The Community Energy Strategy is launched

CSE’s Rachel Coxcoon weighs it all up

27 January 2014

So, the Government has today published the Community Energy Strategy. How does the reality compare with our hopes?

Firstly, let’s summarise some of the main points, in case you don’t have time to read the 108 pages for yourself. I’ve restricted this list to those announcements that feel genuinely new, rather than the recycled announcements of funds and support already committed (e.g. the potential income streams for community energy work that could come from the Allowable Solutions regime):

Vision and planning

The modelling underpinning the strategy shows a very wide range of ambition and potential for community energy generation, with a predicted range from 0.5 GW to 3 GW by 2020. The upper end of this range represents about 14% of the total capacity of solar, wind and hydro operating in the UK, enough for about 1 million homes. To achieve that high end would require a lot of joint ventures with commercial developers.

The early pages of the strategy note that some responses to the consultation called for the definition of community energy to be “wider than specific projects, ideally supporting ongoing energy-related activities” and goes on to confirm that “these activities are included in our definition of community energy”.

Local authorities, parish and town councils, and social housing providers are not included in the definition of ‘community’. However, local authorities are mentioned in a specific section on partners, the key points from which are that:

  • The Secretary of State has written to all local authority Leaders in England calling for more recognition of the positive benefits that community energy can provide, and a step-change in the support offered to projects.
  • The government will convene a national Communities and Local Government Conference in Oxford, in autumn 2014.
  • It also identifies the potential for Neighbourhood Planning to play a role.

Leadership and management

There will be a new Community Energy Unit at DECC.

Three working groups have been set up to look at specific issues that are problematic for groups working on community renewable energy projects – planning and permits, grid-connections, and hydropower. They are to examine the barriers and report recommendations for removing them to the Secretary of State by July. (No commitment is made to funding their recommendations.)

A Community Benefits Register for onshore wind will be set up this year, possibly to extend to other renewable energy technologies. This will allow DECC to track the scale and type of benefits being offered by wind developers to local communities.

DECC will support the development of the ‘one stop shop’ for community energy advice.

Financial – renewable energy generation

There will be a new £10 million Urban Community Energy Fund, to complement the existing £15 million Rural Community Energy Fund.

To overcome some of the problems small generators face in securing Power Purchase Agreements that are both timely and economically attractive, DECC has taken powers under the Energy Act to enable the Secretary of State to implement an ‘off-taker of last resort’ scheme. This should provide “a backstop route to market at a specified price” and “provide investors and lenders with more certainty that the project can access the market at a competitive price”.

The Government will also assess the potential for smaller generators to join its ‘Energy for Growth’ scheme. Under this scheme, government (as the largest single energy customer in the UK) contracts directly with energy generators, which may allow access to finance as projects will have guaranteed income from a stable long term customer.

As previously highlighted, Government will consult on an increase in the FIT ceiling for community projects, with a view to it increasing from 5 MW to 10 MW, and any outcome of this consultation is likely to be implemented in 2015.

Government is committed to negotiating with the EU on allowing combinations of grants from public funds to be combined with FIT/ RHI without State Aid penalties.

DECC and the Cabinet Office will support the Community Energy Finance Roundtable (chaired by CSE’s Chief Executive, Simon Roberts) to explore further with the sector how to address key obstacles to projects being ‘investment ready’, the availability of development risk capital and debt finance, and issues associated with cost-effective raising of investment from the public.

The renewable energy industry will be encouraged to make a local ownership offer for all commercial renewable energy developments, (though what constitutes a ‘commercial’ renewable energy project is not defined (i.e. scale etc), and nor is the proportion of ownership that should be offered locally). The strategy states that “We expect that by 2015 it will be the norm for communities to be offered the opportunity of some level of ownership of new, commercially developed onshore renewables projects. We will review progress in 2015 and if this is limited, we will consider requiring all developers to offer the opportunity of a shared ownership element to communities”.

The strategy raises the well-known problem of getting finance for projects that need funding to the tune of hundreds of thousands of pounds rather than millions, but then rather brushes this aside by saying this issue is not limited to community energy projects and that schemes such as EIS and the National Loan Guarantee Scheme could help.

Financial – energy saving

Investment in the Green Deal Communities scheme will rise from £20 million to £80 million (though this is for local authority-led applications).

There will be a £100,000 ‘community energy competition’ to incentivise communities to develop innovative approaches to saving energy.

The Big Energy Saving Network will get an extra £1 million.

