Customers, Policy & regulation

Compared with countries such as Germany, UK government policy and incentives for community energy are poor. Jeremy Bowden reports

As the government prepares to publish its Community Energy Strategy this autumn, environmental and local groups are calling for a dramatic improvement in incentives to encourage community-based generation. In Germany, where policy is strongly geared towards decentralised expansion, more than 50 per cent of renewable schemes are locally owned and utilities have lost considerable market share (see box, on page 16). The UK’s policy – or lack of it – is far more conciliatory towards big business.

The government acknowledges the advantages of decentralised power generation: cutting carbon and dependence on imported fossil fuels, as well as bills in an era of rising energy costs. But although the government appears positive, only 1 per cent of renewable energy projects are so far owned by individuals and communities in the UK. Organisations, including EnergyforLondon – a green community pressure group – are concerned about the weakness of UK policy.

It claims the government is already backtracking on its core Community Energy Strategy (CES) and has little hope of closing the gap on Germany, where “80,000 citizens are involved in 600 energy co-­operatives”. A spokesperson from the Department of Energy and Climate Change (Decc) confirms that a call for evidence will be published later this spring, which appears to be a delay on earlier plans for a March consultation paper. This could extend the original CES timetable, as happens repeatedly in the case of community heating policy, according to ­EnergyforLondon.

Decc says the call for evidence is needed to help develop strategy by “more clearly identifying the benefits community energy projects can bring and the barriers to their development”. But the CES will be limited to “looking at how community projects or initiatives focused on energy generation, energy saving and management, collective purchasing and collective switching can bring real benefits to consumers”. This means it will not be bringing any major financial incentives to the table, even if a strategy is produced on schedule.

The CES appears to sit within Decc’s “communication directorate”, says EnergyforLondon, with departmental minutes stating: “The focus of the strategy should be community engagement, ideally setting out best practice and a model which all Decc community activity would follow… The strategy could not seek to modify policies, except in respect to approaches to community partnership and community support. It may, however, recommend policy areas for further review.”

Currently, while there are various small budgets to encourage generation or heating at a local level, the main incentive is the Feed-in Tariff (FIT) scheme, which offers cash for green projects up to 5MW in size, including ­community-based schemes. Friends of the Earth (FoE) wants the government to increase the scale of the FIT to 20MW. It claims Germany’s broader FIT has enabled farms, local councils and other local groups to generate renewable energy.

“The government must urgently seize the opportunity to increase the scale of the FIT scheme and help more communities to power their own homes and workplaces,” says FoE campaigner Guy Shrubsole. The group and others are also pushing for local communities to be allocated a 20 per cent share in any new renewable projects over 1MW. (See feature on community FITs, page 22)

According to the EnergyforLondon spokes­person, more could be done for community generation, beyond FITs. This includes development of favourable local authority policy, which can provide important information on where schemes would be most appropriate, planning guidance and long-term procurement contracts for the electricity or heat output. Incentivising distribution network operators to work with community groups is also claimed to be important.

FoE says the government should also use the Energy Bill to reduce the big six energy firms’ “stranglehold” on the power market, which would help open the sector up to community projects. Shrubsole says: “We need to create a fairer system that gives smaller groups a look in,” including provision of finance through the Green Investment Bank.

Among the small-scale incentives that do exist, there is money up for grabs for low carbon heating under the Renewable Heat Incentive, a world first, according to Decc. This scheme, just recently up and running for industrial and commercial customers as well as communities, pays groups for the heat generated by heat pumps, biomass boilers and anaerobic digesters.

In December 2011, Decc launched a £10 million Local Energy Assessment Fund (LEAF) for community groups, and is currently evaluating 236 community energy projects covering energy efficiency, electricity and heat. “The LEAF programme came about suddenly,” says the EnergyforLondon spokesperson, who suggests that an annual funding programme for such schemes is “key to help build up the ‘base’ of community energy groups. One-off funding rounds are useful but miss out on helping deliver the wider potential out there”.

