House of Commons Energy and Climate Change Committee Local Energy Sixth Report of Session 2013–14 Volume I Volume I: Report, together with formal minutes, oral and written evidence Additional written evidence is contained in Volume II, available on the Committee website at www.parliament.uk/ecc Ordered by the House of Commons to be printed 16 July 2013 HC 180 Published on 6 August 2013 by authority of the House of Commons London: The Stationery Office Limited £17.50 The Energy and Climate Change Committee The Energy and Climate Change Committee is appointed by the House of Commons to examine the expenditure, administration, and policy of the Department of Energy and Climate Change and associated public bodies. Current membership Mr Tim Yeo MP (Conservative, South Suffolk) (Chair) Dan Byles MP (Conservative, North Warwickshire) Barry Gardiner MP (Labour, Brent North) Ian Lavery MP (Labour, Wansbeck) Dr Phillip Lee MP (Conservative, Bracknell) Rt Hon Peter Lilley MP (Conservative, Hitchin & Harpenden) Albert Owen MP (Labour, Ynys Môn) Christopher Pincher MP (Conservative, Tamworth) John Robertson MP (Labour, Glasgow North West) Sir Robert Smith MP (Liberal Democrat, West Aberdeenshire and Kincardine) Dr Alan Whitehead MP (Labour, Southampton Test) The following members were also members of the committee during the Parliament: Gemma Doyle MP (Labour/Co-operative, West Dunbartonshire) Tom Greatrex MP (Labour, Rutherglen and Hamilton West) Laura Sandys MP (Conservative, South Thanet) Powers The Committee is one of the departmental select committees, the powers of which are set out in House of Commons Standing Orders, principally in SO No 152. These are available via www.parliament.uk. Publication The Reports and evidence of the Committee are published by The Stationery Office by Order of the House. All publications of the Committee (including press notices) are on the internet at www.parliament.uk/ecc. A list of Reports of the Committee in the present Parliament is at the back of this volume. The Report of the Committee, the formal minutes relating to that report, oral evidence taken and some or all written evidence are available in a printed volume. Additional written evidence may be published on the internet only. Committee staff The current staff of the Committee are Sarah Hartwell-Naguib (Clerk), Liz Bolton (Second Clerk), Dr Alfred Gathorne-Hardy (Committee Specialist), Tom Leveridge (Committee Specialist), Shane Pathmanathan (Senior Committee Assistant), Jonathan Olivier Wright (Committee Assistant), Joe Strawson (Committee Support Assistant) and Nick Davies (Media Officer). Contacts All correspondence should be addressed to the Clerk of the Energy and Climate Change Committee, House of Commons, 7 Millbank, London SW1P 3JA. The telephone number for general enquiries is 020 7219 2569; the Committee’s email address is [email protected] Local Energy 1 Contents Report Page Summary 3 1 Introduction 5 What is local energy? 5 Context 6 Policy developments 7 2 Local energy in the UK 8 The potential for local energy in the UK’s energy mix 8 Ownership 8 Community-owned 8 Local authority-owned projects 9 Jointly-owned 12 3 Benefits of local energy 14 Energy Security 14 Carbon reduction and renewable energy targets 14 New sources of investment 15 Costs to consumers 15 Public understanding of energy 16 4 Overcoming barriers to local energy projects 17 Planning 17 Finance 19 The role of Power Purchase Agreements (PPAs) 22 Advice and support services 28 Delivering a complete package of measures 30 5 Public acceptance of energy infrastructure 32 Project size 32 Community engagement and consultation 32 Ownership model 33 Community benefit payments 34 6 Conclusion 36 Conclusions and recommendations 37 Formal Minutes of the Sub-Committee on Local Energy 41 Formal Minutes of the Energy and Climate Change Committee 42 Witnesses 43 2 Local Energy List of printed written evidence 43 List of additional written evidence 44 List of Reports from the Committee during the current Parliament 45 Local Energy 3 Summary Medium-sized local energy projects such as solar arrays, wind turbines and district heating systems could bring considerable benefits to local communities and the country as a whole, but Government needs to do more to support businesses, cooperatives, local authorities and other public sector organisations who wish to install them. Government provides support to households who install small-scale renewable energy systems through the Feed-in Tariff scheme (FiT), while large scale projects like off-shore wind farms will be supported through new fixed-price Contracts for Difference (CfDs). Medium-sized energy projects between 10-50 Megawatts (MW) are currently slipping through the net, however, being too big to receive FiTs yet too