Infrastructure Bill [HL]

Written evidence submitted by The Carbon Catalysts Group (IB 50)

The Group ’s Work

The Carbon Catalysts Group is a body providing consultancy services in regulatory and energy matters and it is a development organisation which raises funds for and develops its own renewable power projects.

Group members are drawn substantially from senior power industry executives who have been involved in shaping the regulatory structure that governs the markets in which they work. Most members have worked with companies, large utilities and governments. All have worked for or advised banking institutions and major investors on investment in electricity infrastructure and most of them have been involved in development of and financing arrangements for major and smaller energy infrastructure projects and renewable projects.

The Group’s members importantly include those developing community energy schemes for and by communities.

It also includes – of necessity – those developing renewables schemes and seeking to find ways to enable the development of community schemes as part of each development.

Limitation on Community Electricity Schemes

The Infrastructure Bill is intended, inter alia, to provide a means to facilitate ways of developing community energy schemes. Even though the regulations for which the Bill provides may never be enacted, they will inform the practice of industry.

Other legislation and its application will have a direct effect on the Bill’s efficacy and, to the extent that it does so, should be provided for in it.

One such adverse effect is the application of the legislation relating to the Feed-in Tariff and a change DECC proposes to make to it. Both the application and the proposed change relate to the definition of ‘same site’.

We believe both the application and the proposed change prevent the implementation of community electricity schemes that are separate from their adjacent commercial schemes in almost every plausible case and, in our view, as a result make the development of such schemes impossible.

In addition, they both entirely overlook, and make harder or not possible, multiple schemes in industrial parks [1] .

We believe that a change is required to be made to the Infrastructure Bill to remove the obstacle to the development of the community right-to-buy scheme and to addresses the private wires network issues.

Different models are proposed in the Bill for shared ownership of renewables schemes:

v outright ownership where a putative scheme is divided into separate parts one whole part being owned and developed by a community body;

v joint ventures; and

v partial ownership.

For many reasons the simplest arrangement is the first. Many developers feel that attempting to implement a community electricity scheme by means of the other two models is problematic, partly as the result of to the difficulties inherent in different levels of expertise working together. There is some experience among developers to support that concern.

In addition, it is felt that enabling a scheme to be developed by the local community with as little oversight as possible (save for dealing with main infrastructure and connection issues) enables the community to take ownership of the scheme at an early stage.

Shared Networks

In almost all cases involving a community scheme and an adjacent commercial scheme, there will be a shared network. Renewable energy schemes will be located on a private electricity network with one meter point administration number (MPAN) and one main connection point. That is, the separate community scheme will be on the same network as the commercial scheme from which the community scheme has been ‘carved out’.

The approach the regulator appears to be seeking to adopt is that schemes connected to a private wire network with a single connection point are not connected to the grid except via the connection to the public network. The proposals for change made by DECC reinforce that interpretation.

In principle, the arrangement for stand-alone schemes under the regulations could be any combination of a scheme attracting Renewables Obligation support being adjacent to a community electricity scheme attracting FiT payments. Or it could be a scheme attracting a CfD-FiT being adjacent to such a community scheme.

In the case of new stand-alone developments, the reason these different schemes will share a network is clear: the commercial scheme will have obtained an offer of a grid connection and will build and pay for that connection – which is intended to serve both schemes. In almost every case obtaining a separate network connection would make the community scheme financially non-viable. The costs of an additional connection will be far too high.

These problems for adjacent community and commercial stand-alone schemes are exacerbated for schemes developed on commercial sites on private electricity wire networks. Examples of such schemes are rooftop solar installations on buildings inside industrial parks or small wind turbines on such sites.

Communities are now looking to develop rooftop and wind-turbine schemes on these kinds of site. The owners of buildings within these sites will also want to develop their own schemes. These will all be on the ‘same site’, i.e., they will be on the same private wire network.

DECC’s view of the existing legislation is that such multi-schemes are not permitted if they are to benefit from subsidy and its proposals for relaxing its application are so limited that their effect will be minimal.

DECC’s proposed interpretation of the existing legislation – which will be crystallised following its proposed change by being embedded in it – is that only one scheme on a private wire network is capable of attracting a subsidy (FiT, ROC or CfD) and that where there is more than one scheme the capacity of all schemes will be added together and they will all count as a single scheme.

DECC proposes to change the legislation so that where there are only two schemes on a network operating under the same subsidy regime, both schemes could be deemed to be separate schemes.

This provides no relief where there are more than two schemes – such as on an industrial park. They would not be permitted.

It provides no relief for adjacent stand-alone schemes operating under different subsidies. They would not be permitted.

