Conclusions and recommendations
Local energy in the UK
1. Given
the potential benefits, DECC should do more to promote joint ventures
between community groups, private and public sectors. We recommend
that the option for a local ownership share in new energy projects
should be added to the industry's Community Benefit Protocol.
(Paragraph 21)
2. As we noted in
the introduction, there are a range of different ownership models
for projects at the medium scale, including private landowners,
farmers, local authorities, other public sector organisations
and commercial organisations, as well as those owned by community
groups. However, there is a lack of research showing what the
combined contribution of these different types of projects could
be. We recommend that DECC carries out an assessment of the
potential that 5-50MW projects of all types could play in the
UK's energy mix. (Paragraph 22)
Benefits of local energy
3. DECC
has chosen to focus narrowly on just those projects that are run
by community groups in its most recent consultation and therefore
is likely to overlook the contributions that other types of project
could make to opening up new sources of finance. We recommend
that DECC broadens its outlook and assesses the role that medium-sized
projects with different models of ownership could play in the
energy mix as well as what sources of finance might be available.
(Paragraph 27)
4. We note that while
the scope and nature of the impact of local energy projects on
consumer costs remains uncertain, the advantages of local energy
projects in terms of increased diversity and flexibility of supply
are apparent. Local energy projects also have the potential to
broaden public understanding of energy issues, encouraging energy-conscious
behaviour and greater engagement in carbon reduction initiatives
at community level. (Paragraph 31)
Overcoming barriers to local energy projects
5. Although
the National Planning Policy Framework states that local authorities
should consider identifying suitable areas for renewable energy
development, Government needs to do more to encourage local authorities
to adopt this approach in practice. It should also encourage local
authorities to develop clear guidance about what is expected from
local energy projects, to reduce uncertainty and risk in the planning
process. This approach is also more likely to prevent bad projects
from coming forward. While we recognise and support the Government's
ambition to return decision-making powers to local authorities,
carbon reduction is a national priority. National level planning
guidance on key technical issues would help to improve consistency
between different local authorities and would help to ensure that
only genuinely local issues were addressed through the local consenting
process. We recommend that Government incorporates such guidance
as part of its planned reform of the existing guidance suite.
(Paragraph 37)
6. The current landscape
for accessing "at-risk" finance is fragmented and in
some cases restricted to certain geographical areas. We welcome
the Government's introduction of a community energy fund, however
we note that it is not just rural communities that experience
difficulties in raising "at-risk" finance for local
energy projects. We also fear that the high premium repayable
on the loans from this fund may discourage applicants. We recommend
that the Government considers how support might be extended to
other organisations that are interested in local energy projects.
The Scottish Government's Community and Renewable Energy Loan
Scheme provides a useful model that could be emulated either by
DECC or by the Green Investment Bank. DECC is aware that the
PPA market currently poses difficulties for independent generators
and this situation is only likely to get worse with the move from
the Renewables Obligation to Contracts for Difference. We raised
this issue a year ago in our report on the draft Energy Bill.
It is therefore disappointing that the Government has not come
forward with an adequate solution. If Government is serious about
increasing competition in electricity generation it must come
forward with a credible solution urgently. (Paragraph 50)
7. Cost of connection
and lack of capacity in the grid to take new connections without
significant upgrading, are hindering the development of local
energy projects. As a first step, we recommend that Ofgem requires
DNOs to publish maps detailing where there is connection capacity.
Once the scale of the issue is known, Government should assess
the options for facilitating grid connections for small and medium-sized
renewable developments, in order to ensure that local energy renewables
have "priority access" to the grid wherever possible.
Government should also provide advice on grid connection as part
of the advice service suggested in paragraph 63 under 'Advice
and Support Services'. We also recommend that Government reviews
the arrangements between suppliers and District Network Operators
so that connections can be better facilitated. We agree with Community
Energy Scotland and recommend that DECC review the current RIIO
TD-1 business plan for National Grid, and the proposed RIIO ED-1
business plans for DNOs. (Paragraph 55)
8. We commend DECC
for undertaking to extend the Feed in Tariff threshold to enable
projects of up to 10 MW in size to access this support mechanism.
This should provide greater certainty for small to medium-sized
local energy projects to come forward and is a step in the right
direction. However, projects between 10MW and 50MW will not be
served by Feed in Tariffs and are unlikely to be able to access
Contracts for Difference, which are geared toward much larger-scale
developments. There is a risk that these projects will be disadvantaged
by the move from the Renewables Obligation to Contracts for Difference.
