Community ownership and local benefit are essential components of a successful energy transition in a complex market democracy. Beauty is often in the eye of the owner.
Government's renewable energy policies for planning, subsidy and tax support for investment have choked off growth in the community energy sector. A restatement of the case for community ownership of renewable is due. We believe community energy is one concrete way for UK citizens to grow a bigger stake in their economy and community, something Theresa May has pledged her government will support.
Feed-in Tariff Review outcome
Government announced the outcome of its Feed-in Tariff (FIT) Review on 17 December (2015) and the massive volume of responses and efforts of so many Co-operatives UK members to make detailed and evidenced arguments have had at least some impact. However, the end result remains extremely challenging for community energy schemes.
Tariffs caps and degression
There will be significant reductions in the tariff rates across all technologies to the extent that many community energy projects will not be viable. However, for some technologies and bands the cuts are less severe than originally proposed. Notably, government has significantly softened the blow to solar schemes under 10 kW and wind in the 50-100 kW range. See the table (below) for all headline tariff rates.
Government will go ahead with a new system of deployment caps under tight cost controls. The final budget has been confirmed as £100 million up to the end of 2018-19. A new cap will be introduced with quarterly limits for each technology, with schemes missing out in one period queued up for the next. The sharp default degressions proposed in the consultation will go ahead and there will be one contingent degression rate of 10 per cent triggered when each quarterly cap is reached.
We know that all this will result in significant and all too often insurmountable uncertainty for communities. However, we do believe that some schemes will find sufficient support in the new FIT and this marginal gain, in contrast to what we faced back in the summer, is a positive pay off for our collective efforts.
Perhaps the best news for community energy and the strongest suggestion that our arguments were heeded is the decision to reinstate six month pre-accreditation. This will give communities an advantage in the FIT race, but given the significantly increased uncertainty in the system generally it’s an advantage that’s lessoned quite considerably.
We don’t believe this is the end of community energy deployment, though undoubtedly we should still expect a big decline. The Renewable Heat Incentive is being expanded which should offer some hope for those interested in community heat schemes of various kinds. And there are already a lot of discussions going on about how community deployment can continue in the new ‘low or no’ subsidy reality.
Whether it’s developing sectoral mechanisms of mutual support, collaborating to bring forward innovations, or navigating our new regulatory framework, continuing to work together will be absolutely essential.
For government's final response see here.
Feed-in Tariff Review response
Co-operatives UK has submitted a detailed response to DECC's Feed-in Tariff (FIT) Review. We demonstrate the disproportionate impact of proposals on community energy, and the knock on loss of the ‘value added’ by this deployment within the context of the objectives if the FIT scheme. By value added we mean the ways in which community deployment performs strongly against all FIT objectives, and how it therefore represents excellent value for money in terms of FIT spend. In answering question 1 we provide analysis of the negative impacts that will result from the proposed tariff rates.
In answering question 15 we make the case for continuing to support community deployment on the basis that it provides the best value for money by performing strongly against all FIT scheme objectives and aligning key interests in our energy transition. Crucially we also cite modeling for how much a decent package of support for community deployment could actually cost.
Our response draws heavily on the excellent work of Quantum for Community Energy England. We know many of our members took the time to respond to Quantum's survey and thus made it possible for the sector to provide detailed evidenced responses to government.
Our final conclusion is backed up by superb modeling carried out by the Energy Saving Trust with the support of Co-operative Energy.
Consultation on feed-in tariff pre-accreditation
In July DECC opened a surprise consultation on ending pre-accreditation and registration processes for energy projects applying for the Feed-in Tariff (FiT). We know from working with communities in the early stages that pre-accreditation is particularly useful for them, and that removal of this option will create significant obstacles for community energy deployment. We've told DECC this in our consultation response. On 9 September DECC announced that despite significant opposition pre-accreditation will be removed from 1 October 2015.