small to take advantage of CfDs. Although it is unlikely that local energy projects will eliminate the need for larger, centralised power stations, with some Government support they could provide a significant proportion of the UK's energy capacity and a range of other advantages. Giving communities a stake in local energy projects has the potential to broaden public understanding of energy issues, encouraging energy-conscious behaviour and greater public engagement in carbon reduction initiatives. Greater use of local energy would also enhance the security and efficiency of the energy system as a whole by increasing the diversity of generating capacity available and reducing the energy lost in transmission or wasted as unused heat. Local energy schemes could also bring direct benefits to local communities, businesses and public organisations like local authorities. Cheaper electricity could be provided to the communities living close to energy projects. Businesses that use “on-site” generation or buy directly from local generators could reduce their energy costs and local authorities could undertake energy projects that tackle fuel poverty, cut costs and reduce carbon emissions. Local energy projects currently face a number of barriers that can prevent them getting off the ground. Securing funding and Power Purchase Agreements (PPAs), connecting to the grid and overcoming public opposition can all prove difficult. Obtaining planning permission can be costly and time-consuming, and the risk of losing tens of thousands of pounds if permission is not granted is a huge obstacle for community groups or small cooperatives. Larger companies and utilities can shoulder these costs as they may be applying for a number of projects simultaneously and have existing bank debt facilities, but smaller groups do not have access to these benefits and must take considerable risks with no guarantee of recovering expenditure. Some form of support mechanism is needed alongside a comprehensive package of measures addressing finance, planning, grid access and advice. The Government must bring forward a proposal to support schemes within the 10-50MW range to incentivise the development of medium-sized projects which are not served by either FiTs or CfDs. The Green Investment Bank could provide seed funding and project development funding – for feasibility studies, grid permits, etc - to reduce some of the risk in getting projects 4 Local Energy through the planning process. We support the Government’s ambition to return decision-making powers to local authorities, but carbon reduction is a national priority. Government needs to do more to encourage local authorities to identify suitable areas for renewable energy development as recommended in the National Planning Policy Framework. Ministers should also encourage local authorities to develop clear guidance about what is expected from local energy projects, to reduce uncertainty and risk in the planning process. This approach would also help to prevent bad projects from coming forward. National level planning guidance should be provided on technical issues that sometimes hold up planning consent for wind turbines and other low-carbon technologies. This would help to improve consistency between different local authorities and ensure that only genuinely local issues were addressed through the local consenting process. There are strong indications that some level of local ownership can help to boost support and reduce opposition to energy infrastructure projects. If the evidence shows that local ownership does indeed improve acceptability, we recommend that the Government encourages the industry to offer a stake to local residents for all new developments or considers the option of making a community ownership offer mandatory for all new developments. Options for facilitating grid connections for small and medium-sized renewable developments should be assessed, including the arrangements between suppliers and district network operators, in order to ensure “priority access” wherever possible. Finally, the Government should introduce an advice service that can provide support to community groups on issues such as how to finance a project, ownership structure, the planning process, energy technologies, the energy market and the various support mechanisms that are available. Local Energy 5 1 Introduction 1. The Government currently supports small-scale renewables (smaller than 5MW in size) through the Feed-in Tariff scheme (FiT). Larger renewables are supported under the Renewables Obligation (RO) and in future, will be supported through Contracts for Difference (CfDs). We have argued previously that medium-sized projects (between 5- 50MW) are disadvantaged because they cannot access the Feed-in