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- Community Energy - the way forward
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Community Energy - the way forward
Leo Murray, Director of Strategy at 10:10, member of the Community Energy Coalition, explains why together, we are unstoppable.
Following the recent, unexpectedly brutal and comprehensive dismantling of the policy framework that has driven the growth of the UK community energy sector to date, 10:10 thought we ought to step back from the melee to take stock of the situation for our movement going forwards. As a mere intermediary in this movement, we felt we had the luxury - and the responsibility - to carry out this exercise on behalf of everyone involved in grassroots energy transition, most of whom remain up to their necks in last minute project delivery before various looming deadlines hit.
Between February and April this year, we held in depth conversations with over 30 leading community energy practitioners and support organisations about how we might best proceed in the new, much more challenging policy environment. One thing came through very clearly: the old, subsidy driven, grid-export based model for developing community renewable energy schemes is dead. The capricious new Feed in Tariff regime is almost impossible to plan financial models around, and in any case will be wound down altogether over the next 30 months.
So we investigated a range of themes for new avenues we might be able to practically pursue during the next few years, while renewables still need help to compete with (subsidised) fossil fuels on cost, but will not get this help from central government. We tapped the collective wisdom of the movement for the pros and cons of tactics ranging from becoming an electricity supplier, to buying up commercial solar farms, to getting into developing batteries or renewable heat. You can read the full report here.
Many of these avenues threw up more questions than answers. For instance, battery storage as a sector is so new that it’s not yet clear how community energy can get a slice of the fast growing pie, while renewable heat - a huge area of concern for meeting climate targets - is currently being subjected to the same kinds of backwards policy changes as electricity has been. Buying commercial solar farms means competing with financial sector professionals and pension funds, while becoming a full licensed supplier is an epic undertaking that is just not within the means of a typical community energy groups.
Having said all that, a few clear pointers did emerge from this process.
First, it is still possible to develop new solar PV schemes, by relying on Power Purchase Agreements and direct supply to commercial and industrial energy users. Some very specific conditions have to be met - think new, steel, south facing, unshaded roofs on refrigerated warehouses in the South of England - but in certain circumstances these schemes can still be made to work. The difference to what we have done in the past is that arrays must be tailored to match the energy demand profile of the host building - too much ‘leakage’ to the grid and the numbers won’t stack up. The key here is displacing energy supply at retail prices, where we can still offer customers a small discount over what they pay to buy power from the grid, but get a much better price than we can for exporting. What we won’t get out of these schemes - at least until energy prices rise or solar module prices fall a lot further - is the kind of surplus value that has paid into community benefit funds in the past. Margins will remain small for the near future, even when a project is able to cover its costs.
Second, whilst energy efficiency overall remains a very challenging field to operate in, and is in urgent need of new, better designed policies to support the scale and speed of change necessary, one particular technology on this frontier has just come of age: LEDs. Most of the people we spoke to agreed that it should be possible to deliver LED switching schemes in much the same manner as we have done solar, wind and hydro projects in the past. Share issues should be able to repay investors over shorter timeframes too - perhaps six or seven years rather than 20. Savings from LEDs are simpler to quantify than those from other efficiency measures, meaning it is easier to build robust financial models around them.
Again, margins will be small here so don’t expect big revenue flows back to community benefit funds; and there certainly won’t be enough in these schemes to warrant starting new co-ops and societies off the back of them. But for existing community energy groups wondering what they are going to do after their current pipeline of projects dries up, LEDs could be a good next step. Our friends at Pure Leapfrog are hard at work crunching numbers and producing template contracts as we speak; and 10:10’s next big campaign is likely to involve working with them to drive LED switching on a national scale. Watch this space.
Third, our consultees returned again and again to the as yet almost unexplored potential of the Community Energy Service Company or CESCO. Energy service companies use a very different business model to the throughput based, energy unit sales-dependent model of the big supply companies. By selling customers outcomes such as warm, well lit homes rather than kWh of energy, ESCOs can make money from reducing clients’ demand and directly providing sustainable heat. The advent of smart meters unlocks the ability to take the localised model of energy provision in exciting new directions - like the Energy Local trial 10:10 are supporting in Bethesda, North Wales. The details get very technical, but in essence Energy Local allows local demand for electricity to be balanced against local supply, keeping more financial value for both customers and local generators instead of leaking it away into the wider energy system. We’ll write more about progress on this frontier later, but the key point here is that almost everyone we consulted agreed that this (and similar) local energy ‘arbitrage’ mechanisms are the future of decentralised renewables in the UK, with an obvious synergy with community energy.
Finally, there was a clear consensus that community energy cannot continue to prosper without support from larger institutions. We had been nurtured by supportive central government with a range of policies designed to help us to succeed; these are now gone, and without them we must look to new sources of support if we want to survive. Most of our wise heads pointed to local authorities as the best hope here, given their aligned public interest remits - and in particular to those with activities and ambitions to become more active in the energy system. Bristol Energy, Robin Hood and the mooted Energy for Londoners all have potential for community energy support. More broadly, many devolved administrations and councils remain committed to the low carbon transition, and recognise the added value that community energy brings over other models of decarbonisation. Beyond councils, many large corporations have public commitments to source all of their energy from renewables within aggressive timeframes, and there may be scope for fruitful partnerships there too.
In summary: there is still everything to play for. While the UK’s renewable energy sector is in the process of contracting sharply, shedding jobs, diversifying into other sectors or exiting the UK market, the community energy movement must keep the fire alight, finding new and innovative ways to keep driving energy transition from the bottom up. UK domestic energy policy is in crisis and cannot sustain itself in its present form. Despite Minister Andrea Leadsom’s recent speech insisting she wants a market-driven energy system, it is increasingly apparent that the government’s plans for new nuclear and widespread fracking run completely counter to energy market trends, and will have to be forced through with multiple, costly state interventions, or fail.
Globally however, it is equally clear that the clean energy transition is now unstoppable, and while the current British government lacks the vision to see this, the rest of us will just keep going regardless. Market forces tell us that in a few short years, renewable energy will be out competing fossil fuels on cost alone in every market in the world. At that point, everything changes. We just need to bridge the gap between where we find ourselves now and that day. Onwards!
See what others are doing near you at the 2016 Community Energy Fortnight or run an event to start the discussion about Powering Forward with community energy in your local area.