The government released a consultation on the proposed removal of pre-accreditation and pre-registration on the Feed-in Tariff (FiT). Schemes can pre-accredit or pre-register in order to freeze the FiT rate while developing the project. This protects the scheme from the quarterly Feed-in tariff rate reviews, which could see rates decrease if there has been a high enough level of newly commissioned renewable energy schemes in the UK.
Pre-accreditation applies to schemes that are above 50 kW capacity, community energy schemes can often come under this category. Pre-registration is solely for community organisations and schemes under 50 kW, Sheffield Renewables has used pre-registration to guarantee the FiT for schemes.
Sheffield Renewables have submitted a response the governments proposed removal of pre-accreditation and pre-registration which is below.
The Department of Energy and Climate Change must now review all responses to this consultation and summarise then before they can be taken to parliament. In the mean time you can help by writing to your MP to tell them why it is important for pre-accreditation and pre-registration to be keep and urge them to take action. Community Energy England have supplied template letters that can be found by following this link http://communityenergyengland.org/wp-content/uploads/2015/08/CEENews8_1508010.pdf
Consultation on changes to the Feed-in Tariff accreditation
Sheffield Renewables would like to submit evidence under the consultation on the proposed changes to the Feed-in Tariff accreditation, particularly related to pre-registration. Alongside this we feel it relevant to give details of how it would affect the two types of technology with which we have considerable experience developing projects.
Sheffield Renewables was set up by a group of volunteers in 2007 and incorporated as an Industrial and Provident Society in 2009, now a Community Benefit Society. We fund, develop, own and operate renewable energy schemes in a way which brings benefits to both the city and its people. We have two 50kW solar schemes currently operating, both on schools, and a third scheme with South Yorkshire Police due to be installed in the next month. We have an ambition to install 0.5MW of community energy in Sheffield in the next 5 years.
Sheffield Renewables predominantly operates as a voluntary organisation, employing staff members when granted funding is available. We finance our scheme through Community Shares and have raised a total of £259,000 in share capital. We have also raised £135,832.23 through grant funding, to assist the development of projects and fund wider work. Sheffield Renewables are one of 15 community energy groups that mentor emerging groups through the Cooperative’s Community Energy Mentoring Scheme, advising on setting up their organisation and developing projects.
Sheffield Renewables initially developed a hydropower scheme. Unfortunately we took the difficult decision to halt this scheme due to several risk factors, particularly surrounding legislative and cost issues. Hydropower installations do not benefit from the economies of scale, as with technologies such as solar panels. This due to the fact that hydropower installations generally require custom pieces of equipment to suit the particular site. This causes prices to be high. The high project cost, along with the fact that only ‘small scale’ (<1MW) developments are possible in the UK, often leads to projects not being financially viable in the commercial sector. Community groups are then the only viable option, as they have access to ‘patient’ capital, which does not demand quick or large rates of return on investment. The development timeline for community hydropower projects are particularly lengthy, as the work is generally carried out by volunteers and is dependant on successful receipt of grant funding in order to complete specific development tasks and permissions.
It cannot be stressed enough how crucial policy stability is in order for community groups to develop these projects. With uncertainty surrounding how much income such a project will generate it is impossible to progress development, attract funding and secure finance, as well as seriously undermining investor confidence.
Sheffield Renewables turned to solar power based projects as we felt this to be the most viable alternative, financially, technically and legislatively. This technology offers a simple way to increase our country’s energy security, particularly in areas of large day time usage. The solar panel market however, has not reached maturity, the continued uncertainty in government policy is often cited as being a major influence in affecting confidence in the market. There has been considerable change in the market since 2006, prices for panels have decreased considerably. This price decrease is yet to be great enough to make them financially viable and enable a return on investment on community shares, under the model that Sheffield Renewables and many other community groups offer.
The solar panel market has the largest potential for job creation and financial growth in comparison to other renewable technologies. Solar represented 32% of all jobs within the renewable markets in the UK, as stated in the REN21 Global Status Report. There is good potential for local job creation in Sheffield. 2014 saw the solar market in Sheffield grow to £28.4 million with 239 employees, predicted to grow by 5.6% per year, according to the Innovas report, Low Carbon and Environmental Goods and Services Sector Analysis for Sheffield City Region. The solar market is still a turbulent market, requiring confidence in policy and technology, in order to offer a stable platform for job creation and growth.
The proposed removal of pre-accreditation and pre-registration would not allow this job creation and grow in the market. It has the potential to repel investment and stunt market growth in this area. It will make it impossible for community groups to present a reliable business case to investors, potentially causing a complete collapse of any development in the community energy sector.
