13 June 2013: The House of Commons Library has issued a useful briefing note on the Energy Bill. Included in the note is a summary of discussions on concerns of how community energy schemes will operate under the new complex electricity market reform (EMR) regime.
The note highlights the key issues with the following text:
“Community Energy Schemes
“In its pre-legislative scrutiny of the Draft Energy Bill, the Energy and Climate Change Committee concluded that the proposed CFDs were unlikely to work for smaller electricity providers, such as community schemes. It heard evidence that the problems for smaller-scale projects included:
- A lack of financial capability to deal with the complexities and uncertainties of CFDs, resulting in high transaction costs; and
- Difficulties in obtaining the full reference price for the electricity they generate, resulting in lower income per unit of electricity generated.
(House of Commons Energy and Climate Change Committee, Draft Energy Bill: Pre-legislative Scrutiny July 2012, HC 275-i of session 2012–13, para 66)
The Committee recommended that:
A simple fixed Feed-In Tariff would be a more appropriate form of support [than the proposed CFDs]. We therefore recommend that this Bill provides for the Energy Act 2008 to be amended to allow for the eligibility threshold for small-scale FiTs to be extended to at least 10MW and potentially up to 50MW in size. (para 70)
The feed-in tariff scheme pays energy users who invest in small-scale, low-carbon electricity generation systems for the electricity they generate and use, and for unused electricity they export back to the grid. At the Bill’s committee stage, Tom Greatrex moved an amendment to raise the maximum threshold for the small-scale feed-in tariff so that larger community energy schemes which generated higher amounts of electricity could also benefit. He withdrew his amendment following assurances that the matter was under consideration by the Government (Public Bill Committee, 22 January 2013, afternoon, col 252). In advance of the Community Energy Strategy due for publication in the autumn, DECC published a Community Energy Call for Evidence on 6 June 2013.”
However, DECC’s recently released Community Energy consultation does not address points raised by in the ECC Committee’s Energy Bill Pre-Legislative Scrutiny report – the fact that post-EMR, community energy schemes over 5MWe (ie those above the FITs threshold) will be operating in a far more complex market structure. It does however say that “Groups focused on electricity generation have for the last few years been able to access Feed-in Tariffs as a reliable long-term source of revenue. We are continuing to actively consider raising the FiTs threshold from 5 MW. This would have potential benefits for some community groups, although we know that not all community groups would be in favour of an increase.” [para 76]
It’s not immediately clear why some community groups would be against raising the FIT threshold, and neither the community energy consultation paper or the supplementary research issued alongside provide any further information. Research undertaken by Cornwall Energy for Co-operatives UK in 2012 (also see earlier post here) however sets out why the Government should be taking note:
“DECC does not seem to have considered as part of the EMR process the impact of its proposals on the community energy sector. It assumes projects of this type fall under 5MW meaning that the existing feed-in tariffs (or fixed FiTs) – not the new CfD FiTs – would apply. This assumption is incorrect as various existing and planned community energy schemes are above the 5MW threshold, some considerably so.”
This is clearly a issue that DECC needs to look at more closely – but there is no specific question in the community energy consultation that considers the impact of the Electricity Market Reform on community energy schemes: that shouldn’t stop respondents from raising them however!