We recommend that Government brings forward an alternative
proposal to support projects within the 10-50MW range to incentivise
the development of medium-sized projects which cannot access either
Contracts for Difference or Feed in Tariffs. (Paragraph 61)
9. We
are concerned that the current definition of "community organisation"
under the Feed in Tariff Order 2012 risks excluding community
energy projects which operate under a "trading and subsidiary"
model. We recommend that DECC amend the definition to ensure
that these projects are eligible. We also recommend that DECC
consider introducing a minimum level of local ownership or membership
within the definition of "community organisation".
(Paragraph 62)
10. Community-owned
energy projects have to rely on the goodwill of volunteers to
get projects up and running. However, not all projects are able
to access the expertise and specialist knowledge that is needed
to get projects off the ground. The Government should introduce
an advice service that can provide support to community groups
on issues such as how to finance a project, ownership structure,
the planning process, energy technologies, the energy market and
the various support mechanisms that are available. Community Energy
Scotland could provide a useful model for how such a service might
operate. The appetite and capability for local authorities
to undertake local energy projects varies across the country.
Government should introduce guidance and support for authorities,
which sets out the pros and cons of investing in energy projects,
in addition to national planning guidance as recommended in paragraph
37. It should also develop "best practice" guidance
for those that would like to go down this route. (Paragraph
68)
11. We have recommended
ways in which Government could help to improve access to finance
(paragraph 50), develop appropriate support mechanisms (paragraphs
61 and 62), reduce risk in the planning process (paragraph 37)
and improve access to support and guidance (paragraph 68). If
the Government is serious about supporting community-owned energy
projects, it needs to develop a package of measures that will
help to address all of these barriers simultaneously. Addressing
only one or two will not be sufficient. The Government should
also set out its expectations in terms of what such a package
of measures could deliver in the form of an indicative target.
(Paragraph 70)
Public acceptance of energy infrastructure
12. We
welcome DECC's proposals in conjunction with DCLG to introduce
best practice guidance on community engagement and compulsory
pre-application consultation for larger wind farms. These measures
should help to encourage earlier and better quality consultation
with communities, leading to greater public acceptance. DECC
should consider extending these guidelines to cover other local
energy projects in addition to wind. (Paragraph 74)
13. There are strong
indications that some level of local ownership can help to boost
support and reduce opposition to energy infrastructure projects.
We welcome the fact that DECC is seeking to develop a more robust
evidence base on this issue. If the evidence shows that local
ownership does indeed improve acceptability, we recommend that
the Government encourages the industry to offer a stake to local
residents for all new developments (perhaps by revising industry
guidelines such as the Community Benefit Protocol). If the industry
does not respond, the Government should consider the option of
making a community ownership offer mandatory for all new developments.
(Paragraph 78)
14. The idea of providing
cheaper electricity to the communities living close to energy
infrastructure projects has merit. It would provide a tangible
and visible benefit to people living near to development sites,
which could act as compensation for any negative impacts associated
with the project (such as aesthetic impacts). We encourage
the Government to monitor the various initiatives that are emerging
in this vein so that it can assess which approaches are most successful.
This includes discounted tariffs, discounted bills and any projects
going forward with a 'Licence Lite' derogation. DECC should also
investigate whether the Licence Lite route is accessible to community-owned
projects and, if it is not, should consider exercising the powers
that have been proposed in the Energy Bill to amend electricity
licence conditions. (Paragraph 84)
Conclusion
15. Medium-scale
energy projects could contribute a significant amount to UK energy
supply, but because DECC policy has focused either on very large
or very small (<5MW) schemes, the evidence to quantify this
is not available. We think there is room for medium-scale projects
to contribute to the UK's energy mix.
(Paragraph 85)
16. While the Government
has been explicit about its support for community energy projects,
it has neglected some other options, including projects owned
by local authorities and projects owned by private sector (commercial)
organisations. This means potential for new capacity and new sources
of finance is being missed. (Paragraph 86)
17. There is a need
for a comprehensive package of measures addressing planning, grid
access, support mechanisms, finance and advice. Addressing only
one or two of these issues will not be enough to create the right
conditions for local energy projects to flourish. (Paragraph 87)
18. Joint ventures
are beneficial: community groups benefit by accessing expertise
and finance from commercial partners, and commercial partners
benefit from increased local support. Government should do more
to promote this approach and to provide more central guidance.
It is notable that the new Office of Unconventional Gas and Oil
is examining community benefits from shale gas as a priority,
and perhaps such an approach could be adopted for medium-scale
energy projects. (Paragraph 88)
19. In a system geared
toward large-scale generation, medium-sized local energy projects
are struggling to gain a foothold. However, it is these smaller
local schemes that have the best hope of engaging communities,
raising energy awareness and increasing public acceptability of
new low-carbon infrastructure. The Government must do more to
encourage medium-sized projects, particularly in the 10-50 MW
range, if we are to realise the full benefits and potential of
local energy. (Paragraph 89)
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