A £15 million Rural Communities Renewable Energy Fund for England is due to be launched later this spring, while the Renewable Heat Premium Payment (RHPP) grant scheme has enabled installation of low carbon heaters in social housing and renewable heat projects in local communities. Individual householders have also benefited from money off biomass boilers, heat pumps and solar thermal equipment. Other projects include a national heat map, which clearly shows the density of heat demand from different buildings, helping planners to better target community renewable heating schemes (see feature, page 27).

Although the proportion of total generation remains low, there are many examples of effective community energy projects across the UK, including projects being developed by LEAF and RHPP scheme winners. For example, the Meadows Ozone Energy Services is a community-owned co-operative based in Meadows, Nottingham, which has received global attention. The project arose to tackle fuel poverty in 2009, since when 65 households have been fitted with solar panels and hundreds more have been given energy-saving advice. The co-operative is now looking into building a community-owned wind turbine.

At the other end of the market, community purchasing schemes such as the Big London Energy Switch are negotiating energy tariffs collectively with gas and electricity companies, and are proving rather more popular than community generation. Last year, councils in Peterborough, Norwich, Cornwall and Oldham launched similar schemes, and in the first major switch in June, 37,000 people saved an estimated average of £223. Once the CES is introduced, more resources could be made available for switching, which has been one of energy secretary Ed Davey’s key priorities since taking office.

If the CES is delayed and does little to modify actual policies, not much is likely to change and the community generation sector in particular will suffer. With Decc’s complex Community Energy Online website, many groups feel there is already enough advice and case studies for communities to follow, and are looking for more substantial support. However, the underlying structure of the UK generation sector remains unfavourable to community development, and many claim the recent Energy Bill makes it even more difficult to develop smaller scale generation schemes, leaving the UK unlikely to close the gap on Germany at all.

Jeremy Bowden is a freelance journalist

Call to arms: an Energiewende here?

Why and how has the Energiewende [energy transition] in Germany achieved levels of success in ­community-owned energy that currently seem a distant possibility in the UK? Chiefly because of long-standing anti-nuclear sentiment, plus the widespread recognition that decentralisation of energy is a better and fairer way to organise the energy that powers society. And decisive policy moves enabled communities in Germany to take energy generation into their control.

Take Schonau, a town of 2,500 people in the Black Forest. Led by Ursula and Michael Sladek, the community set up EWS Energy and bought the local electricity grid from KWR when the licence came up for renewal. The Sladeks and their partners launched a nationwide campaign, raising more than six million Deutschmarks, and went on to secure the vote to set up a co-operative and buy the grid. There are now more than 1,000 owners of the co-operative, who are paid small yearly dividends. It has grown to serve 120,000 households and industrial clients with clean electricity that it buys from suppliers around Germany and generates itself in and around Schonau.

Schonau is one of 600 energy co-operatives in Germany (as of 2012) – a number that has quadrupled in the past three years. In 2012 in the UK, meanwhile, there were just 20 (with 20 undertaking or planning to undertake feasibility studies). The potential of community energy is vast – independent researcher Rebecca Willis puts it at 3.5GW and estimates its value at £6 billion to the energy economy – but the country has been held back by public apathy, a vociferous anti-wind lobby, and the dominance of the big six.

There is hope on the (turbine-lined) horizon. Frustrated by a lack of direction from government, and inspired by successes elsewhere, civic society groups up and down the country are taking matters into their own hands (see feature, page 18, on utility engagement with community energy). And according to research by The Co-operative, seven out of ten people would support a community energy project near their home.

Concrete actions for government are being identified to help facilitate this transition. In Denmark, wind developers are required by law to offer 20 per cent of a project for sale to local people. Meanwhile in Germany,RWE announced a scheme enabling individuals to invest in renewable energy projects, helping to bridge the divide between community and centrally-owned energy. Could this be mimicked in the UK?

Energy secretary Ed Davey says he “wants nothing more than a community energy revolution”. So now’s the time. Let’s learn from the lessons in Germany and beyond. Let’s create a movement.

Giles Bristow, head of energy, and Katie Shaw, communications advisor, at Forum for the Future.

Facilitated by Forum for the Future and The Co-operative, the Community Energy Fortnight kicks off in the UK on Saturday 24 August, running until 8 September. Visit www.ukcec.org from mid-July for details.

This article first appeared in Utility Week’s print edition of 24th May 2013.

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