Analysis: Community energy wishlist

The government is shortly due to issue an update on its strategy to promote the deployment of community energy. Saffron Johnson asks the industry what it hopes the government will do next.

Community energy is one part of the new energy landscape that will “weather the political storm”, according to former energy minister Ed Davey. He told a recent gathering of investors that, while in office under the last government, he faced opposition to community energy from civil servants who “weren’t very keen”, but he remained convinced that the way to roll out new forms of energy successfully was to ensure support at a grassroots level. So convinced, indeed, that he now chairs Mongoose Energy, a community energy co-operative that aims to “change the nature of energy generation and supply”.

Davey is just one of a number of industry heavyweights to line up behind community energy. Former RWE Npower group chief executive Volker Beckers chairs Albion Community Energy, and high-profile figures such as Ian Marchant, former SSE chief executive, and Paul Massara, former Npower chief executive, are now involved with solar companies.

But is the government as committed to the model, which aims to get communities to buy in to renewable energy projects – literally and figuratively? Community energy is a complex and multi- faceted concept that was first set out in the government’s 2014 community energy strategy. This was vague in its definitions but went beyond the community benefit model, often dismissed as “bribery”, to assure people a stake in the infrastructure appearing in their neighbourhood.

The strategy covered a multitude of funds and initiatives – none of them large, many recycled from earlier announcements. The biggest number was £10 million for an Urban Community Energy Fund, and the strategy also included an unbudgeted “one-stop shop” for information on how to develop a community energy project.

The potential rewards set out in the strategy were not huge either: on the power generation side, 60MW of renewables running in 2014 were “community-owned”. By the Department of Energy and Climate Change’s (Decc’s) most optimistic projection, this will rise to 3GW in 2020. A fifty-fold increase in six years would be impressive, but it still only gets to 1.4 per cent of forecast electricity demand.

Since the community energy strategy was set out, policy changes and subsidy cuts have dramatically affected the sector. Decc is due to reveal the results of a sector survey later this year that will assess the impact of the strategy, the needs of the sector and explore the future of community energy. 

Ahead of this strategy update, Utility Week asked key players in the sector for their wishlist:

1. Innovation funding

After the spending review in November 2015, the government allocated £500 million over five years to Decc’s innovation programme, with an overarching aim of reducing the costs of decarbonisation. Half of this was applied to nuclear research and development and the community energy sector hopes that some of the remaining £250 million will be directed towards community energy innovation. Jenny Coles, Plymouth City Council’s low-carbon city officer, who works closely with Plymouth Energy Community, says: “We need policy mechanisms that will support innovation, specifically based on local models and generation projects.”

2. Tax relief

The government recently withdrew Enterprise Investment Scheme (EIS) tax relief for community renewable energy and many companies expected it to be replaced with Social Investment Tax Relief (SITR) without which, it is “much more difficult to raise a large amount of funds”, according to Bristol Energy Co-operative. Plymouth Energy echoes calls for the reintroduction of tax relief, saying it offers an incentive to smaller investors to join the “ethical investment space”.

In a recent meeting between energy minister Andrea Leadsom and Regen, Leadsom defended the government’s move, saying the EIS tax relief is for high risk investments and was removed for community energy groups because it was being abused by developers. In response, Regen asked Decc to make SITR available, since it was for social investments. Decc declined to comment on the meeting, saying it was a constituency meeting and not a ministerial one, and therefore Leadsom was not attending on behalf of Decc.

3. Stable policy environment

Regen believes significant changes to government policy surrounding renewables, including the removal of tax relief and the reduction of the feed-in tariff (FIT) have “dramatically affected the sector over the past few months” and have been “very detrimental”. Giles says: “To cut it [FIT] as much as they have, has basically undermined the existing business model for most community energy projects.”

Bristol Energy Co-operative notes that there have been “at least three very quickly implemented changes to the rules and rates” around FIT, introducing challenging deadlines for the companies to work up and install projects before the changes take effect. It suggests a more gradual tapering off of FIT rates would be more beneficial.

4. Public commitment

A mood of frustration within the sector is tangible, with some companies urging the government to publicly state its support for community energy schemes. “At the moment the government doesn’t even appear to understand what community energy is,” says Giles.

Plymouth Energy would like to see a “reflection of how important it is for people to get involved” in government policies, while the Community Energy Coalition (CEC) believes “more needs to be done to increase people’s awareness and support for renewable energy projects”. This in turn would increase energy saving, according to a report the CEC published in 2012 setting out a vision to dramatically scale up community and co-operative energy by 2020. The CEC was initially enthusiastic about the launch of the UK’s first Community Energy Strategy but has since described the community energy sector as pushing on in the “face of storm clouds”.