The Community Energy Strategy (Strategy) published by the Department of Energy and Climate Change (DECC) set the expectation that “by 2015 it will be the norm for communities to be offered some level of ownership of new, commercially developed onshore renewable projects”. As a step towards achieving this aim, DECC requested the establishment of the “Shared Ownership Taskforce” formed of representatives from the renewables industry (Industry Taskforce). The Industry Taskforce’s mandate was to liaise with communities and, by September 2014, produce a robust framework and timetable for the implementation of widespread community ownership of renewables projects.
Whilst engagement with the Strategy is nominally voluntary, DECC made it clear that if by 2015 progress towards its community ownership objectives is unsatisfactory, it will consider requiring, by law, all developers to offer shared ownership to communities. This imperative was given further teeth in the draft Infrastructure Bill published on 6 June 2014 (Draft Bill). The Draft Bill sets out a broad enabling power (to be activated, or not, at DECC’s option) to give community residents and/or community groups the right to invest in renewable electricity generation projects located within their community.
Draft Report for Consultation
In this policy context, the Industry Taskforce published its Draft Report for Consultation on 23 June 2014 (Draft Report). The Draft Report sets out the Industry Taskforce’s initial proposals for shared ownership and invites further views from renewable industry stakeholders, before publication of its final report in September 2014.
The Industry Taskforce’s key recommendation was that commercial developers seeking to develop significant renewable energy projects (above £2.5 million in project costs) for the primary purpose of exporting energy onto a public network should offer local people the chance to invest alongside the developer. Such an offer should be a based on a fair market value and should be subject to an (as yet unspecified) minimum threshold for investment (as very small levels of community ownership may be commercially unviable).
The Industry Taskforce recommended that communities should be able to choose between three different ownership models:
- Split ownership: the project is divided into two or more separate generating systems, allowing for the community entity and the developer to own distinct generating assets.
- Shared revenue: although not strictly an “ownership” model, this model enables the community entity to buy rights to the project’s future revenue streams.
- Joint venture: the community entity and the developer jointly develop and own the project.
The Draft Report was clear that Government has a key role to play to ensure that shared ownership is a success. For example, financial support mechanisms and planning were identified as two areas in which Government support was critical.
Financial support mechanisms
The Draft Report notes how financial support mechanisms for renewable energy are currently in a state of flux. Examples of such flux include DECC’s consultation to increase the capacity ceiling for community projects eligible for the Feed-in Tariff from 5MW to 10MW, the replacement of the Renewables Obligation with Contracts for Difference by 2017, and the potentially insufficient budget set aside to fund the Levy Control Framework. Furthermore, it is also unclear whether DECC intends to create a bespoke support mechanism for shared ownership schemes, or rely on existing support mechanisms.
In response to this policy uncertainty, the Draft Report argues that the Government must provide greater clarity in relation to the types and levels of financial support available to both the community and commercial developers in order to encourage the uptake of community ownership.
The Draft Report argues that shared ownership is currently not given enough weight when planning decisions are taken. In addition, the complex and expensive planning process (often requiring detailed environmental impact assessments) can act as a barrier to entry for certain communities.
To address this issue, the Industry Taskforce recommends that shared ownership should become a “material planning consideration” in the determination of renewable planning applications and that local authorities should treat discussions regarding community ownership in a similar way to discussions with residential applicants (i.e. through enhanced planning officer support). Such a supportive approach would be consistent with the Government’s shared ownership ambitions.
A clear message from the Draft Report is that UK renewables industry representatives are willing to engage on the issue of shared ownership. Indeed many shared ownership projects already exist and are successful. However, the renewables industry suggests that it should not bear the burden alone. For shared ownership to succeed, it is argued that the Government must offer tailored practical and financial support (as it is noted to have done indirectly with the UK’s nascent shale industry, whereby local authorities will be entitled to retain 100% of the business rates collected from shale sites).