How does it measure up? My analysis

It’s not a strategy that’s going to scare anyone – nothing radical has emerged, and neither does it seem to contain anything challenging or really transformational in terms of making communities central to both delivery and management of energy resources. And, as we suspected (and concluded in our blog piece last week), the strategy has fallen short on the detail of how its most challenging components will be implemented: How will the Government ensure that less able communities are able to participate? How can the neighbourhood planning tools be used to best effect? Exactly what proportion of project ownership will commercial developers be asked to offer for local purchase?

It’s great to see that there will be a new, dedicated unit within DECC tasked with driving forward this area of work, and we really welcome the extra funding for community renewable energy projects – filling the funding gap in urban areas with the new £10 million fund – and the commitment to clarifying State Aid issues and providing a new route to market via the off-taker of last resort scheme.

However, it’s less than impressive that one of the main tools of implementing increases in community energy efficiency activity is a £100,000 competition. Firstly that’s a paltry amount of funding, and secondly, I think we can all agree that government-funded competitions are a lovely way to get ministerial press coverage, but less useful for establishing replicable, useful models of action!

The strategy lays out a vision that “every community that wants to form an energy group or take forward an energy project should be able to do so”, but does (thankfully) go on to recognise that the Government needs to go further than this and reach out to encourage other communities who are not already active to get involved. However, no detail is given on how work with less able communities would be supported or funded, and this is something we’d like to see more detail on as soon as possible.

I’m sure it wasn’t everyone’s view, and it obviously isn’t DECC’s view, but we think it’s a real missed opportunity that local authorities, housing associations and local councils have not been included in the definition of ‘community’. In this context, it’s odd that Germany is mentioned as a ‘model’ country, where ‘community ownership’ of energy generation resources is fast approaching 50%. It’s openly stated in that section that much of this has been achieved through direct activity by the municipalities and the very strong leadership role they play. It also fails to note the bigger, national level policy driver in Germany that makes all this possible – the transformational Energiewende policies that demand decentralisation of energy supply.

Although not defined as community per se, local authorities are discussed in the section under ‘partnership working’ which urges all local authorities to fully explore partnership opportunities for community energy in their area, and to give due differentiation between community and profit making enterprises when making decisions. They are also encouraged to reinvest the business rates retention from renewable energy in further information, support services and advice for community energy schemes, which echoes the ‘virtual carbon cycle’ that we described in our PlanLoCaL video on reinvesting the profits of renewable energy generation, back in 2011. The Secretary of State has also written to all local authorities calling for more recognition of the positive benefits that community energy can provide.

The biggest disappointment is the lack of detail and ambition in the strategy for the use of local planning tools. The strategy encourages the use of neighbourhood plans to plan for community led renewable energy developments. DCLG are apparently supportive of this and will work with DECC to make sure that the range of advice and support services are able to offer support on community energy. This is a minimal, and extremely overdue commitment. The commitment should be around really broad local planning, which allows communities to have those really big conversations about their available technical resources, and how they can best be utilised in the national interest, for local benefit. It’s frustrating to us that we applied to DCLG for funding to do exactly this back in early 2010. Our proposal called for the provision of a national programme of support for low-carbon neighbourhood planning, which would put a low-carbon future at the centre of neighbourhood planning and provide space for those big conversations to be had. Unfortunately, our proposal was not successful, and we have witnessed four years of ‘generalist’ neighbourhood planning support missing these considerations almost in their entirety.

The real risk of using neighbourhood planning in the way being proposed in the strategy is that it limits communities to thinking about renewable energy in a way that encourages parochialism, not localism; small-scale thinking that will undermine energy planning in the national interest. Indeed, one of the examples given in the strategy appears to explicitly exclude the development of large-scale renewable energy, and contains policies that limit support to renewable energy that is linked to individual buildings (or groups), ‘as close as practicable’, and ‘in scale with’ those buildings. DECC seems to have completely missed the risk that neighbourhood planning can easily be used as a tool to attempt to block development of renewable energy at any useful scale. And that will set communities up for real disappointment and anger, because such policies will ultimately be found to be not in line with national or district policies, and will therefore end up being overruled.

Fortunately, we have been able to secure some funding, partly from the forward-thinking Joseph Rowntree Charitable Trust, which has allowed us to produce resources to help communities think through these sorts of planning issues better; to take account of national needs and local benefits at the same time. We call this work Low Carbon Localism, and it’s a big part of our PlanLoCaL programme of work, which includes really useful resources for communities wanting to plan renewable energy and energy saving projects, or develop a low-carbon neighbourhood plan. You can find all these resources here. Here’s hoping someone at DCLG will have a look at them too and, more importantly, make sure they are used in the work they fund to support neighbourhood planning.

Rachel Coxcoon is CSE's Head of Local & Community Empowerment

CSE is part of the Community Energy Coalition. You can read the Coalition's joint response to the Community Energy Strategy here.

Photo: Brendon Energy