On 31 March, the government ended its feed-in tariff (FIT) policy, which has been strikingly successful in deploying smaller renewables, including more than 12GW from solar PV. In the case of solar, the export tariff – a partial repayment to owners for the electricity their systems exported to the grid – has also gone. Not only must small-scale solar and wind energy launch their generation without any support, they must also effectively provide their surplus energy to the grid for free.
This news is overshadowed by continued crowing about the success of large-scale (mainly) offshore wind. At that end of the scale, there is a pot of about £557 million available over a number of years to support large offshore and other substantial technologies. This support will be managed through regular auctions into which the large developers will be invited to bid for contracts for difference. It is impossible for small systems to bid into these auctions: it is strictly for the big players, as are Power Purchase Agreements (PPAs), alternative support mechanisms to underwrite investment.
Under a PPA, the developer of a project obtains a long-term guarantee for the sale of the energy they produce – and this can be, in the absence of an underwriting from elsewhere, a useful way of underpinning an investment; it guarantees you the developer a market for what you are producing. However, PPAs will not be available for smaller generators for the foreseeable future – unless aggregation systems that can create a “virtual” large supply from many smaller sites become established, and they are some way off at the moment – leaving small-scale generation with few options.
The government justification for ending all support is that costs have come down substantially, and some projects can get off the ground on commercial grounds alone. If there is some truth to this argument, smaller installations remain a long way from being able to independently purchase the kit, install and start running successfully. This is particularly true for community energy, which often involves a small community wind farm with one or two turbines, or a solar PV array on a community centre or a small field installation, often under 5MW.
In 2014, the government set a target of one million homes to be powered by community energy by 2020. Today, only 7 per cent of that target is met (in England and Wales). Onshore wind has effectively been banned across England and Wales through planning restrictions, and now solar must operate without any income from the sale of surplus electricity.
These restrictions add yet more hurdles for community energy schemes to jump to finance and launch sustainable generation successfully. Many groups do not have deep pockets and the often arduous planning and permission processes eat up what small pre-production resources they might have had.
The government was right to see the importance of community energy. The future energy system looks likely to be distributed, decentralised and digitised. Connections will be made locally, trading will happen between neighbours and smart systems will plot energy flows in real time and adjust bills accordingly. Within the context of this future energy system, community energy schemes will bring tremendous value to the energy world far beyond the bare mathematics of trading transactions.
This value will only be realised if schemes get the support and nurturing they need to reach a secure position in the system. The existence of a reliable FIT system has been one way to underwrite schemes. Support and advice at a local and regional level for community developers in the early stages of development would be another, as would a known and stable destination for the power that such schemes produce. Altogether, this support often helps to get hard-to-find investment in schemes across the line.
The European Union recognises this importance and has produced new legislation that guarantees communities and individuals the right to generate, store, consume and sell their own energy. This is coming into force just as the UK, with its continuing raft of barriers to the effective operation of community energy, leaves the EU. It’s unlikely we’ll transpose those new EU rules into UK law. Even worse, new proposals from Ofgem look to treat all sources of generation equally, regardless of whether they travelled the length of the country, or across the road.
Despite all the hard work of local energy entrepreneurs and despite the glowing testimonials to its importance in the future energy landscape, community energy is suffering. This urgently needs to change before we risk stunting the sector completely. Reinstating FITs for small and community schemes ought to be a priority, along with assisted support for collective PPAs or similar arrangements. Even if not required to by EU directives, placing into UK law a presumption of local support and priority would give an enormous boost to the security of future operation that local schemes need.
It cannot be right in the long term to bet the farm on large-scale offshore wind as the carrier of renewables for the country, and ignore or actively hamper the rest of the renewable spectrum, but that is where we are headed at the moment.