Energy and Climate ChangeWritten evidence submitted by Friends of the Earth

Summary

In summary Friends of the Earth consider that the following key changes need to be made to secure improvements in the development of local energy:

National and local political commitment to the development of renewable energy, in particular onshore wind, and community ownership.

The scale of the Feed-In Tariff must be raised from its current 5MW to at least 20MW, to ensure independent generators and community developers are able to benefit from generating clean electricity. As the Committee have discussed in previous inquiries, the Contracts for Difference model proposed in the Energy Bill will squeeze out small-scale generators, and pose insurmountable hurdles to their participation in the electricity market.

Funding made available for feasibility studies for communities interested in developing their own schemes.

Loans made available to be repayable within reasonable timeframes once the project is connected.

Community right of first access.

Prioritisation of renewable energy to grid.

The encouragement of 100% renewable energy targets in “leader” local authority areas.

Legislative measures to ensure that all local authorities have a duty to act on climate change and for local authorities to have access to better borrowing to invest instruments.

Legislative measures to ensure a mandatory proportion of community ownership to be brought forward as soon as possible following consultation.

Technical advice and planning guidance on public participation and climate change to be published alongside the National Planning Policy Framework.

Introduction

1. This Government needs to be consistent in its support of the development of renewable energy, and to properly and effectively meet its commitment to encourage community-owned renewable energy schemes.1

2. It is important to recognise at the outset that there is a high net social benefit from the development of renewable energy at all scales. Rapid decarbonisation of the electricity system is essential if we are to meet our legally binding climate change commitments. The Committee on Climate Change consider that “any path to an 80% reduction by 2050 requires that electricity generation is almost entirely decarbonised by 2030”—The Committee on Climate Change, Building a Low-carbon Economy (2008).

3. Onshore wind is the most mature and cost-effective technology available for deployment at scale to meet this need, whilst other renewable energy technologies are rapidly reducing in cost: solar power has halved its cost in the past two years and offshore wind is anticipated to reach £100/MWh by 2020. It is also important to recognise, however, that currently the benefits and costs of installing renewable energy are not evenly distributed, and Friends of the Earth entirely supports the principle that areas which host (for example) large scale wind power developments should be developed with the community and local benefit derived. Renewables, and wind energy in particular, provides a feasible model for community enterprises to own all or part of an installation. Camco and Baker Tilly estimate conservatively that there is potential for 3.5GW of clean power from community and cooperatively owned energy by 2020, suggesting the potential contribution community energy can make to our energy needs is very great indeed.2

4. However, the development of onshore wind, particularly, has been hampered in the UK by the dominance of large energy companies. In the context of privatisation, public and community interests must also be protected. In countries where acceptance and approval of wind energy is highest such as Germany and Denmark, there is far greater community ownership and tangible benefits in the form of jobs. In Germany only 11% of onshore wind is owned by utilities companies. In Denmark, there is some resentment against the more recent developments of larger wind farms with less community ownership and less local benefits, particularly in terms of jobs, demonstrating that this is a key factor in public support for development.

5. Onshore wind in the UK suffers from a lack of transparency and consistency over community engagement and benefit, but is also delayed by lack of community consensus about the need for and the planning required around developments. In addition, the Planning Inspectorate are currently not promoting the Section 19 duty contained within the Planning and Compulsory Purchase Act 2004 (amended by Planning Act 2008) that requires that all local development documents contribute to mitigation and adaptation to climate change—pointing up the need to legislate to ensure that local authorities are focussed on tackling climate change. The Committee on Climate Change also recommended a duty for local authorities to tackle climate change. Every local authority should have a target to deliver their share of renewable energy in the way that best suits their locality.

6. It is also the case that development of onshore wind in the UK has become highly politically polarised to an extent that is not seen in other countries. It is important that national legislators and the Planning Inspectorate maintain the principles of evidence based policy making and decisions. It is also important that politicians recognise the scale of the challenge, and the tangible benefits of energy security and safeguarding against increasing energy costs of renewable, local energy infrastructure.

Financing

7. In the Energy Bill currently before Parliament, the Government has set its face against expanding the Fixed Feed in Tariff system that has been used widely in other countries to great effect in deploying renewable energy and diversifying the market, instead preferring the highly complex Contracts for Difference (CfDs) model. Previously, the Energy and Climate Change committee has found that smaller and independent generators would be “squeezed out” under contracts for difference.3 There are three key reasons for this:

CfDs end the existing guarantee that renewable energy will be bought. Both Renewables Obligation and Feed-in Tariffs require energy companies to buy the electricity produced.