Benefits of Community Energy
The potential benefits of Community Energy are far reaching. The success of this is alternative way of doing business is often attributed to the flexible approach groups can take to each project, which present a variety of different needs depending on the community it is based in and the challenges they face. Community energy groups offer a democratic and collaborative way of operating, this helps to build a local community and install a sense of pride and ownership within the community, something that is often eroded in modern society.
Community energy groups work in line with recommendations made by the European and Social Committee in their report, Changing the future of energy: civil society as a main player in renewable energy generation. This states ‘make decentralised, civic renewable energy a policy priority’
Community energy groups have the ability to release capital (through community shares and grant funding) that commercial organisations don’t have access to. This capital gives a direct benefit to the local community, most community groups supplement their projects with community benefit funds to help the most disadvantaged in the community. They also offer outreach work and educational opportunities, as well as working experience opportunities, through volunteering that commercial organisations could never offer.
With over 5000 community groups in the UK now, this is real viable route to assisting the UK to meet its climate change targets while engaging and educating local communities about ways in which individuals can play a roll.
Community energy groups are generally in a vulnerable positon financially. Stability in the sector is the key to success, continued change in the funding mechanisms for renewables will considerable increase the risk to investment.
Answers to consultation questions
1. Do you agree that, in the context of deployment and spend under the FIT scheme significantly exceeding expectations, it is appropriate to remove the ability to pre-accredit from the FIT scheme?
No, we do not agree. Removal of pre-accreditation and pre-registration should not be used as the mechanism to control spend. FiT degression is the method for controlling spend.
The removal of pre-registration particularly, will have a detrimental effect on community based projects. Due to the method of FiT degression, pre-registration is essential to give certainly to project financial returns, to attract investment and ensure project viability. Sheffield Renewables, like many community energy groups, needs this guarantee as we develop multiple site solar projects that require different leases and approvals before installation can take place, the time scales on these can vary considerably.
2. Are the assumptions made above on the impact of removing pre-accreditation reasonable? Please provide robust evidence to support your response.
DECC has not provided sufficient evidence of the likely impact on deployment if pre-accreditation or pre-registration is removed. It is clear the intention is to reduce deployment of renewables. From this consultation it is also clear that community schemes will be disproportionately adversely affected by the removal of pre-accreditation and pre-registration, and will directly contradict recommendations made by the European and Social Committee, as mentioned in ‘Benefits of Community Energy’ section of this consultation response.
If the ability to secure the FiT rate is removed, interest rates on finance will be increased as the risks associated with the project is higher. Investment will be associated with higher risk and uncertainty, meaning investors will demand higher rates of return, which will not be possible as FiT degression progresses, potentially rendering projects investable.
3. Are there additional measures which could achieve the objectives of encouraging deployment under the scheme while ensuring value for money under the LCF?
The increase in renewable energy installations in the UK can only be a positive shift in energy generation. The increase in renewable energy generation is aiding the UK’s future energy security and should be encouraged. This applies to projects developed by the community that bring the added benefits already mentioned in this consolation response.
The government must clearly set its stance on renewable energy subsidies to ensure stability in the sector. Only once this is achieved, along with price parity, should consideration be given to removal of subsides.
On the 22nd July 2015 the Secretary of State for Energy and Climate Change announced the Government’s wish “to take control of the costs of renewable electricity subsidies under the Levy Control Framework (LCF). This is part of the Government’s commitment to control energy bills for hard-working British families and businesses as we continue to move to a low carbon economy and make progress toward our carbon reduction and renewable energy targets”. In order to move to a low carbon economy the government must not hinder the growth of the renewable energy sector by removing subsides and undermining investor confidence. There are alternative methods of controlling spend under the LCF, while preserving subsides and support to community renewables. Suggestions in the consultation document mention the possibility of preserving pre-accreditation for the largest schemes. It is also essential that for community schemes pre-registration is retained to prevent the disproportionate impact to community energy. Before further action is taken, DECC must demonstrate the root cause of over spend under the LCF, examine the types of schemes that ‘hard working British families’ benefit most from and ensure the subsidies for these schemes are preserved.
4. Are there groups or sectors where it may be appropriate to reintroduce pre-accreditation in the future?
We do not believe that pre-accreditation or pre-registration should be removed. The removal and reintroduction of pre-accreditation will have a considerable impact on confidence in the sector, as well as cause confusion and uncertainty.
It is essential that pre-accreditation and pre-registration is preserved for community projects regardless of the outcome for commercial projects.
At Sheffield Renewables, as with most other community energy groups, considerable time and commitment is made by many highly skilled volunteers. All involved share a vision to make Sheffield, and other communities, cleaner, sustainable and more community focused, leading to a citythat is more pleasant to live in. Removal of pre-accreditation and pre-registration will severely hamper this vision.