The Community Energy Revolution - Our Response to the Government’s Current Stance
Background
The Community Energy Revolution is a nationwide campaign calling for new legislation to enable smaller-scale renewable energy schemes – especially ones owned and run by community groups – to sell the electricity they generate to local customers. This would make more community energy schemes viable and help realise the huge potential for their growth – studies suggest a twentyfold increase is possible in ten years.
The campaign is backed by a coalition of national organisations, over 100 local authorities and is organised by Power for People. Tens of thousands of people and hundreds of community groups have written to their MP asking that they support the legislation in Parliament, called the Local Electricity Bill. This has resulted in support from 322 MPs, including 128 Conservative MPs, and all the main opposition parties.
The wording of the Local Electricity Bill has been added into the Government’s much larger Energy Bill as clauses 272 and 273. This was done via a cross-party supported vote in the House of Lords on 17th April. The Energy Bill is now proceeding through the House of Commons and the campaign has been calling on MPs to support these two clauses remaining in the Bill.
The Government’s Current Stance
Some Conservative MPs have been sending the Government’s current stance in replies to constituents as worded below, or similar,
“Specifically on clauses 272 and 273 the Government recognises the role that community and local renewable energy schemes can play in supporting our net-zero targets. However, it continues to believe that small-scale, low-carbon electricity generation should be brought forward through competitive, market-based solutions. A key feature of the smart export guarantee regime is to allow suppliers to set both the tariff level and the structure and for suppliers themselves to determine the value of the exported electricity alongside all the associated administrative costs. Any move to introduce a regulated price for exported electricity has the potential to limit the overall scope for innovation and export tariff packages. This would fundamentally undermine the principles of the supported export guarantee policy objective, which looks to encourage a market-driven approach.
“Small-scale, low-carbon generation will be intermittent and unable to supply local consumers at all times. Suppliers would therefore need to buy additional wholesale energy from other sources and incur all the associated network and system costs. The local tariff would also be required to have regard to the export price paid to the local generator. This would create a somewhat perverse outcome where higher export prices would benefit the generator but also increase the tariff price. As a result, there is no guarantee that the local tariff would be lower than the current regulated standard variable tariff.”
Our Response
We agree that community energy should stand up on its own in the market, without the need for state subsidies. That is why clauses 272 and 273 set up a market-based solution that would enable community energy schemes to sell their power to local customers. The current regulatory arrangements make this impossible, as is clear by the fact that not one of the hundreds of existing community energy schemes sells their power directly to local customers.
We welcome the smart export guarantee regime. However, it has not helped realise the huge potential for growth in community energy generation, which has seen near zero growth since the smart export guarantee was established in January 2020.
For three years, in debates organised by sponsors of the Local Electricity Bill, Ministers have said repeatedly that they want to see more community energy generation. Despite these statements of support, Ministers oppose these clauses and have offered no workable alternative to create growth in community energy.
The clauses would give community energy schemes fair access to the market, so that they can sell their power at a fair price. This will make them viable and create growth. The clauses do not say what that price is – clause 272 says it would be for Ministers to determine on advice from OFGEM – and would also establish monitoring of the process to allow adjustments in that set price over time. These adjustments could be price increases or reductions, depending on growth levels.
Ministers would have a fair point in saying that the clauses would create a subsidy if the guaranteed price was many times the price of other sources. But that is not what the clauses do. Setting the price will be in Ministers' hands, following OFGEM advice. Experts have suggested a rate of around 5-10p per unit.
When we turn on our kettle at home, we pay about 30p a unit. Under the Government’s Contracts for Difference schemes, which sets a fixed price for larger low carbon generation, prices for onshore wind are guaranteed at around 4p a unit, whilst we are seeing a guaranteed 4.6p a unit for commercial solar and 17.8p for tidal. The Hinkley Point nuclear power station is guaranteed 11.7p a unit.[1] The guaranteed price for community energy that these clauses would set will be comparable or lower than these other sources.
The numbers tell the story – Government has not delivered the growth in community energy it claims to want to see. In 2017 community energy scheme capacity accounted for 249 megawatts. This had only risen to 331 megawatts in 2022 – a mere 0.5% of UK generating capacity.[2]
Ministers either need to abandon years of claiming community energy is a good thing to have more of and be straight – tell people they do not really value it and will not help it grow or deliver new mechanisms that will help it grow. Currently they claim they want more while doing nothing that increases its provision.
Imagine we applied the same terms to the corner shops which operate alongside supermarkets. Local shops have an important role in our towns and cities, offering convenient access to food etc. But if someone wanting to open a new local shop had to go through the usual planning application as well as everything required of companies like Tesco when opening a new supermarket, e.g. traffic surveys, Section 106 grants, improvements to the public realm, that would be totally unreasonable. The result would be no small shops.
But with small shops we do not require this. And we do not say it is a "subsidy" for start-up costs to be less for small shops than supermarkets. We simply want the same for small energy generators.
In pressing for this basic principle to be applied, we and supportive MPs have been very flexible. Peter Aldous MP, in his original version of the Local Electricity Bill, tried to make the legal costs of selling energy proportionate to the size of the generator, but Ministers rebuffed this on the grounds that the licensing and standards were too complex. So now David Johnston MP has tried to piggy-back this process onto existing larger licensed energy suppliers with his improved wording, which is directly reflected in clauses 272 and 273.
This approach does mean fixing a price. This is no different in principle to the Government’s Contracts for Difference scheme that so much of our new generating capacity is built under. Ministers also often claim that new nuclear power is not subsidised but, rather, has been guaranteed a price for the energy produced.
We, and supportive MPs from all parties, have been clear that if Ministers have a better way to deliver, we are fully open to it. But it has now been three years since Ministers first promised more community energy and next to nothing has happened. And nothing in this debate so far suggests that if Ministers are not pressed further on this issue, we will see the growth in this sector that they have long promised but never delivered.
[1] BEIS, ‘Contracts for Difference: Methodology used to set Administrative Strike Prices for CfD Allocation Round 4’; 2021
[2] Community Energy England, ‘Community Energy State of the Sector Report’; 2022