In these cases, community schemes would have little chance of being developed at all or would be bound to founder (legitimately and in full compliance with the regulations) as a result of the increased cost of obtaining and building a separate network connection.

The Source of the Problem

The legislation (The Feed-in Tariffs Order 2012) was drafted to avoid a scheme being divided up into smaller parts to attract a higher tariff: it introduced what is essentially an anti-fraud measure.

In its application, two (or more) schemes on the same site are to be treated as a single scheme by virtue of being on the ‘same site’ and will attract under the FiT tariff only the (lower) tariff level of the larger scheme.

The ‘same site’ is a term of art and has a number of potentially identifying features, including:

"any other factors which the Authority considers relevant".

In its Renewables Obligation: Guidance for Generators the regulator makes clear that in determining the size and identity of a scheme it takes account of a number of factors including:

"whether there is one connection to the transmission or distribution network".

‘Connection’ is not defined.

In DECC’s Consultation on Support for Community Energy Projects Under the Feed-in-Tariff Scheme questions were asked about obstacles to the development of community schemes. It was clearly understood that the limitation built into the legislation affecting FiT schemes (and by extension the ROC scheme via the regulator’s interpretation and use of its discretion) could have an adverse effect on the development of community schemes under the right-to-buy arrangements.

Industry views published in the November Government response to the consultation included the following:

5.6 Allowing community and commercial projects to share a single grid connection whilst still being treated as separate projects for FITs payment purposes was seen as beneficial by a wide range of respondents for projects at any size.

5.7 A few respondents suggested that community projects should be able to share grid connections with much larger commercial projects which may be receiving support under other financial schemes such as the RO or CfDs (which is not possible under current policy).

The DECC summarised view (in parentheses in the second bullet) provided support for the regulator’s interpretive approach to ‘site’ definition in application to the ROC scheme, extrapolating from the legislation relating to the FiT scheme, which itself gave the regulator a great deal of discretionary scope.

Absent that support (which is to be crystallised in proposed legislation) the scope of ‘site’ and ‘same site’ is not fixed.

That to one side, the articulated view of the industry was reasonably clear that facilitating community right-to-buy schemes would be assisted by a different approach to the identification of a scheme – by a different approach to ‘same site’ and that allowing there to be different sites on the same network would be helpful.

Nonetheless, DECC has decided to amend the rules in a minimal way only – to allow, e.g., two FiT schemes on a private wire to be registered as separate schemes but to prohibit a FiT scheme and a ROC scheme or a FiT scheme and a CfD-FiT scheme to be treated as separate schemes. They will still be caught by the ‘same site’ criteria.

This change incorporates a change which allows for two (very small) schemes to co-exist separately and yet prevents one of the preferred means of developers of enabling substantive community engagement by creating the capacity for communities to be the developers of their own schemes.

The consequences have been outlined above for stand-alone schemes and separate schemes on private wire networks in industrial parks.

Overcoming the Problem

We suggest that the problem caused by the existing legislation (and by the DECC proposed change to it) be specifically ‘carved out’ so as to enable the implementation of a community FiT scheme on the same network, sharing the same grid connection, as adjacent CfD-FiT or Renewables Obligation schemes.

Shared Electricity Network

X. Paragraph 2(a) of section 15 of The Feed-in Tariffs Order 2012 is not to be taken into account in determining the site of A or B where:

(a) A is a self-contained community electricity scheme;

(b) B is a renewable electricity scheme using the same technology as A in paragraph (a);

(c) A and B share a connection to the grid and have the same meter point administration number; and

(d) A and B have separate meters.

This is a very limited amendment and one which, we suggest, will permit two schemes – a community scheme and a commercial scheme – to co-exist on the same network under different subsidy systems. That, we believe, is a minimal amendment to be made to the arrangements for the arrangements for the community right-to-buy legislation.

This is not a proposal that extends to a major source of community schemes – development of community schemes on existing private wire networks in industrial parks.

Nor is it a proposal that deals with the possibility of owners on private wire networks developing their own schemes and also community bodies developing their own schemes on the same network.

Shared Electricity Network

X. Paragraph 2(a) of section 15 of The Feed-in Tariffs Order 2012 is not to be taken into account in determining the site of any electricity scheme located on a private-wire network where:

(a) any such scheme is a self-contained community electricity scheme, whether or not there is more than one such scheme on the same private wire network; or

(b) where any such scheme is a renewable electricity scheme, whether or not using the same technology as any other schemes on the same private wire network, which is owned by a person other than the owner of any community electricity scheme; and

(c) the output of each scheme is measured using separate meters.

January 2015