On 16th September Secretary of State Ed Miliband wrote to GB Energy’s CEO Dan McGrail to set out the Government’s strategic priorities for GB Energy. GB Energy now has six months to develop its Strategic Plan to deliver on these priorities.
The letter confirmed Government’s commitment to community and local energy and the ‘critical’ importance in ensuring that Great British Energy (GBE) work collaboratively with The Department for Energy Security and Net Zero (DEZNZ) on the Local Power Plan, which is due to be published by the end of 2025.
Over the last 18months Government has been through three consultations with the sector on what is needed to support and scale up community energy. Policy measures called for by the sector include:
- Support for local supply models which enable local generators to supply to local consumers, underpinned by a long-term minimum price guarantee needed to raise finance
- GB Energy grants and loans to support the development and construction of new community energy generation
- Incentives for commercial developers and community energy enterprises to work together to deliver shared ownership of renewable energy generation
- A community ‘right to connect’ to their local distribution network
CfR welcomes the progress made on these policy asks but there is still a way to go.
Local supply
Class A exempt supply, as enabled under ELEXON Modification P442 adopted earlier this year, provides a basis for community-scale generators to supply power directly to domestic and commercial consumers and unlock significant value for both.
Whilst Class A exempt supply can provide the revenue upside needed to make new subsidy free community-scale generation viable, we still lack the long-term certainty needed to raise finance. Community energy enterprises are nervous about raising community investment and loan finance for projects dependent on Class A exempt supply, in case the Government retrospectively removes the benefit. In order for Class A exempt supply to be used as a model to unlock new community energy projects, the Government needs to provide assurance that Class A exempt benefit will be grandfathered once a project is operational and/or introduce a long-term minimum price guarantee to underpin it.
If the Government is concerned about Class A exempt supply being ‘wasted’ on projects that don’t need it, the grandfathering rights could be restricted to community and municipally-owned subsidy free generation.
GB Energy Funding
We welcome the commitment to GB Energy funding for community and local energy in the Spending Review and GB Energy’s strategic priorities. We encourage GB Energy to progress as quickly as possible to come up with funding models to unlock the pipeline of community generation projects that have secured land, planning and grid.
In the meantime the Community Energy Fund has been re-launched as the Great British Community Fund with grants of up to £140,000 available to support the feasibility and development of new community energy generation projects. This funding stream is a vital source of at-risk investment to get new projects off the ground.
CfR has extensive experience of supporting community energy groups to carry out feasibility and development work on MW-scale community solar and wind projects with the support of these grants, including 40MW of community solar projects which have secured land, planning and grid consents.
The funds are administered through the five Local Net Zero Hubs, and further information on how to apply for funding can be found on their respective websites:
Shared ownership
In August DEZNZ launched a tender to commission the creation of a set of template legal agreements and supporting guidance to support the development of shared ownership renewable energy projects.
CfR provides company and asset management services to 47MWp of shared (split) ownership solar projects across 7 community energy enterprises. The projects range from 3 – 15MW. Most were built in 2016/17 as a result of the ‘split FiT’ policy.
These split ownership solar projects have between them generated over £5million of community benefit income to date to support net zero transition, fuel poverty and community projects in their localities. They are projected to generate over £30million of surplus income (after operating and finance costs) over their 30 year lifetimes.
To find out more about shared ownership business models, case studies of successful shared ownership projects delivered by CfR and the policy measures needed to make shared ownership a good thing for communities and commercial developers see:
- CfR’s response to the Government’s consultation on Community Benefits and Shared Ownership for Low Carbon Infrastructure.
- Local Zero podcast CfR’s Jake Burnyeat did with Regen’s shared ownership specialist Dr Jess Hogan.
Grid connection
For some years community and local energy generation projects trying to connect to their local distribution network have been caught up in transmission-level constraint issues which have caused delays (in some cases years) and increased risk and cost.
In May this year Ofgem approved raising the threshold over which transmission level constraint issues need to be considered for a new generator seeking to connect to the local distribution network. The threshold was increased from 1MW to 5MW. In most cases this will make connection more straight forward for sub-5MW projects, where there is capacity in the local distribution network.
What next?
Ed Miliband remains committed to community and local energy and sees climate action as “how we protect our way of life and make people better off today with energy security, lower bills, good jobs and economic growth.”[1]
Supporting local ownership of generation is a means to an end of towns, villages and cities having well-resourced local energy enterprises working to deliver the broader objectives of retrofitting our housing stock, bringing down bills, tackling fuel poverty, balancing the grid, creating local jobs, localising our energy spend, positively engaging communities in the low carbon transition and ensuring they benefit from low carbon infrastructure development.
Supporting community and municipal energy generation is naturally re-distributive and an efficient use of capital. Support communities and councils to own profitable generation projects and they will re-invest the profits in supporting local services. You don’t have to use a windfall tax to try and get some of those profits back. When community energy generators made windfall profits in the energy crisis, they were re-invested in helping their communities deal with the energy crisis.
Community energy has delivered a small percentage of the UK’s renewable generation capacity against the odds in a policy environment which has favoured commercial ownership. Despite this, there is much enthusiasm for community owned energy. The latest annual report from Community Energy England shows a twenty-four percent jump in the total number of locally-owned community energy organisations in the last five years alone, which now total 614. With a favourable policy environment, locally-owned energy could make a significant contribution to the UK’s renewable generation needs.
CfR believes policy measures which support a mainstream role for locally-owned generation, including through shared ownership, would be good for the sector as a whole. We can have a thriving renewable energy industry based on local ownership.
We are now a year into this government’s term. The community energy sector has provided clear feedback through multiple consultations on what is needed to support and scale up the sector. The Local Power Plan due by the end of 2025 must deliver policy detail and action not just aspirations.
[1] https://www.gov.uk/government/speeches/climate-innovation-forum-2025-keynote-speech-by-ed-miliband