The policy asks below are a work in progress. You can see our 'short-list' of policy asks in our current parliamentary briefing bit.ly/CEEbriefing. This link takes you direct to the specific policy suggestions.
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29 June 2023.
In 2014 the government’s Community Energy Strategy envisaged 1 million homes powered by community energy by 2020. From 2014-2017 the sector more than doubled in size every year. Over successive years policy uncertainty and cuts to and removal or ending of ROCs, the Feed-in Tariff, Export Tariff, the Urban and Rural Community Energy Fund and Tax Relief caused a previously dynamic sector to stall. The State of the Sector 2022 report shows that in 2021 community renewable energy installations only grew by 7.5MWs or 2.4%.
However in that most challenging year ever it grew employment by 40%, increased energy efficiency activity by 38%, engaging with 57,000+ people and saving them £3.35m on their energy bills. The sector engaged 217,489 people on energy and climate change, spent £510,160 on providing building improvements to 20,843 households and distributed £1.35m in community benefit funds. £15m was spent into local economies.
Why Community Energy is important
The future of energy is renewable, zero-carbon, flexible, smart and local. Community energy is key to delivering an engaged citizenry who will participate actively in these changes and in how energy is generated and used. In 2021 the Environmental Audit Committee enquiry into community energy concluded, in recommendations to government, that “Due to the urgency of the climate crisis and the vital roles communities will have to play in reaching net zero, it is essential that a timely solution to support the long-term growth of community energy across the UK is found.”
The Net Zero Review by Chris Skidmore MP identified the vital importance of local climate action, noted that the government had neglected community energy and recommended it “turbocharge the sector” and “empower people and places to deliver” on net zero.
Why the government must support Community Energy
The sector is hugely entrepreneurial, diversifying and combining business models to deliver climate mitigation and community benefit but constantly struggles to make an investment case. Community energy has to compete in a highly commercial field with high risk and low margins and yet is expected to deliver community benefit as well. Unlike other social enterprises it receives no tax relief. Community Shares offer no opportunity for capital gain, cannot be easily liquidated and offer low returns and only one vote per shareholder rather than per share. The field is high-risk even before these factors are taken into account. Yet share-offers are continually over-subscribed. People want to make an impact, especially in their communities.
Government support to derisk community energy projects by offering investors certainty (as the Contracts for Difference scheme does for commercial investors) would reap huge returns in human and financial capital invested, carbon saved and huge community benefits. The Rural Community Energy Fund pipeline in the NW of England promised to mobilise £69 of community investment for every £1 of development grant provided by the government.
Thousands of local community energy volunteers and experts are waiting and wanting to support the government’s urgent energy transition locally. Without support from the government to enable them to act this vital asset will be lost as they find something else to do with their time.
To play the vital role described by the Environmental Audit Committee community energy must:
- Explicitly recognise and emphasise the importance and added social value of Community Energy in the government’s energy and climate policies, including, vitally, engaging the wider public in the net zero transition. Community energy must be supported in line with that importance.
- Establish a ‘Duty to support local climate action’ within Government.
Policy must include:
- “Practical support measures to harness the potential of community energy”, especially financial and policy support. (see below)
This must be backed up by
- a ‘community energy' team within DESNZ with
- ambitious targets, as in Wales and Scotland
- a cross departmental working group with
- strong grass-roots community energy participation in policy making, as well as
- increasing support for knowledge sharing and collaboration, for instance via Community Energy England and similar bodies.
- Government and Ofgem must end ‘technology neutral’ regulation and positively support community energy
Because of the huge diversity of community energy activity, (from ‘draught-busting’ energy switching and advice in individual homes though innovation projects around local supply, flexibility, transport and heat, to generation projects from rooftop solar to large ground-mounted solar and wind) there is no single, silver-bullet solution. A policy package of different “practical support measures” is needed to support different types of projects across the wide remit that is the ‘energy transition’.
The policy package should include all or some of the following policies:
Specific policy proposals
The Department of Energy Security and Net Zero must
- Institute a National Community Energy Fund** to replace the Rural Community Energy Fund, to support urban and rural projects, heat, energy efficiency and retrofit projects, with feasibility and development grants and loans. This must include capacity building funding to enable the sector to grow again. The fund should seek to realise the potential for the sector identified in 2020 of 5GW of installed capacity. Transitioning to a revolving loan support mechanism with support of national institutions such as the UK Infrastucture Bank we calculate that this would cost £2bn
- Institute a Community Energy Contract for Difference, simplified and with an enhanced strike price. Or a Community Smart Export Guarantee** with a guaranteed floor price over a 20 year period.
- Greatly increased funding for Energy Efficiency and Retrofit including for skills and supply chain, that is accessible by community energy organisations.
- A replacement for the non-domestic Renewable Heat Incentive** that is accessible by community energy organisations. Or the EAC wording: Create a community Renewable Heat Incentive or similar for non domestic community renewable heat schemes.
- Introduce a mandated offer of 15% Shared Ownership (with voting rights) for renewable energy as provided for in the Infrastructure Act 2015’s ‘Community Electricity Right’.
- Enable local supply of energy*** via the Local Electricity Bill or similar, including making it part of the Review of Electricity Market Arrangements (REMA).
- Policy and funding for “Local Area Energy Planning”*** to Local Authorities and community energy and for the resulting collaborative energy projects.
The Department for Energy Security and Net Zero (DESNZ) must work with other departments and agencies, such as the Treasury, DLUHC and Ofgem to:
- Reinstate tax relief and institute business rate incentives** for investment in community energy.
- Ensure Ofgem’s official mandate includes maximising social benefit from the energy transformation and that regulation actively supports community energy including a ‘Community Right to Connect’.
- Reforming the planning system at local and national level to ensure it properly supports net zero.* (not just sustainable development) as quickly as possible and to enable community-led renewable energy**.
- Remove completely the planning blocks to onshore wind in England*** and ensure a strong element of community ownership and/or control.
- Open up the Energy Redress ‘main fund’ to community businesses.
- Maintain permanently 0% VAT on Energy Saving Measures (including solar and batteries)*.
- Mandate procurement of community energy by public sector bodies** (EAC recommend ‘investigating’). Or Encourage public and corporate power purchase agreements with community energy generators
- Create local energy conservation, efficiency, DSR and flexibility markets that are accessible for new entrants and in particular for community energy groups.
- Reverse the regulatory penalty to small generators, recently introduced under the Targeted Charging Review by Ofgem
* Net Zero Review recommendation
** Environmental Audit Committee recommendation.
*** Net Zero Review and Environmental Audit Committee recommendations