CfDs create near insurmountable hurdles to small investors and independent generators, such as a need to post collateral of many tens of millions of pounds, pay imbalance fees and fees for trading services and to set up a trading arm involving extra specialist staff.

CfDs introduce huge trading uncertainties for renewable energy generators, creating an even greater level of uncertainty over what price they will receive for the electricity than under the Renewable Obligation, increasing the cost of financing.

8. In order to at least go some way towards remedying these problems, the scale of the Feed-In Tariff must be raised from its current 5MW to at least 20MW, to ensure independent generators and community developers are able to benefit from generating clean electricity.

9. Additionally, in order to kick-start community ownership of renewables, the Government must do more to support schemes through the crucial first phase of development. The Government must provide: a) Feasibility study money to communities, and b) Loans which only need payback once scheme is up and running.

10. Feasibility study funding examples can be found in Wales where the Welsh Government launched the “Ynni Fro” scheme in 2012: “The Welsh Assembly Government initiative is backed with over £7 million from the EU’s European Regional Development Fund and will generate an investment of £15 million in community energy projects in Wales and will also provide a seamless service guiding communities in Wales through the process of developing renewable energy projects.”4

11. Local authorities should be a much bigger player in the development of community energy—it would be feasible for every single local authority to have a stake in helping to develop (through accessing public land—particularly eg contaminated land/brownfield), providing investment and certainty, and reaping the benefits to cross-fund eg retrofit for those most in need (social justice).

12. Local banks, such as the Sparkasse and Volksbank in Germany, or the GLS (based in Bochum, Germany) which specifically provides loans for projects with environmental and social benefits, could be another part of the equation which should be considered to provide the investment needed to get a radical transformation of the delivery of community renewables, in particular for those most in need (suffering from inability to lower their demand for energy given their poor quality housing, and subject to volatile price rises in energy bills from fossil fuels particularly gas).

13. In Germany there is also a community right of first access to the energy they generate. One example is of a village outside Berlin that had its own wind turbines and was able to buy back the electricity they generated at the same (wholesale) price they supplied it. They were buying electricity at €0.13cents/kWh when Berlin prices were €0.23cents/kWh. The prospect of cutting over 30% off an electricity bill profoundly changes the local debate about whether something is desirable or not.

14. The UK also needs to simply get on with a roll out of two way meters. The importance of this is summarised by Alan Simpson (2012)5 as follows: “Since 1990, German citizens have had a legal right to be producers and suppliers of electricity to their grid system. Two-way meters are a given, not an experiment. German households expect to know how much energy they produce as well as how much they consume. While Britain still plods through a tortuous debate about ‘trials ‘of two-way meters, the Germans have been using them to transform energy politics. The right to generate became the power to transform. It also provided the platform for constructing a more open, democratic and sustainable energy market.” Options for introducing this in the UK should be urgently considered.

Community Engagement

15. The new National Planning Policy Framework fails to mention public participation, which is not consistent with the Aarhus Convention on public participation in environmental decision-making.6 It is essential in order to build public trust and legitimacy that a clear process of engagement is adhered to across the board so that communities know what to expect and are involved at the earliest possible stage (in all planning decisions) which includes wind farm developments.

16. Developers often stigmatise the planning system as a problem—but the solution is actually to understand and support what the planning system offers in terms of a legitimate, accountable and impartial process. Community engagement should be secured at the earliest stages of the process, rather than after the planning application is submitted. Political commitment to tackling climate change has to come from the highest levels of Government—and through the local plan process.

17. The local plan offers an opportunity to understand the energy needs of the area, and to then identify ways in which those energy supplies will be secured in a way that is participative. Mapping for renewable energy is now part of national planning guidance (paragraph 97) but can be largely ignored by local authorities as there is no further guidance on what this might mean in practical application, or what the Government is expecting all local authorities to do with their communities in order to build a sense of opportunity and ownership.

18. A local plan that goes through consultation and good participative processes will create better community understanding of the wider needs of the community, and to understand potential sources of supply such as wind, and following that to understand where these developments could possibly go. Local knowledge of opportunities and constraints is crucial to making better and more consensual decisions. Unfortunately there is insufficient planning guidance on this topic from the Department for Communities and Local Government.

