Examination of the Infrastructure Bill in the Lords Committee in July included a number of probing amendments to the 'Community Electricity Right' (CER) provisions. While, none of the tabled amendments were agreed, the debate on these is instructive on the Government's current position.
The Government again stated that the legislative provisions are a potential backstop power if the voluntary approach is not successful. A consultation on the draft Framework for the voluntary approach by the Shared Ownership Task Force (endnote 1), began on 24 June and ends on Friday 29 August. The final Framework was due to be published in September, but is now due to be published in October the Government Minister indicated. The Infrastructure Bill is likely to proceed to the House of Commons for first and second reading in November.
This note highlights and summarises the issues debated. You will find our full briefing on the proposed provisions here.
Scope of the 'Community Electricity Right'
The first proposed amendment sought to extend the scope of the CER to include all electricity generation facilities. This was clearly intended to explore whether it is appropriate to single out renewables.
The Government responded that while it strongly supports community engagement in relation to the development of all energy projects, the current provisions should apply only to renewable electricity generation facilities. A number of reasons were cited. The measure is part of the Government's broader approach for increasing community investment in renewables, as set out in the Community Energy Strategy. This policy was developed specifically to tackle the imbalance between national and local benefits that characterise renewable schemes. The Government referred to experience in the UK and abroad which had shown that a financial stake in a local development often translates into less opposition and a quicker and cheaper development process.
Baroness Verma on behalf of the Government stated: "The Government are clear that the powers would apply in the first instance to those onshore renewable technologies that currently form part of the voluntary process, and only if the voluntary process is not successful."
A further amendment raised the question of offshore technologies within the provisions. The Government confirmed that "There is scope within these provisions to include offshore renewable projects" and "it is our [the Government's] intention that this [inclusion of offshore technologies] would be on a longer timescale, which would provide us [Government] with the flexibility to include these technologies further down the line without needing new primary legislation."
An assurance was given that any extension of the provisions to other technologies would be subject to a formal consultation and would be informed by experiences drawn from other technologies as well as the views of relevant stakeholders.
Excepting certain facilities
An amendment was tabled to elicit more information on the provisions for certain renewable electricity facilities, defined as excepted facilities, to be exempt from the community electricity right regulations.
The Government's view was that it was important for the Secretary of State to retain flexibility to specify that certain facilities may be excluded from any future regulations. This is to ensure that where renewable electricity generators are already providing a community stake or other form of benefit to the community in a way that is specified in regulations as an acceptable alternative, they are not also required to comply with the regulations.
The Government confirmed that it wished to exclude facilities wholly owned by the community. It confirmed that it was also considering exempting facilities where generators may be offering innovative approaches to shared ownership; e.g. generators offering certain revenue- sharing arrangements to local residents that are passed on in the form of electricity bill discounts and which are in addition to any community benefit payments.
It also confirmed that it was considering exempting generators not taking part in statutory energy schemes, such as feed-in tariffs, contracts for difference or the renewables obligation, as there might be a higher risk profile for community investors in such projects.
The Government explained that eligibility criteria determining who may exercise the right to buy would be subject to formal consultation and subsequently set out in secondary legislation. It confirmed that age (over 18 years) was likely to be one of the criteria. The 5% cap
The Government also provided more information on its intention concerning the proposed 5% cap to be set in legislation. It confirmed that the 5% would provide the upper limit on the size of stake the industry may be required to offer communities.
It also stated that the actual amount to be set in secondary legislation could vary by technology. The reasons being that the scope of the powers would cover a greater than 10 fold range in project size. Consequently a 5% mandatory offer might be appropriate for smaller schemes with lower capital costs. However, for schemes with a higher capital cost it might be more realistic to set a lower limit, "for example 1% of project capital costs".
The 'Backstop power'
A voluntary approach was the Government's stated preference, but at the same time it confirmed that it would set up a broad and flexible enabling framework for a 'community right to buy in'.
Exercise of the backstop power, the Government confirmed, would be subject to affirmative resolution procedures and would therefore require the consent of both houses.
It stated that it felt the policy on the whole created the right impetus and drive to achieve the Government's aim to substantially increase shared ownership from 2015. The potential for the back-stop powers to be implemented is "intended to nudge industry to ensure that the voluntary process is sufficiently robust". Scotland Electricity generation is a reserved matter and consequently the right could be made to apply in Scotland without a legislative consent motion being required. The UK Government confirmed it was in discussions with the Scottish Government.
Note that the Scottish Government consultation on its Community Energy Policy Statement was published on19 August 2014. It seeks views on the ambitions and support mechanisms for Scottish community energy, including proposals for community ownership and shared ownership. The consultation closes on 10 November 2014.
Timetable for implementation
Currently the commencement provisions provide that it is open to the Secretary of State to implement the back-stop power 2 months after the coming into force of the Act.
The timeframe for the implementation of the new Act stretches into the next Parliament. This could mean that a new Government could implement the power regardless of the current assurances.
The Infrastructure Bill's Committee Stage is set to continue on 14 October, but The Lords Report stage is yet to be scheduled. The bill is likely to proceed to the House of Commons for first and second reading in November.
The Shared Ownership Task Force was due to publish in September, but the Government Minister indicated in debate that it is now due to be published in October.
While the debate is instructive on the Government's position a number issues remain on which it would no doubt be helpful to the industry to receive further clarity. For example, could the CER apply to extensions over 5MW to existing facilities, would the additional 5MW make the entire facility qualify for the CER or just the extension?
While the Government reiterated that it favoured the voluntary process, it also made it very clear that the introduction of legislative backstop powers "also sends a very clear signal that we want to see offers to communities being made on the ground from 2015."
In the context of the upper limit on the size of stake that the industry might be required to offer communities it is interesting to note that the Scottish draft Community Energy Policy Statement (endnote 2), gives the example of investment up to 49% equity in forthcoming wind and hydro projects on the national forestry estate (land managed by Forestry Commission Scotland). It remains to be seen if communities could ever participate at this level.
If the Taskforce report is published in September it would enable the Committee debate, when it resumes, to take its findings into consideration. However, if the report is only published in October then it is possible that debate on the bill will have moved beyond the relevant bill provisions.