Community Energy Policy in the UK
In May 2014 the Government granted approval for the Green Investment Bank (GIB) to expand its investment to include community renewable energy schemes. There is also support for Community Energy from a variety of schemes, including the Renewable Heat Initiative and Rural Community Energy Fund. However, the Government has made a number of policy reforms which threaten Community Energy. The Government reduced feed in tariffs, made regulations more complex and ended tax relief. These changes made it far harder to setup community energy projects.
feed in tariffs (FITs)
The Feed in Tariff was introduced in 2010 and provides payment to individuals or groups who generate their own renewable energy in small-scale projects. It is a payment made for every kilowatt hour generated by a renewable energy system. This can be paid to almost any property owner, including homeowners, businesses or schools. The FIT has been gradually cut to control costs:
In 2010, when the FIT was first introduced it paid 43.3p per kWh.
In 2012 it was cut to 12.92p per kWh.
In 2016 the FIT was reduced by a further 65% to just 4.39p per kWh (Mongoose Energy, 2016).
These drastic cuts made it harder to setup community energy projects. At the end of 2017, the Government announced that FITs would end in 2019 and subsequently confirmed that there would be no replacement. In particular, the Government’s decision to remove the export tariff, one aspect of the FIT, means that, as of April 2019 new community energy projects won’t be paid for the surplus power they generate that goes to the grid. In effect, they would be giving free electricity to the Big Six energy companies, who would sell it to other people.
After extensive lobbying, the Government announced in January 2019 that they would develop a mechanism to ensure that new community energy projects setup after the phase out of the FIT will still receive payment for electricity they export to the grid. However, the new mechanism is taking time to implement and likely won’t come into force until 2020, meaning we are currently in a period where new solar installations will not receive payment.
removal of tax relief
In November 2015, the Treasury announced that Community Energy projects would be excluded from the Enterprise Investment Scheme (EIS) which has been vital to the success of many community energy projects. They are also excluded from the Seed Enterprise Investment Scheme and Social Investment Tax Relief. Unfortunately, Community Energy projects were only given 5 weeks notice, as opposed to the 6 months they were previously promised.
In 2015, the Government introduced stricter rules on onshore wind energy. This change to the national planning guidelines includes a ban on new onshore wind projects, whether or not the local community is in favour. Furthermore, while the planning guidelines say that community ownership should be taken into account as a “material consideration” in planning decisions, in practice councils often fail to do this.
While this isn’t a recent change made by the government, the centralised nature of the UK energy system is a big problem for community energy projects. At the moment, regulations require community energy projects to sell the energy they generate to the grid, before buying it back at the market price. This means it is difficult for communities to use the energy that they generate locally.