19. For instance previously planning policy (PPS1)7 contained the following guidance (paragraph 43):

“Community involvement in planning should not be a reactive, tick-box, process. It should enable the local community to say what sort of place they want to live in at a stage when this can make a difference. Effective community involvement requires an approach which:

tells communities about emerging policies and proposals in good time;

enables communities to put forward ideas and suggestions and participate in developing proposals and options. It is not sufficient to invite them to simply comment once these have been worked-up;

consults on formal proposals;

ensures that consultation takes place in locations that are widely accessible; and

provides and seeks feedback.”

20. Article 6 (4) of the Aarhus Convention states that: “Each Party shall provide for early public participation, when all options are open and effective public participation can take place.” The ODPM’s “Community Involvement in Planning”8 is also a useful, although now archived, resource.

Barriers to community engagement

21. The common barriers to community engagement in wind development are:

lack of ownership over the project;

failure to engage at an early enough stage to influence the outcome, the “what colour do you want the gates” problem;

lack of agreement on the solution, for instance that the development is needed or appropriate

lack of understanding of the scale of renewable energy development required, what this would mean in practice, and the impacts it would have ;

lack of trust in developers, particularly larger companies who may for instance also be charging very high energy bills (feels exploitative);

lack of local and national political commitment to tackling climate change through developing renewable resources such as wind;

the time needed to engage properly is often considered too “costly”; and

developers are inhibited from engaging by a sense that hostility will be stirred up against a proposal by organised objectors regardless of its merits.

22. A number of different approaches can be used through the planning system in order to address these barriers—early engagement, meaningful involvement in the development of the project, and a real recognition of the benefits of the pathway to securing reliable, renewable and local sources of energy.

Community engagement in Germany

23. Germany has benefited from a different approach which has seen a much more successful and secure planning system functioning, and beneficial rights, duties and ownership. The legal powers given to localities play a big part in this, and it plays a big part in the German approach to all renewables, not just wind.

24. It is much easier to make the step to taking individual or community control of energy in Germany because of the ways in which the system has been transformed. Community engagement by contrast in the UK results in more or less community benefit fund, but none of the real devolution of power available in Germany. Planning processes and outcomes are much more certain in Germany because the system is functioning much more effectively—it is much more devolved, but also much stronger and clearer.

25. Cities such as Berlin, Munich and Frankfurt aim to have 100% of their electricity from renewable sources by 2025. This ambition is an important part of the community engagement and interaction with leadership.

Community engagement in Denmark

26. Grassroots development of wind energy in Denmark is the main factor behind public support for the widespread use of this technology. In addition the Danish local authorities map their renewable energy resources (and have been doing this for last 30 years) resulting in the entire country being mapped with respect to wind intensity and landscape. Each local authority in Denmark has to find areas for development in line with national planning rules which help the country meet its national target. Local planning engages the public in the development of areas and policies. Public communication of the production of wind electricity is done through a website where the information is provided on an up to date basis. This has been beneficial in building confidence in the technology as workable and effective. A strong community of researchers has also been beneficial in providing independent evidence and conclusions on wind energy, helping to build trust. The initiative of the island of Samsø—in developing itself as a model of energy self-sufficiency—helped change the view of the national Danish Government in demonstrating the potential of renewable energy development through what they achieved. Further references are included at the end of this evidence on Danish experiences.

Community Benefit and Ownership

27. Community benefit suffers from inconsistency in the UK. Communities are not clear about what they can expect, what is ‘affordable’ for the project, and who to trust. Friends of the Earth agrees that there needs to be clear legal agreements about the community benefit fund—separate to the Section 106 agreement the developer may have with the local authority, and negotiated through separate channels to avoid an impression that planning consent is being “bought”. There should be more guidance on thinking over the lifespan of the project (25 yrs + funding stream), identifying the type of benefit sought at the outset, such as: community resilience to rising energy prices and climate change; empowering communities to harness local resources; landscape scale biodiversity and ecosystem services gains. This can be problematic given that the legal ownership of a scheme will typically change more than once during its full lifespan from concept through consenting, construction, operation, re-powering and decommissioning. Unfortunately working out the price per MW that is fair for the community often depends on financial calculations that are opaque and depend on the productivity of the wind farm when up and running.

