt as to their tax position should consult their professional taxation adviser.

The Treasury has announced that EIS will be discontinued for community energy schemes on 30 November 2015. Investments in Whalley Community Hydro after that date will therefore not be eligible for tax relief under EIS. The share offer will however remain open.

How do I apply for EIS?

Each investor does this through their tax return. Whalley Hydro has to apply to HMRC for recognition as a suitable enterprise, four months after we start generating. HMRC have given us advance assurance that we are eligible so will get the recognition when we apply. When HMRC give their approval they provide WCH with EIS3 forms which we pass on to shareholders.  You then include EIS3 with your tax return. If an investor doesn’t make a regular tax return they can write a letter to notify the tax office of their application for tax relief under EIS.

Can I cash in my shares?

We encourage prospective Members to view their investment as a long-term commitment to the project – a one-off investment to generate a long-term financial benefit to yourself, and a lifetime of environmental and social benefit to the community. Shareholders should ideally be prepared to tie up their capital for the long term. Share capital cannot be withdrawn for the first three years of investment, and then only at the Directors’ discretion. However, part of our financial plan is to create a reserve fund to enable investors to withdraw money in cases of hardship or other unforeseen circumstances. This fund can only be of a limited size, especially in the early years, and withdrawal of investment will remain at the discretion of the directors.

Is the £250 minimum shareholding going to deter people on lower incomes from participating in the offer?

Every Community Benefit Society making a share issue has to debate this issue of where to set the minimum holding. To reach our target with a smaller minimum shareholding would require a lot more investors. This would make the administrative costs of dealing with the distribution of share interest and ‘churn’ of the membership too large in relation to the benefits of having more small investors.

We have taken advice from our share issue adviser and talked to people running other similar schemes and have opted for the £250 figure as the best compromise we can reach.

We plan to ensure that people who may not have the funds to invest, are able to contribute to decisions about the disbursement of surplus income for community benefit. We plan to set up a committee to advise the Board on principles for guiding such decisions. Representatives of a range of community interests will be invited to take part in this committee.

Do investors have to be local?

We welcome applications from outside the local area. We expect a substantial proportion of investors to be from the local area but if we are to raise our target funds and ensure that the scheme can go ahead we can’t be too restrictive. As it happens, indications from our list of people enquiring about the share issue are that the overwhelming proportion of applicants will be from Ribble Valley and nearby areas. Most of the very few intending applicants from a distance have strong connections to the area.

What are the major risks associated with the project?
  • Prolonged equipment failure is a possibility, though we believe a remote one as the technology involved is very basic engineering and similar plants have a long life expectancy. The contractor has given us a performance guarantee for the first five years of operation.
  • Prolonged drought and an inability to generate electricity is another possibility, though those with long experience of local weather will regard this as unlikely. The long term outlook according to professional meteorologists is for more rainfall, not less. We have river flow data for over 30 years from a gauging station just downstream from the weir which shows a fairly steady pattern of flows.
  • Looking further ahead there are the possible risks of damage to the installation from floods and the ingress of floating debris etc. The generator building has been built at a height that will put it well above any previously known flood level (the so-called 100 year level). Screening and safety devices built in to the installation should prevent damage to the essential equipment. We have adequate public liability insurance.
  • There is a risk that the price of electricity could collapse but we consider that highly unlikely. The Government backed Feed-in-Tariff, which is much more significant than the electricity resale price in the early years, is guaranteed and indexed for 20 years.
  • Weir collapse is a possibility, but is unlikely after being in place for so many years; it is a sturdy low-tech structure and will be surveyed regularly and renovated when necessary. We have now carried out two sets of stabilisation repairs and are confident that the weir will remain sound for the foreseeable future. Even before the second, larger of the two repairs was carried out, the weir came through the major flood event of 2012 with no noticeable problems.
Other legal stuff we need to tell you.

Anyone interested in making an application for shares in Whalley Community Hydro Limited is advised to take appropriate independent advice. The list of risks contained in this document is not necessarily comprehensive. Shares in the Society are not ‘investments’ for the purposes of the Financial Services and Markets Act 2000 (FSMA), therefore you do not have the level of protection that you might otherwise be offered by that Act or subsidiary regulations. In particular, this document does not need approval (and has not been reviewed, authorised or otherwise approved) by an “authorised person” under section 21 of FSMA or by any regulatory body.

As a Community Benefit Society, Whalley Community Hydro Limited is registered with, but not authorised or regulated by, the Financial Conduct Authority and therefore any money you pay for shares is not safeguarded by any depositor protection or dispute resolution scheme. In particular, you will have no right of complaint to the Financial Ombudsman Service nor any access or entitlement to the Financial Services Compensation Scheme.

Whalley Community Hydro Limited was registered with the Financial Services Authority (the predecessor regulator to the Financial Conduct Authority) on 5 March 2013 (registered number 31253R). We use governing documents provided by Cooperative Mutual Solutions (www. cms.coop), specialists in community investments who have advised us in the preparation and launch of this share offer. Our governing document, the Rules of Whalley Community Hydro, is available to download at www.whalleyhydro.uk, and explains member rights as well as the management and constitution of the Society.

As with any investment, there is risk involved. Should Whalley Community Hydro get into financial difficulties:

  • We may not be in a position to pay interest.
  • We may have to suspend your rights to withdraw.shares
  • You may lose all the money you pay for your shares.

If Whalley Community Hydro is wound up, its assets will first be used to meet its liabilities; next to repay members for their shares; and finally any surplus remaining will be passed onto a charity, society or other body with similar objectives.

As a potential investor you should ask yourself if you could afford to be without the money you would pay for these shares, at least for a number of years? If not, please do not buy any shares.

Acknowledgements

We are grateful to Osney Lock Hydro for permission to adapt their material for use in this document and to all who have asked us questions.