Wind of change: How 2013 turned up the heat on community energy production

Energy was big news in 2013. Price rises helped galvanise the community energy sector and enabled retailer Co-operative Energy to show its difference.

Energy was big news in 2013. Price rises helped galvanise the community energy sector and enabled retailer Co-operative Energy to show its difference.

In December 2013, the number of co-operatives producing electricity and generating income for their communities was approaching 100, with 95 on the Co-operatives UK database, 15 of which had registered in 2013.

Britain's first co-operative gas and electricity retailer, Co-operative Energy, grew its customer base to 150,000. It hosted the Community Energy Conference in October, bringing community energy experts and representatives from the government and Ofgem together to grow the sector.

In 2012, the Co-operative Group, Co-operatives UK, Energy4All, National Trust, Women’s Institute, Church of England, Friends of the Earth and others formed the Community Energy Coalition, a campaign to make community energy at scale a reality by 2020. In 2013 it came into its own, enjoying a string of successes in parliament.

Colin Baines, campaigns manager at the Co-operative Group, says: “Progress achieved over the last couple of years has been impressive, from a small handful of community energy pioneers to what seems like the announcement of a new project or community share offer every few days.

“The issue has rocketed up the political agenda, with every major party now vocally championing the cause and the issue dominating many a parliamentary debate. With the Community Energy Coalition and Community Energy Fortnight, public awareness is also rising.”

Just 20 years ago there was no such thing as a British energy co-op. The first, Baywind, formed in 1996, following in the footsteps of successes in Scandinavia.

In 2013, Baywind’s co-operative development company, Energy4All (E4A), is a growing family of 10 co-operatives, which has raised over £20m of equity. E4A began the year with Drumlin Wind Energy Co-operative, Northern Ireland’s first renewable energy co-op, closing its £2.7m share offer.

The launch of the largest co-op in the family, Spirit of Lanarkshire, followed in the summer. Its share offer, which has already raised almost £2m of its £2.7m target, is scheduled to continue until March 2014, as it seeks a stake in two separate wind farms.

“We have worked hard to facilitate mutual support between the E4A co-ops and where possible other co-op energy initiatives like Sharenergy,” says Marna McMillin, CEO of E4A. “Getting projects done takes the vast majority of our time, so policy and campaigning initiatives by others have been welcome.

“The Co-operative Energy Community Energy Conference 2013 was a particular milestone, which captured the current positive and confident mood in the sector.”

Successful projects are building awareness and driving emulation, she says. But, she adds, it is still difficult to get community projects into operation because of planning and grid issues:

“Planning remains a significant barrier, particularly for projects of reasonable scale, for example single 500kW capacity wind turbines, which we had hoped more communities would aspire to.

“The cost of preparing and submitting planning applications is significant – and funding raised by communities and invested in development of the project is entirely at risk.”

Ms McMillin acknowledges national planning policy supports community-led schemes, but believes there is “a major disconnect” between that and local decision-making. Community energy’s social and environmental attributes do not receive sufficient weight, she says, while small numbers of local objections often gain precedence. The cost of securing a grid connection is also a barrier.

“Different electricity network operators appear to have different charging policies and requirements for deposit amounts, some of which are more helpful than others,” says Ms McMillin. “From a straight £10,000 to requiring the whole cost to be paid up front, grid connection costs can be prohibitively high, particularly in remote areas.

“We advocate priority connection of community projects by the distribution network operators and a fixed, modest connection cost for community projects, with the cost of infrastructure development being paid by all consumers or the taxpayer.”

Colin Baines agrees that there is still a lot to do. “We need a comprehensive framework of government support including, for example, affordable electricity grid access for community schemes, and an obligation on commercial developers to offer a proportion of their projects to the community,” he says.

“We believe a democratic revolution in the ownership of energy is possible and want to see a dramatic increase in the number of communities owning and benefiting from clean energy and energy saving projects.

“Over the course of the year, thousands of co-operative members and customers have contacted their MP in support of the early day motion, Energy Bill amends or recommendations for the Department of Energy and Climate Change (DECC) Community Energy Strategy, plus 60,000 members signed the Community Energy Fortnight petition, all to good effect.”

