New report calls for premium tariff for community energy projects

A  new report has called on the UK government to introduce a premium Feed-in Tariff for community energy projects following the planned subsidy cuts next week for solar PV.

The report, published by Regen SW, calls on energy ministers to put the microgeneration revolution “back on track” and delivers four recommendations to support the continued roll-out of green energy technology.

In addition to calls for the introduction of a premium tier Feed-in Tariff (FiT) rate for community groups, the 18-page report also recommends the December 12 cut should be deferred until April 1 and the fixed cap on expenditure under the FiT regime should be removed and replaced by a clear degression policy to limit the cost to bill payers.

It also urges the coalition to provide “clear political backing and a transparent long-term approach” to support for microgeneration, across all technologies and says the introduction of energy efficiency requirements to the Feed-in Tariff scheme should be kept simple and flexible.

Regen SW is a leading centre of sustainable energy expertise and pioneering project delivery. The organisation enables business, local authorities, community groups and other organisations to deliver renewable energy and energy efficiency and build a prosperous low-carbon economy.

The report, “The Benefits of Microgeneration and the Feed-in Tariff”, draws on Regen SW’s knowledge base and links to the industry and stakeholders in the south west to look at the evidence of the benefits that microgeneration, supported by the Feed-in Tariff, has brought to date.

It explains: “The levels of renewable energy being installed under the Feed-in Tariff are significant in the south west. The Tariff has been successful in engaging a much broader community of entrepreneurs, businesses, landowners, local authorities and housing providers and public in generating power.

“There is early evidence that engagement in generating power has also created greater awareness of the value of energy and that those installing microgeneration are also taking energy efficiency measures.

“The interest in microgeneration has created a large investment in new businesses, jobs, skills and training with over 2,000 people employed in the solar sector in the south west and significant investment from colleges in new courses and facilities.

“Perhaps the most unexpected impact of the Feed-in Tariff is the extraordinary increase in the number of communities interested in taking control of their own energy use. Community energy groups have sprung up – many with sophisticated models and plans to retain the expenditure going into energy within the community.

“The cuts in the Feed-in Tariff have sent a message that the government is no longer committed to the shift to decentralised energy. We need the government to put the microgeneration revolution back on track.”

The report’s four recommendations are:

* Provide clear political backing and a transparent long-term approach to support for microgeneration, across all technologies

* The cut to the solar PV tariff from 12 December 2011 should not be implemented until 1 April 2012 and the fixed cap on expenditure under the Feed-in Tariff regime should beremoved and replaced by a clear degression policy to limit the cost to bill payers

* The introduction of energy efficiency requirements to the Feed-in Tariff scheme should be kept simple and flexible

* A premium Feed-in Tariff for community energy projects should be introduced.

The report argues that a premium Feed-in Tariff rate for communities would help local groups overcome the financial obstacles of launching such schemes.

It adds: “There is clear evidence from the IPPR and from discussions with community groups that community energy projects have the potential to bring a wide range of benefits. However, community energy projects face greater barriers to development, including access to finance. Even with the potential for revenue income through the Feed-in Tariff, community projects struggle to raise the capital required to invest in a project.

“A number of financing mechanisms are possible, including community share offers, private sector sponsorship or partnerships and bank loans. However, the lengthy decision processes involved in community projects mean that these are often perceived as risky and upfront capital can be difficult.

“The government has introduced a range of welcome measures to support community energy including tax advantages. An enhanced Community Feed-in Tariff would help to overcome the problem of upfront capital, as the higher returns would offset the higher risks involved.

“In a new report for Regen by ClimateChangeMatters, it is recommended the simplest way of achieving this is through an exemption for community projects from the 20 per cent deduction for single ownership multiple installation (aggregated) schemes in relation to the PV FiT.

“This alone will not have sufficient impact to tackle the extra costs for communities, but would make an impact as part of a co-ordinated package of support.”

Merlin Hyman, chief executive of Regen SW, said: “In 2009, there was a rare degree of agreement between all political parties on a revolutionary approach to how we power our lives: agreement that the challenges of energy security and climate change meant a shift was needed away from large scale fossil fuel power stations.

“Instead, energy would increasingly be generated by decentralised local and community energy technologies. Power was to be put in the hands of the people.

“This radical policy was perhaps best articulated by the Conservative 2007 policy paper “Power to the People” written by Greg Barker with a foreword by David Cameron. Liberal Democrats were equally fervent in their support.

“The Feed-in Tariff was duly introduced by Ed Miliband in April 2010 as the primary mechanism to
invest in this revolution. With cross party agreement and long-term, simple and clear policy in place that business could plan against, the future looked bright for microgeneration.

“Less than two year later as the solar industry faces another round of boom and bust the obvious
question is, what went wrong?

“Undoubtedly two factors have contributed. Firstly, the challenging economic situation led to the
imposition of a fixed budget by the Treasury undermining the Feed-in Tariff policy. Secondly, the system was unable to adapt tariff levels clearly and quickly in response to rapid falls in the prices of solar modules.

“However, the response to these problems has made clear that the political consensus underpinning the policy has also broken down. At a time of pressure on customer bills solar technology in particular has been criticised for being too expensive and putting up customer bills.

“This report looks at the evidence on the benefits that the first steps in the microgeneration revolution have brought – using the south west of England as an example.

“It is early days, but already it is clear that the opportunity to generate local energy has delivered the flowering of community groups, local business investing in new skills and new jobs and energy savings that ‘Power to the People’ predicted.

“The case for decentralising energy remains as strong now during these challenging economic times as ever. What is now needed is to rebuild the political consensus behind this radical approach to energy and put in place a stable policy framework to invest in microgeneration.”