Ofgem Consultation: Non-traditional business models
Following recommendations made in the Community Energy Strategy energy market regulator Ofgem has begun looking at the possible role 'non-traditional business models' can play in our evolving energy system. This is a clear opportunity to talk about possible 'prosumer' co-ops, in which communities generate and directly use their own green energy. We offered Ofgem an insight into co-ops and the prosumer model in our consultation response.
We helped lead a successful campaign to extend EIS for bona fide community energy co-ops beyond April 2015, for what could be up to a year. For more details see here.
The mutual purpose in community energy co-operatives
The Financial Conduct Authority (FCA) prevents community energy schemes being incorporated as bona fide co-operatives because as energy supply regulations prevent the selling of electricity directly to members it sees no mutual benefit being provided. In our view the FCA’s interpretation of what member relations can be legitimately created in a ‘bona fide co-operative’ is far too rigidly focused on the meeting of economic needs through a trading relationship
To better inform our discussions with the FCA we have conducted a simple survey of members of bona fide community energy co-ops. We’ve asked them how their co-op serves their needs, and why they were motivated to join in the first place.
The results of this survey suggest a strong basis for arguing that bona fide community energy co-ops are formed by people who aspire to a citizen-led energy transition, in which communities actively participate in and benefit from the deployment and ownership of green energy generation. Their common aspirations for a democratic and local low carbon energy system, and their common need for a decarbonised environment, are met through being contributing members of their co-op.
Autumn Statement 2014
We successfully led in lobbying government to safeguard tax relief for community energy co-operatives, but further reform is necessary.
Fears that the removal of Enterprise Investment Scheme (EIS) relief would leave community energy organisations in a financial void were allayed in the Autumn Statement. The community energy sector – with notable exceptions – will also benefit from an expanded and improved Social Investment Tax Relief (SITR) scheme. This follows our response to an HM Treasury consultation in which we provided quantifiable evidence of the severe impact a lack of any tax releifs would have for community energy, see here.
Co-operatives UK lobbied for amendments to the fine print of Budget 2014 to support continued growth in community energy generation, and we're looking for you to back us up.
Some of the Budget 2014 provisions appeared to undermine such growth because they removed crucial incentives for community investment in renewables, and removed incentives that made community energy projects viable. We were particularly concerned by the following aspects of Budget 2014 where community energy co-operatives are concerned:
- Enterprise Investment Scheme (EIS) being made incompatible with Renewable Obligation Certificates (ROCs)
- EIS being made incompatible with the Renewable Heat Incentive (RHI)
- Social Investment Tax Relief (SITR) being made incompatible with the Feed-in Tariff (FiT)
- Potential general measures to make EIS incompatible with any government incentive
In consultation with friends in the community energy sector we produced this position paper, which sets out the issues, and makes recommendations based on an existing precedent set by government in 2012.
Community Energy Strategy
Following detailed consultation and research DECC published its Community Energy Strategy in January 2014. Co-operatives UK were closely involved in the Strategy development, and were represented on the main advisory group to DECC, the Community Energy Contact Group. Through this strategy government aims to support a step change in the scale of community energy generation with a target for the UK to produce 3 gigawatts of electricity through co-operative and community organisations by 2020.
To meet their target, government plans to:
- Set up an independent ‘one stop shop’ for advice and support for communities.
- Tackle barriers to community renewables, including difficulties with connecting to the electricity grid.
- Investigate whether community renewables projects can supply local people with electricity directly.
- Ask commercial renewables developers to offer local communities a share in the ownership of wind farms.
- Provide funding for local projects.
The Community Energy Strategy presents both opportunities and risks for the development of a truly co-operative community energy landscape.
Community Energy Case Studies
In 2012 we took an in depth look at community energy co-operatives and used the learning to identify what makes these enterprises tick.
Our report is titled 'Co-operative renewable energy in the UK'.
Community Energy Manifesto 2012
Co-operatives UK was a founding member of the Community Energy Coalition. Our first manifesto in 2012 set out the high level policies needed to grow the sector.