Community Energy Scotland – Media Release
July 15th 2015
Cuts to renewable energy support force community groups to quit
Volunteers who have worked for years to establish sustainable incomes for vulnerable communities through clean energy developments are set to throw in the towel,days after the UK government's announcements of cuts in payments for renewable electricity.
• Community members of Community Energy Scotland who are yet to start construction have indicated that their business planscan no longer be made viable.
• Community Energy Scotlandmembers who already operate community-owned wind turbines say that the loss of revenue to their communities will be measured in millions of pounds.
• Across hydro, solar and wind, the whole community energy sector faces rising costs and falling incomes.The Scottish Government's target of 500MW of community-owned generation by 2020 has been severely undermined.
• George Osborne's budget has not lowered electricity costs. Alevy that previously encouraged clean energy will now go to the Treasury instead.
The UK Government has announced two measures that directly impact the incomes of community energy schemes.
1. RENEWABLE OBLIGATION CERTIFICATES CLOSURE
The UK Secretary of State for Energy and Climate Change, Amber Rudd MP, brought forward the closure of the Renewable Obligation Certificate (ROC) mechanism that applies to larger developments (over 5MW). These can include cost-effective joint ventures between community groups and commercial developers.
The exclusion of new onshore wind generation from the Renewables Obligation is seen by the London government as a manifesto commitment carried out, albeit sooner than had been pledged.
Community Energy Scotland and its members see it as a crude measure that does nothing to promote affordable electricity and disproportionately impacts communities seeking to take their economic future into their own hands.
Community developers face longer development timelines than commercial developers and cannot spread risk over a wide project portfolio.
Bringing the closing date forward twelve months to April 2016 without warning, as has happened, will specifically block community developments from proceeding as they have the least capacity to staff up and try to meet the shorter deadline.
Mark Brennan, Development Coordinator at Melness & Tongue Community Development Trust,responded:
“The early closure of the RO is a disaster for us. We are working on shared ownership of a large wind farm that has grid, land and could achieve ROCs accreditation by April 2017 but not April 2016. The project is currently in local public inquiry and due to report this autumn. The project is required to fund the long term implementation of our community growth plan.”
Not all developments are eligible for ROC payments – smaller schemes can instead qualify for Feed-in Tariff (FiT) support.
FiT payments have not yet been reduced by political intervention since the UK election, but they are scheduled to degress (reduce) and any project seeking finance based on the Feed-in Tariff mechanism will now face a tougher battle to convince investors given the unpredictable manner in which the UK Treasury and DECC have acted.
Even for projects that do not face revenue reductions, the dent in confidence is likely to see increased finance, procurement and upkeep costs for the entire wind energy sector as economies of scale dwindle.UK supply chain companies have already reacted by announcing closures of UK production centres.
2. CLIMATE CHANGE LEVY EXEMPTION ENDED
In the Budget itself, a separate, further diminution of support for clean energy was announced without warning.
The abolition of the renewables exemption for the Climate Change Levy (CCL) is deeply concerning to Community Energy Scotland and its members for two reasons:
• It applies to all forms of low carbon energy, not just wind energy
• It affects existing projects
The CCL enabledrenewable energy generators to sell Levy Exemption Certificates (LECs), with a value around £5/MWh. The cost was borne by businesses through their electricity supply contracts.
No domestic or commercial user's electricity costs will go down when renewable generators are barred from claiming LECs.
The CCL payments that continue to be payable will instead now go directly to the UK Treasury.
A scheme originally designed to promote clean energy is now simply a tax on electricity.
Community Energy Scotland members and community energy groups are left exposed to all the same costs that they previously were. The loss of LECs will translate directly into reduced monies being available for community benefit. Community Energy Scotland estimates the entire sector stands to lose £20m over the next 20 years from existing schemes alone.
Community benefit does not buy flashy luxuries. It routinely funds local transport, care for elderly people, road repairs, home insulation improvements.
One Community Energy Scotland member, Galson Energy Ltd, a subsidiary of community landowner Urras Oighreachd Ghabhsainn, which operates three community-owned 900kW turbines at Ballantrushal in north-west Lewis, expects to lose £50,000 each year for the next 20 years due to the demise of LEC income.
The non-profit company's Chair, Carola Bell, commented:
“The removal of the Climate Change Levy exemption is very disappointing as it will result in a loss of around £1m gross income over the lifetime of our project. Crucially, this means a reduction in the funds available to invest in the community each year and, therefore, additional work for volunteers to achieve their long-term ambitions for the area. This is yet another set-back for communities engaged in bringing forward renewable energy generation.”
COMMUNITY ENERGY SCOTLAND RESPONSE
Community Energy Scotland continues to engage with Scottish and UK politicians to underline the effect these cuts will have on people working hard to promote self reliance in vulnerable communities.
The knock on effects from these decisions by the UK government will be heavily felt by small businesses involved in the supply chain for local energy projects, and dampen the level of innovation which has been driven by the challenges facing the affordable and efficient integration of renewable energy into the energy system. The irony is that onshore wind represents the most affordable renewable energy technology currently available and support will now be diverted to more expensive technologies.
Community Energy Scotland’s Head of Development Felix Wight represented itsmembers at the Onshore Wind Summit held by Scottish Energy Minister, Fergus Ewing MSP on July 9th. Felix stated:
We call for recognition of the additional challenges that community energy developers face. The original April 2017 closure for entries to the ROC mechanism was already tight but community groups simply cannot meet the new 9-month deadline.
We therefore back the urgent demand from Scottish Renewables for greater clarity over the grace periods and criteria for determining which projects currently in development can qualify for ROCs.
We are also calling for a longer grace period – up to April 2018 – specifically for community groups to become operational and qualify for ROC support.
We suggest that the same definition of community group as is used under the 2015 Feed-inTariff Order (for smaller installations) could easily be applied to larger scale projects under the RO.
This is a practical proposal which would not require additional funding but would help ensure that the remaining budget for the RO is spent on projects with the greatest environmental and social value.
****
ABOUT COMMUNITY ENERGY SCOTLAND
We are a membership organisation and social enterprise which supports communities to develop fairer, more affordable and more sustainable local energy systems. Community Energy Scotland has been established since 2007 and during that time has worked with several hundred communities on projects now totalling nearly 50MW installed capacity.
On behalf of our members we are actively campaigning for stronger financial support for community energy, improved grid access for community projects, and a planning regime that recognises the value of locally owned energy.
For more information please contact Marion O’Hara.
email:
telephone: 01349 860120
address: Community Energy Scotland, 2b Fodderty Way, Dingwall IV15 9XB
****
Ends