2015 What a year high hopes and crushing blows
Community energy was progressing well with numerous schemes in dvelopment and while steadily degressing FIT rates was a cloud on the horizon it looked like STIR tax relief meant we could continue to deliver useful community projects as well repay investors with a small dividend.
We also had the huge opportunity of large solar were new regulations meant 60 + solar farms could not get a tariff unless community owned. This looked like the opportunity of a lifetime for us
Gwent Energy along with others dived into this new exciting era. Potentially revolutionising community energy and putting us on a par with mainland Europe
It soon became apparent that buying large solar was not like buying a loaf of bread. It was more like playing poker when the other players could see your cards.
We had a change of government and an all out assault on the renewables sector started
The list of measures against renewables is barely believable from major cuts to tariffs, and numerous other measures making it much more difficult to fund schemes
Large developers have been hard hit by the ending of ROC’s, grandfathering rights and cancelled many schemes. Over 1 GW of solar farms have been lost To put that in perspective theses schemes would have reduced everyones electricity bills by about £1.50 a year
The government decision to allow comercial developers to own the community side of a large solar farm as well as the commercial side was a hard blow to our hopes. It is still hard to see how this is compliant with the rules that require 100% community ownership of the community side. This change meant a lot of money and 6 months of our time was wasted There has been a huge loss of social and community benefit that would have flowed from these schemes.
Other measures the government have taken that have penalised community energy include:
1. 64% drop in solar FIT tariff to a return of 4.8% on the investment. In a low inflation environment this means we can barely repay the capital cost over 20 years let alone deliver any community benefit or dividend to investors
2. Ending of pre registration where we could fix a tariff while we raised funds to build a community scheme.
3. The rather sneaky way that the ending of SITR tax relief was passed through parliament is yet another major blow to community energy
4. Other planned measures include possibly metering exports, higher EPC levels, ending the ability to extend an installation, as well as the likely imposition of VAT at 20% for domestic installations all make solar harder for us
If the government had deliberately targetted community energy they could not have fashioned a more destructive set of measures that what they have implemented
Currently about 15,000 people benefit from our community energy installations it does not look like they will be joined by many more in the near future
What effect has all the changes had on Gwent Energy
A. The change to allow commercial operators to own community solar has cost us with lost time and expenses. The lost opportunity cost is immense
B. The drop in tariffs has caused us to shelve future community solar installations
C. The consultation period on the tariff drops has allowed us to install a number of solar schemes for community centres and private people
D. Attached are our recent installations designed to benefit vital community organisations
So what does the future look like for community energy?
The funding model using loans and shares is now unlikely to work except for some wind and possible district heat systems. There are a few hydro possibilites the planning costs mean these are high risk
Will investors be hard to attract without the EIS or SITR tax relief promised?
Cost of installations will not drop much as solar panels are subject to the EU minimum price regime that has just been extended for another year
One area that might work is where you can charge a commercial rate for power generated to the customer. This with the remains of the FIT could make these viable again but there would be little if any community benefit
We may be able to use “donation crowd funding” where many people could donate small amounts each to fund a large portion of the installation and topped up with commercial funding This might work for a well used community centre that people want to suppport
Standalone systems will be difficult unless you can arrange a local buyer for your power at more than the wholesale rate technically and legally this is still hard to do although there are severel trials underway such as PICLO and local energy.
Gwent Energy is doing a similar trial on home energy where we have installed solar panels and a battery system to fully power a house we can then charge the householder for their power as a tariff replacement the trial should tell us if this model will be viable
Recent successful fund raising shows there is an appetite for community energy but will the loss of tax relief change this or can we raise funds without it? That is an important question for us
What other options does community energy have?
The government is behind with meeting the heat targets so biomass and district heating may well get some extra support an announcement is due soon
There may be opportunities of us in this but there will be legal and technical challenges
The lack of tax relief will dent investor confidence, so funding could be an issue
So for these reasons they will difficult for community groups to carry out except for small schemes
The Green Deal has been scrapped and a replacement is to be announced shortly
There may be opportunites for community organisations in this as it will be mainly low cost insulation work and could involve community engagement
Conventional large community energy projects look to be dead unless the government announces some sort of community tariff or tax relief which looks unlikely
Small scale renewable for community buildings where the building benefits from cheap power also looks to be dead unless we can generate some sort of “donation” funding
Large community solar farms are still a possibility but the damage to investor confidence of all the changes and the continual and draconian tariff cuts makes funding very difficult
We need something like an interest only mortgage to fund these (annuity type investment?)
What is Gwent Energy planning to do?
1. Continual to offer a solar installation service. For people who can use most of the power and have low finance costs solar still makes sense.
2. There will be many installers giving up so we can offer a care package to people to monitor and maintain their solar systems
3. Offer a cleaning service as older panels may be dirty enough to benefit from cleaning
4. Battery backup system for people with solar panels so they can make full use of all the power they generate
5. Biomass boilers for community centres may still be possible, although future tariffs are a concern, as will the availabliltiy of finance
6. Other technologies such as fuel cell or LED lighting may offer opportunities
7. Keep an eye on large solar farms in case an opportunity develops, although previous experience indicates this will be difficult to make work
8. District heating system if the government will provide sufficent support
Our recent Christmas lunch indicated support for battery backup systems, continuing solar installation work for private individuals and a cleaning and care package for people
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