Mentoring lights the way as government rules turn tough for community energy

Community energy groups receive support ‘in principle’ from government, but the sector is blighted with contradictions in policy and insurmountable practical difficulties. This is the conclusion of Co-operatives UK’s latest report, Energy Mentoring: Lessons for Government, by Rebecca Willis.

Based on the experience of participants in the Energy Mentoring programme, run by Co-operatives UK and the Community Shares Unit, it looks at how government policy, strategy and funding has helped community energy groups. It also considers the obstacles in policy, regulation and market structure that stymie success.

In 2014-15, Energy Monitoring supported 30 new community organisations as they negotiated the complex technical, legal and practical path to generating renewable energy. The programme, funded by the Esmée Fairbairn Foundation, offered up to six days support, matching new starters with 14 experienced organisations.

For example, bencom Chase Community Solar received support from GenCommunity as it raised £750,000 for its share offer to put solar panels on council houses in Cannock Chase. Director of Chase Community Solar Mike Kinghan said: “A lot of it’s been moral support… This has been an enormously challenging scheme personally. There have been quite a lot of moments of dark despair, and it helps that they’ve been through some similar experiences and come out the other end.”

His mentor Andy Heald of GenCommunity also found the exchanges useful.

“It’s helped me by having a two-way information flow on pricing, viewing different parts of contracts and gathering information on what actually works, where money’s come from,” he said. “It was very good for sharing knowledge.”

Ed Mayo, secretary general of Co-operatives UK, said: “We’ve tried a methodology for business development that, as an alternative to the costs of traditional sources of business support, creates a modest but enabling reward structure for practitioners to support those who are following them.

Barriers

“Some of the barriers that practitioners have faced are better simply removed, rather than advised on. Community energy is influenced by a complex policy and regulatory environment and there are lessons, and recommendations, for national policy that we set out in this report.

“The challenge of scaling community energy across all the relevant renewable technologies is also about learning. How do we accelerate learning in order to accelerate practice? One answer which can now be added into the mix is energy mentoring.”

Many of the 44 participants in the mentoring scheme expressed their appreciation for the coalition government’s commitment to community energy. They considered the 2014 Community Energy Strategy an important statement of intent which helped build credibility within the sector. A dedicated Community Energy Unit, established within the Department for Energy and Climate Change (DECC), was also welcomed.

But most groups were frustrated by the complexities. More than a year after publication of the Community Energy Strategy, there is still no simple, predictable regulatory framework for community energy, they said.

Mike Kinghan of Chase Community Energy said: “The policy uncertainties, the tax system and the Financial Conduct Authority (FCA) regulation risks the whole thing just collapsing in a heap. There are obvious contradictions in government policy.”

Gill Fenna of MORE Renewables, also a bencom, added: “The strategy is great as a background document – you can say ‘look, national policy supports this’ – but then you hit practical difficulties. We fight every step of the way. At a practical level everything is difficult.”

According to the report, working groups on finance, grid connection, planning, the regulatory process for hydros and local supply options have, as yet, brought about few significant changes to policy. While community groups wait for the situation to improve, Feed-in Tariff rates decrease and good sites become harder to find.

Pete Capener, co-founder and chair of Bath & West Community Energy, added: “Loads of people had put lots of time into the working groups, yet there’s little evidence to date of tangible changes implemented as a result. This is disappointing given the level of political commitment that was put behind the setting up of the groups.”

Nearly all the projects in the mentoring scheme are receiving or will receive income from the Feed-in Tariff (FiT). Offering a guaranteed price and therefore income stream from energy generated, the FiT is seen as crucial in building a viable business model for community renewables.

“The starting point is clearly the FiT,” said Mr Capener. “These projects wouldn’t even be thinking about this if there wasn’t a tangible outcome that would generate an income back into the community. It’s easy now that it’s been going so long to underestimate its impact and its importance.”

Pre-registration, whereby community groups can apply for the FiT when they have met specified project milestones but before the project is built, was welcomed by many, but is also now under threat.

Exemptions

Many groups have benefited from tax incentives in the form of the Enterprise Investment Scheme (EIS), and the Seed Enterprise Investment Scheme (SEIS). Under these schemes, people who buy shares in a community enterprise may receive tax relief on their investment. But, the report says, the future of tax incentives for community energy is uncertain, following an FCA review.

Another helpful development was the exemption given to community groups for Energy Performance Certificates (EPCs). For most building-mounted renewable energy, FiTs will only be offered if the building meets the required level of energy efficiency, measured through an EPC. However, many community groups do not own or have control over the buildings they use. They may, for example, agree with a local school or business to use the roof for solar panels in exchange for cheaper electricity.

Will Cottrell of Brighton Energy Co-operative said: “There’s little things that really can make a difference, for example the exemption from EPC requirements…

“That really gives us an opportunity in the rooftop market to get things done.”

Nearly all the groups had applied or were planning to apply to the Rural Community Energy Fund (RCEF) and the newer Urban Community Energy Fund (UCEF). These government grants provide support at the early stage of project development, allowing groups to explore possibilities before they have a project and revenue stream.

Some groups said the Social Values Act, which requires local authorities to consider social values in procurement, has helped local schemes to develop. Warrington Borough Council has supported the setting up of Lymm Community Energy and helped identify potential community buildings for PV installations, said Richard Pearce of Lymm Community Energy.

Mike Kinghan said: “Cannock Chase Council offered Chase Community Solar the opportunity to install PV on its council homes and has been supportive throughout the process. They were very keen to work with a social enterprise and it’s been a very good partnership.”

The report adds: “Overall, the groups feel cautiously optimistic about the future for community energy, encouraged by the growth of the sector in recent years.

“Most are developing plans for further projects. However, their optimism is tempered by considerable uncertainty about the policy framework for community renewables and the viability of future schemes.”

How government can promote community energy: The report’s recommendations

• Set up a ‘compact’ to allow government departments and agencies to work together, reducing the administrative burden

• Continue to support early-stage initiatives and recognise the importance and value of community shares, through which communities invest in, own and control community energy initiatives

• Make the Feed-in Tariff work for communities

• Support a swift resolution to current uncertainties: FCA, tax relief, grid connection and local supply

• Incentivise partnerships with others

• Support a clear business model for community energy efficiency enterprises