Energy and Climate ChangeWritten evidence submitted by OVESCO Limited
What contribution could medium-sized energy projects (5–50MW) make to the UK’s climate change, energy security and energy affordability objectives?
At least 10MW/site (a typical medium size five turbine wind farm using 2MW turbines), but ideally more and 50MW could be achieved by a single project with the right project loation, support from government and banks.
What different models of ownership exist for medium-sized energy projects and how prevalent are they in the UK?
Cooperatives UK have identified models for ownership and the potential growth in their Community Energy Manifesto http://www.uk.coop/energymanifesto
What types of financing model are most suitable for small- and medium- scale projects? Do these differ from the financing models used for larger-scale projects?
Currently the smaller schemes are financed with community shares and small loans (£50K or less) using company structures such as the Industrial & Provident Society. OVESCO is an example of such a company structure (there are may others), which raised £350,000 via a community share issue and a PURE loan of £50,000 in 2011 for investment in four community owned roof mounted photovoltaic projects (installed during 2011–12) see http://www.ovesco-ips.co.uk/harveys_priory_projects.html. OVESCO is now looking to develop larger projects with one of approximately 800kW using solar PV and will probably use the Co-operative structure for this project see http://www.ovesco-ips.co.uk/index.php?id=65. OVESCO is seeking to scale up over the next five years to provide a secure for a larger number of investors, ensure an income to mange its projects for the long term and provide a community benefit fund over time to develop new projects and encourage energy efficiency. OVESCO is now looking to follow existing successful medium scale schemes such as Westmill, http://www.westmill.coop/westmill_home.asp or those managed by Energy4all see http://www.energy4all.co.uk/ which use the Co-operative model for their company structure. Scaling up will mean that OVESCO could access bank finance in the future, which requires projects to have a value of at least £1 million. All the previous examples allow for direct finance from share holders and at scale additional capital from bank finance. The Co-operative model allows investors to see where there money is invested and have a say on how their investment is managed. In this way they are entirely different from large scale renewables such as off shore wind farms, which require large utility companies and investment from beyond the UK to develop their projects. At this large scale development provides a supply of electricity to the UK public, but cannot provide any direct/transparent benefit from a return on investment to the UK public.
Why are community-owned energy projects more prevalent in countries like Germany and Denmark than they are in the UK?
To date there has been greater support in the from of incentives and access to bank finance for community projects to be built in Germany and Denmark. The beginnings of the successful wind industry in Germany and Denmark go back to the 70s. A decade later, WEA (http://www.wind-energie.de/verband/aufgaben-und-ziele) as an example had on average 100 to 150 kW installed, in the Mid-80s this new industry grew because of the Danish rejection of nuclear power. Instead, the country opened its electricity networks for wind power generators and secured fixed feed-in tariffs. Five years later, 100 MW of wind power capacity was installed, by 1999 1,500 MW and 3,752 MW in late 2010. Wind energy currently provides a quarter of the Danish electricity demand. In German community ownership has played an important part in the development of renewable energy (both wind, PV and other sources) and this is called the Bürgerbeteiligung (citizen-share ownership movement). It has been very successful and in 2011 more than 50% of all wind-generating capacity in Germany was owned directly by its own citizens. While most community-owned projects are developed with the share-ownership model of limited partnerships, there is a growing movement in Germany toward true cooperatives. In a private limited company, votes on management decisions are determined by the number of shares an investor owns. In a cooperative, the structure can allow one person to have one vote no matter how many shares they own, which is a truly democratic model for investment in the UK’s energy future.
Is there any evidence that medium-scale energy projects are more likely to be accepted by local communities?
