Scotland's small hydro schemes face ruin after being hit with huge backdated bills
Hydro businesses claim the change in bills was sudden with no warning or justification provided
Scotland’s network of small hydro schemes could be in jeopardy after being landed with millions of pounds worth of backdated business rates.
The invoices have been ordered by the Scottish Assessors Association (SAA), a voluntary, non-statutory association of land valuation assessors who set rateable values.
Alba Energy, which represents small hydro-operators in Scotland, claims the SAA decided to reassess its own methodology on rates mid-way through an ongoing battle the two parties are having over previous bills.
It means producers of hydroelectric power across Scotland are being handed unexpected, backdated bills which Alba Energy has strongly condemned as “perverse, punitive and predatory.”
In one case, Inver Hydro on the Isle of Jura on the west coast was issued with a new demand last week for more than than £330,000 - with £157,000 of that to be paid by November 7.
The invoice is on top of the existing non-domestic rates bills which were already the highest of any property on either Islay or Jura and were being appealed. The bill for Inver Hydro is £269,000 more than the small island business had budgeted for rates between now and the end of the financial year in April next year.
According to correspondence from the SAA’s office, Inver was told the additional charge would not be pursued if it withdrew its appeal against the 2023 valuation.
Inver Hydro’s owner John Lithgow said: “We’ve played by the rules, paid our bills, and pursued a lawful appeal.
“To be sent a retrospective top-up bill of over a quarter of a million pounds and told to pay up in a matter of months - and then told it goes away if we drop the appeal - is intolerable. It is nothing short of extortion and is bullying of the worst kind.
“Our small business is a success story within a fragile rural economy. Inver’s generation ensures energy security and has proved vital to keeping the island’s lights on when the local network failed.
“This kind of goalpost-shifting puts locally owned renewable energy and small Scottish businesses at risk and it is totally unacceptable behaviour by a public office.”
Inver is currently building a solar project to better utilise the existing hydro scheme’s available grid capacity and ensure renewable generation continues in the drier months.
The project is believed to become the UK’s first hybrid solar and storage hydro scheme and is due to come online early next month.
Mr Lithgow said the new retrospectively-enhanced Rateable Value (RV) of £676,000 for the 2MW hydro at Inver is perverse when compared with other nearby properties on Islay and Jura.
He said the next highest RV on either island is the Laphroaig Distillery which has a RV of £300,000, meaning that Inver’s hydro scheme – which is housed in a small agricultural shed - is more than double one of the biggest buildings on the island.
He said the 20.5MW Cour windfarm on the mainland adjacent to Jura – with 10 times the capacity of Inver Hydro – has an RV of £597,000. It means Inver has a RV of £338,000 per MW of installed capacity as opposed to Cour windfarm’s £29,122/MW.
Alba Energy claims the change has been applied selectively to appellants, meaning those challenging the 2023 valuations are being hit with even higher bills.
Alexander Linklater, executive director at Alba Energy, said: “In the middle of litigation, the Assessor has declared a brand-new way to value hydro, then re-issued historic rateable values and extra bills for 2023–2025.
“Applying this only to schemes with appeals is punitive in effect.
“For years, hydro schemes have been over-valued by the Assessors compared to onshore wind and other energy generators and this latest manoeuvre makes an already unjust position much, much worse.”
Alba Energy said the retrospective bills should not have been issued while legal proceedings are under way.
The organisation has written to minister for Public Finance Minister Ivan McKee to request a pause on the timing of payment until a resolution has been reached.
The Scottish Government confirmed it had received the letter and will respond in due course. However, a spokesperson said the valuation of all non-domestic property is a matter for the SAA, who are independent of central and local government.
“Non-domestic rates are collected and administered by local authorities and the Scottish Government cannot comment on individual cases,” they said.
Kate Gilmartin, chief executive of the British Hydropower Association, the trade body for the sector across the UK, said: “This isn’t just about rates — it’s about fairness.
“Hydropower operators are facing opaque decisions and retrospective bills with no accountability.
“We need transparency, proportionality, and ethical oversight before this becomes another case study in systemic governance failure.”
The sector-wide dispute over revaluations in 2017 will head to court in Edinburgh on 10 November, before Lord Young.
Alba Energy said it will argue that hydro has been subjected to anomalous and disproportionate rateable valuations for more than a decade, far in excess of other renewable technologies of similar or greater capacity.
A spokesperson for the SAA said: “There is a statutory appeal process to challenge a Valuation Roll entry and it would not be appropriate for the Scottish Assessors' Association to comment on an ongoing legal case.”
According to the Institution of Civil Engineers, more than 85 per cent of the UK’s hydropower is located in Scotland.
Alba Energy said hydro-electric power is the only indigenous form of Scottish renewable energy with most small hydro being designed in Scotland, developed in Scotland, engineered in Scotland and built in Scotland.
Mr Linklater said : “Unlike wind power, small hydro it is mostly owned and operated by Scots. We are not leased out to foreign companies.
“Yet the message from Scottish Assessors is: 'if you want to build green businesses in Scotland, we will punish you for the impertinence’.”
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