28. The Joseph Rowntree Foundation in their report, Wind energy and justice for disadvantaged communities,9 sets out the key issues for community benefit in the UK:

“Two observations are key here. Firstly, the long-standing industry “benchmark” for community benefits of ￡1000 per megawatt (MW) of installed capacity per annum (RenewableUK, 2011) seems very low. It falls below the sums that some recent projects have offered, of ￡5000 per MW, discussed below. It also falls below the equivalent revenue that a community might expect if they had some ownership stake in the facility. For example, the Stirlingshire village of Fintry negotiated community benefits that took the form of community ownership of a 2.5MW turbine within a wider, commercial wind farm. This stake will generate c￡50,000 per annum while loans are being paid off, then ￡400,000 per annum thereafter. Secondly, the balance of power between the parties in community benefits negotiations is very important; an issue which ties together distributive justice and procedural justice. Research suggests that, until very recently, wind energy developers had the greatest freedom to determine how much community benefit to provide, based on their assessment of what is affordable and appropriate for a given project (Cowell et al., 2007). This deference to developers is reinforced by the conventions of British planning which, as noted above, mean that the provision of community benefits cannot legitimately be considered when making consent decisions unless they mitigate a specific, acknowledged impact (Ennis et al., 1993). Any influence exerted by “host communities” extends only to the form of community benefits, not the level. It matters a great deal who decides “how much community benefit is enough?” One might reasonably be anxious that small, disadvantaged communities lack the capacity to negotiate a “good deal” with major, international developers (see van der Horst and Toke, 2010). Giving potentially affected communities a more effective voice in decision-making processes may enable higher levels of community benefit to be delivered. It will also enable better appreciation of how the different communities affected by a wind farm project value their environment, and thus a more comprehensive assessment of benefits and harms.”

29. As JRF recommends, better public participation in the local plan stage as well as at the pre-application stage is crucial, but a mandatory proportion to be given into community ownership would also provide a level playing field for developers and communities, alongside much greater financial support and certainty for wholly community-owned schemes.

30. Friends of the Earth is convinced that there should be a mandatory community ownership offer from the development of all onshore wind as a percentage of the scheme. This could then be factored into business models for exploring, financing and building the projects. The Government should also consider funding feasibility studies or providing wind resource mapping on a GIS facility so that the best areas for development can be transparently identified with communities, and areas that are suitable for smaller community developments can be identified with communities.

31. Problems that are encountered in traditional ownership models are the difficulties in raising money if approval is not certain, the fact that wealthier individuals or communities will benefit more easily than those most in need, and that there is little understanding and confidence in many communities about taking on such a project.

32. There are options for co-ops as follows: a) General “share issue” based coops (where it should be specified that no one can own more than 10% of the shares so as to avoid speculators/power companies dominating). b) Community of Interest coops, where (eg) the National Trust were to offer shares to their members for renewable energy projects on National Trust lands; and c) Locality based coops, where the ownership was restricted to those within the defined boundaries of the community.

Examples from Germany

33. Community ownership and the proliferation of decentralised energy schemes has transformed the grid in Germany. If the UK wants to see a similar transformation to decentralised energy, it needs to drive community ownership and focus on the contribution that small to medium sized projects make to the grid rather than focussing on macro solutions. The drive in Germany is now for community ownership of the grid as Alan Simpson points out in his paper (2012):10 “German citizens not only own renewable power installations individually. There are also a huge number of localised distribution initiatives that socialise energy supply. This includes the current initiative in Berlin to buy the power distribution network from the utility Vattenfall. There has been a rapid expansion of their community energy systems.”

34. Decentralising energy to communities, means decentralising ownership and systems. Planning is a means to deliver that decentralised system, but it requires financial support and legislative change. Simpson (2012) also points out the further benefits of the German transformation. “Advanced, low-cost, renewable energy is, much like the internet, highly distributed. It requires ‘uploading’ of energy on a decentralized and intermittent basis. Uploading this new energy is forcing new (and different) investment in the grid. The German grid is the most reliable in Europe, with the average consumer experiencing only 19 minutes of downtime in 2009. This was despite the fact that the German grid now copes with the stresses and strains of its 20% of renewable energy capacity (RWE, 2011). A combination of intelligent simulation tools, good control systems, solid engineering and innovative power electronics has allowed the German grid to achieve this stability and strength.”