Yes, OVESCO’s own community PV share issue was very successful and met with no objections to its planning application, because it combined, support for a local business (for example PV at Harveys Brewery), access for local people to invest in renewable energy (allowing for investment by members of the public who could not invest in home microgeneration) and benefit from a ROI via the Feed-in Tariff. Unlike the application for the 850kW turbine by the Glyndebourne opera house, which allowed for no community ownership in the project and had to go to an appeal to get planning permission. Despite this both Transition Town Lewes and OVESCO supported the planning application for the turbine. At a recent talk about wind farms run by Transition Town Lewes there was an over welling support for wind energy (approximately 95% support with 5% objections with an estimated fifty attendees), but the general consensus revealed over whelming support to allow for community investment and benefit. In the Lewes District there has recently been a planning application for a 15MW solar PV array, this will be privately owned, but there is currently no community benefit form the project or any option for local people to benefit from or invest in this project see http://planningpublicaccess.southdowns.gov.uk/online-applications/applicationDetails.do?activeTab=summary&keyVal=MJAME6TU02B00 . There is a need for incentives to encourage community benefit and options for the community to have a stake in larger scale projects and in so doing smoothing the planning process and provide the greatest community benefit.
What appetite is there for community-owned medium-scale energy projects in the UK?
OVESCO’s experience shows that there is at a local scale a large appetite for community-owned medium-scale energy projects. The companies first share issue aimed to raise £300,000, but exceeded this and raised £350,000 in six weeks from 247 investors 95% lived within a ten mile radius of the town of Lewes. An expression of interest for a larger field scale PV project was sent to existing share holders in early 2013 and raised the potential for £150,000 of further investment without having a project secured. With the right incentives in place and access to financially viable grid connections, OVESCO sees no reason why it cannot increase capital investment in community owned renewables. Other larger share issues such as Westmill have been over subscribed see http://www.goodenergy.co.uk/blog/2012/06/18/good-energy-customers-get-priority-allocation-in-westmill-solar-coop-share-offer
What appetite is there among private sector organisations in the UK to invest in their own medium-scale energy projects?
In the case of OVESCO’s first project at Harveys Depot, the brewery took the opportunity to invest in the project buy buying shares. OVESCO is actively seeking partnerships as a community owned company to raise capital to support a local business, especially where that business consumes energy directly in site. This is where the greatest saving can be made both financially and in terms of CO2 reduction. OVESCO urges DECC to encourage this kind of mutual benefit partnership.
What appetite is there among UK local authorities to invest in their own medium-scale energy projects?
Lewes District Council (LDC) has already installed PV at a number of site including the Wave Leisure Centre in Lewes and on the councils own building. OVESCO did approach the council about a share issue to finance PV on their own buildings; however they have not yet taken up the possibility of a partnership to raise public money to develop new projects, but the council have been supportive of community renewables. In the case of Priory School in Lewes OVESCO signed a lease with East Sussex County Council to install 35kWp of PV on the roof of the school. OVESCO is now offering to install PV at another secondary school in the Lewes District and sees LA’s as well as other public bodies such as the NHS as likely future partners, especially where there is the potential for mutual benefit.
What are the barriers to medium-scale energy projects in the UK?
Long term vision by Government to support community owned renewables and allow for scaling up of new entrants into the market place is essential. The removal for the ROCs in 2017 and replacement by the CfD is a barrier with the proposed 5MW cut off for the FiTs. Setting the cut off point at 5MW is too low to allow for communities to develop schemes on the scale of countries like Denmark and Germany. The cut off point for the FiT needs to be increased to at least 10MW the scale of a medium sized wind farm such as those developed by Energy4all and Westmill. Trading and balancing in the electricity market place is not viable for community schemes.
How effective are current Government policies in encouraging local and medium-sized energy projects? Could they be improved in any way?
Continued support for the FiT and RHI with tax incentives such as EIS are having a positive effects. The FiT proposed and actual cuts during 2011–12 damaged confidence. Therefore clear long term policy is essential for the growth of community owned renewables. In order for the ROI to be attractive enough, capitals cost for generation equipment need low, but be good value for money and potential taxes on imported equipment such as PV panels from for example China are likely have a negative effect on deployment renewables. Preference for community owned renewables when applying for a planning application and support through grant funding for planning applications helping risk would be beneficial. Policy giving a preference for community schemes over private schemes would help the planning process and provide increased benefits. Support for grid connection especially in rural areas for community projects would allow for scaling up.
April 2013