In November, Simon and I published "Helping community energy get back in the driving seat" outlining how Big Society Capital has seen social impact created by community energy schemes and how social investors could support this.
In our response to the Department for Energy and Climate Change (DECC)’s consultation around the Feed-in-Tariff, we therefore called for a carve-out of the existing Feed-in-Tariff (FIT) budget to be used exclusively for genuine community energy projects, which could be defined using three key principles:
- Legal form: Must have a social regulator (therefore be a Charity, BenCom or CIC)
- Ownership: Minimum levels of local and individual ownership; and
- Governance: Majority control of the board in the hands of locals.
On 17th December, days after the UK Government agreed a deal in Paris to keep global temperature rises to less than 2 degrees, DECC published the Government Response to the Review of the Feed-in-Tariffs Scheme, outlining the actions the government has decided to take. Unfortunately for the community energy sector, the results aren’t pretty.
The proposed low cap of £100m in FIT spending to 2019 remains in place, and the response to considering a community carve-out was: “Government does not believe re-focusing the scheme [towards householders and communities] at this time meets the core objective to control costs of the scheme”. With the laser-like focus on reducing overall energy costs across the country, there is no time for a smaller, highly-impactful sector that consistently helps build stronger communities with limited impact on energy bills.
One positive development was the re-introduction of pre-accreditation of certain projects, allowing them to ‘lock-in’ a tariff for the energy they will produce ahead of construction, giving investors more certainty and reducing risk. However this is only available to wind and solar projects above 50kW, as well as hydro and anaerobic digestion projects . They also published new, lower FIT rates to begin in February. Rates for rooftop solar projects, for example, will drop from 12.47p per kilowatt hour to just 4.39p. A few smaller individual projects may still be feasible at these rates, but not at the scale as before.
The sector appears to have already recognised the tremendous effect of this announcement. Community Energy England CEO Emma Bridge said: “The initial feedback from our members indicates that at the rates applying from February most community owned rooftop solar schemes over 10kW will not be viable.”
As the FIT comes to an end in Britain, how can small-scale renewables that enable communities to deliver local impact survive? Developers will need to look elsewhere than government to lock-in long-term rates at which they will be able to sell the energy they produce. The next generation of power purchasers is likely to be public sector bodies who have long-term needs for lower cost energy supply, such as local authorities and housing associations. Other remaining areas of opportunity include developing energy efficiency and heat network schemes. We hope that developers can adapt quickly to this new policy landscape and look forward to seeing how we can support the next era of community energy entrepreneurs.