Examples from Denmark

35. Community ownership in Denmark is set out in law that when a project with a certain height is being set up, a minimum of 20% is offered to the community11. The creation of local jobs and the employment figures in the wind industry in Denmark have definitely been a factor in getting community support for the development of wind energy. Local maintenance and aftercare (eg landscaping) jobs have also been consistently offered locally so that there is a tangible link between jobs and the development.

Conclusion

36. Friends of the Earth hopes that the Committee will consider the feasibility of making community ownership mandatory as a proportion of the overall project over a given size.

37. The Coalition Agreement talks specifically about promoting ‘community owned, renewable energy generation’, but this is not explicitly promoted in the National Planning Policy Framework. Communities can then feel confident that any development will deliver a benefit to their community, in a way that is fair.

38. Alongside community ownership there must be clear local and national political commitment. As the Climate Change Committee recently recommended there should be a legislative duty on local authorities to tackle climate change mitigation and adaptation—this would be a factor in driving forward local plans that address the challenge of the Climate Change Act seriously and responsibly.

39. Financing measures must be properly considered—ranging from feasibility to loans, to local authority borrowing.

40. The Committee could also consider the matter of additional planning guidance is provided to local authorities (note the Taylor Review on planning guidance due to conclude with additional practice guidance to be issued—without consultation—in July 2013) to ensure that issues like the new viability policy introduced in March 2012 in the changed framework for England do not jeopardise the delivery of community energy infrastructure.

Further References

The Danish island of Samso—a model of energy self-sufficiency | Journal Reporter

http://www.youtube.com/watch?v=4UE5Pl4p2nY&feature=related

Island in Denmark produces more energy than it consumes

http://www.youtube.com/watch?v=FmJxUsXWajo&feature=related

Danish Government on green economy

http://www.ens.dk/Documents/Netboghandel%20-%20publikationer/Pjecer%20uden%20isbn/Our_green_economy.pdf

DONG Energy CEO—Interview about energy savings

http://www.euractiv.com/energy-efficiency/dong-energy-exec-energy-savings-interview-512570?utm_source=EurActiv%20Newsletter&utm_campaign=111cf57af5-newsletter_energy&utm_medium=email

Danish Energy Outlook 2011

http://www.ens.dk/en-US/Info/FactsAndFigures/scenarios/scenarios/Documents/Danish%20Energy%20Outlook%202011.pdf

Maps from the Danish Energy site

http://193.88.185.146/website/energidataKort/viewer.htm?starttema1=vindkraft

Map of wind resources—Danish Example

http://www.emd.dk/files/windres/images/RES_DK99_25pct.gif

Two maps showing the change over 24 years from 1985 to 2009 in Danish development of wind energy

Map of power production 1985

http://www.ens.dk/da-DK/Info/TalOgKort/Energikort/Download_faerdige_kort/PublishingImages/Kort_1985_veksel_j%C3%A6vn.png

Map of power production 2009

http://www.ens.dk/da-DK/Info/TalOgKort/Energikort/Download_faerdige_kort/PublishingImages/Kort_2009_veksel_j%C3%A6vn.png

Case Study: E W Energy Ltd

This company is a joint venture between Community Energy in Pembrokeshire (CEP) Ltd and Seren Energy (SE) Ltd. CEP is a social enterprise engaged in promoting renewable energy in Pembrokeshire and SE is a developer of sites for community scale wind turbines. Its plan is to own a 500kw wind turbine in Pembrokeshire.

For many community groups, the raising of risk capital to develop a scheme is difficult if, not impossible—typically submitting a planning application for a 500kw wind turbine will cost around £50k and there is no guarantee of success.

CEP was in this situation and by teaming up with Seren this hurdle was overcome—as SE agreed to submit the application for a minimum fee. CEP have access to some grant funding and the amount raised by the group will determine the % of ownership of the project by the group.

Once consented the costs of the project, around £1million, will need to be secured. The main lenders in this market sector, Co-operative and Triodos Bank recently stopped lending to projects of this scale making funding difficult. It is anticipated that the project will be funded through a combination of grants, equity sale and venture capital. Fortunately, the Welsh Government has a fund which should provide some of this.

Several sites were identified by an initial feasibility study and the best prospect was agreed by both parties in Autumn 2011.

Several months were then spent on the legal details of such an arrangement, including creating the company, shareholders agreement and option to lease agreement with the landowner.

The technical work on the application is ongoing, with CEP liaising with the community and councils and SE carrying out the studies and reports necessary for such a scheme.

It is hoped that a planning application will be submitted in early 2013.

April 2013