Biomass eco project is shut down in £11.5m ‘green’ energy fiasco

January 9, 2014 by  
Filed under Green Energy News

Householders in Wick, Caithness, were to receive their heat and power from a wood-chip-powered plant, run by a not-for-profit company set up by Highland Council.

But, after receiving more than £14million from the public purse, the scheme was mothballed without a kilowatt of green power being produced.

It was originally intended to generate heat and hot water for 500 homes in an area of fuel poverty, using a waste wood-fired biomass system. 

But it failed to deliver and an oil-fired generator had to be used instead.

A report published today by the Accounts Commission, found that “serious deficiencies” led to the “significant” net loss to the taxpayer of £11.5million.

Caithness Heat and Power (CHaP) was set up as an arm’s-length company by the council in 2004, but ran into major problems and had to be taken back into council ownership four years later.

A report published by the Accounts Commission in 2010 uncovered “fundamental failings” in the way the project was structured and managed. 

Highland Council wound up CHaP in 2012, with Ignis Energy taking on the supply of 160 homes previously supplied by the defunct firm.

Yesterday, in a follow-up statutory report into the fiasco, the Accounts Commission said that the scheme should act as a warning to other councils considering similar projects.

The report found desperate cost-cutting measures by Highland Council had seen the loss reduced by more than 25 per cent from initial predictions. But it concluded: “As a result of its own actions between 2002 and 2008 and, in particular, the lack of good governance, the council has not secured value for money from the substantial amount of public money spent.”

Accounts Commission chairman Douglas Sinclair said: “Arm’s-length external organisations can be an option for delivering council services, but only if the necessary safeguards are built in from the start. Caithness Heat and Power was an example of how not to do this. Serious deficiencies in the governance of the project have led to significant loss of public money.

“Highland Council has learned an expensive lesson.”

Tory Highlands and Islands MSP Mary Scanlon said she believed the council had set up the company “in good faith” but added: “£11.5million is a huge amount at any time, but in times of austerity it’s even worse. This is cash that could have been spent on valuable public services.” 

A spokesman for Highland Council, which is controlled by an SNP/Liberal Democrat/Labour coalition, said: “The council fully recognises and deeply regrets the failings of Caithness Heat and Power during the early years of its operation. Since taking control of the enterprise in 2008, the council has worked tirelessly to minimise the losses and to learn lessons to ensure that the failings are not repeated.”

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