Co-operative Energy has been active too. “We endeavour to support schemes in practical ways at whatever stages of development they are at,” says Ramsay Dunning, general manager. “It takes communities a couple of years before a scheme gets off the ground. We can support them by having an arrangement in place to buy power.

“We buy as much power as possible from community schemes. The amounts are lower than I would like, but there is a whole range of factors hampering development of community energy. We are working with community groups and the DECC to change that.”

Co-operative Energy, which was formed in 2011 by Midcounties Co-operative, began 2013 with a growth spurt. A period of consolidation followed, along with the first in a series of senior appointments from its multinational rivals.

Back in autumn 2012, when the ‘big six’ increased their prices by over eight per cent, it cut electricity bills and promised to freeze prices through the winter – moves which contributed to extraordinary growth and a decision to accelerate the organisation’s business development plans.

“Last winter’s growth caused us to review all our systems and processes to ensure that they are going to be fit for purpose for a business several times our present size,” says Mr Dunning.

“We have been strengthening our management team, particularly at senior level, and we look forward to continuing to grow the business and change the nature of the energy industry in the UK.”

Co-operative Energy has already appointed Neil Denby, formerly of Npower’s domestic leadership team, as its chief operating officer. Other key positions will be filled in the new year.

“We recognised when the first customer signed up that we needed people who had the bruises of having been around for a while in senior positions,” says Mr Dunning. “It isn’t a reaction to our growth. It’s part of a progressive plan.

“We need high calibre people and business experience, while ensuring the co-operative ethos is completely embedded in the business.”

A well-publicised price war has dominated energy retail in 2013. In May, escalating wholesale and transport costs forced Co-operative Energy to increase prices for over 100,000 customers on its Pioneer tariff, adding £100 a year to its average dual fuel bill. In October, soon after British Gas had revealed it would increase its tariffs by 10%, Co-operative Energy reluctantly announced another price rise, this time of 4.5% – which, the organisation said, represented half the extra costs it faced as a business.

In November, there was better news. Co-operative Energy launched a new fixed price tariff until March 2017, and cut the 4.5% price rise to 2.5%. It did this based on a clear indication that the government would remove mandatory Energy Companies Obligation (ECO) green taxes on gas and electricity bills.

“Ultimately, if we have misread the signals and social taxes remain in place for next year, we will have no alternative but to review this decision, but at least our customers will have benefited over the difficult winter months,” says Mr Dunning.

“I don’t think the multinationals will ever do what we can do. In the end they are there to make the maximum profit,” he adds.

“We are not answerable to shareholders; we are answerable to our customers who are our members. We know that these are very tough times for everyone.”

Colin Baines says the big energy companies know their days are numbered. A recent PricewaterhouseCoopers poll of senior executives from 53 international utility companies found that 94 per cent predicted complete transformation of, or important changes to, the power utility business model between now and 2030.
Almost 60 per cent said there was a high or very high likelihood that utilities will have to change significantly because of increasing levels of distributed generation, where businesses, communities or individuals produce their own power.

Marna McMillin agrees this is possible, but remains unconvinced that any political party has the will to make the changes such a movement requires. “The current lack of coherent policy in the UK may not produce the best conditions for community energy development, particularly at the scale which would compete with the large utilities,” she says. “Political will is needed to facilitate this transformation and give appropriate voice to the community sector.

“The apparent crisis in generation capacity is driving decisions like the agreement pricing for new nuclear build, which appears to be more costly than onshore wind. This may not be good in the long-term and means that government will need to continue to pay close heed to the large utilities controlling key components of our generation capacity.

“Continued pressure is important. The initiatives over the past few months, involving DECC, are welcome – but there is a risk that they will remain simply as initiatives and not translate into concrete policy and legislation.”

Mr Baines and Mr Dunning are more hopeful. “I have got a real sense that there is will in all directions,” Mr Dunning says. “There is complete cross-party support. It is non-political. They are all looking at what can we do to make this happen in practical terms.

“I think we have a significant role to play. We will do whatever it takes.”

In this article

Join the Conversation