A focus on local, community scale energy generation is not a new feature. An emphasis on the potential benefits of a more localised and distributed pattern of energy generation and on the involvement of local communities in renewables first emerged in the 1970’s.
The Localism Bill
The Decentralisation and the Localism Bill is now at the Committee stage in the House of Lords. As we previously outlined in terms of community renewable projects the main provisions of note are:
- Neighbourhood Plans (NPs)- which would be approved (by councils) if they received 50% of the votes cast in a referendum
- Neighbourhood Development Orders (NDOs)- to allow communities to approve development without requiring normal planning consent
- Business Rates - communities that choose to host wind farms will be able to keep the business rates they generate for six years
NPs could potentially detail renewable elements which could be built and operated under the terms of an NDO, without the need to apply for planning permission. This is a huge simplification but in principle the Bill could be a powerful tool in enabling appropriate development.
Overview of Developing a Renewable Energy Scheme
The viability, acceptability and profitability of renewable projects is very much location specific and for schemes to be successful three main aspects need careful consideration; namely:
- Engineering and design– Suitable advice on technology, grid connection, third party issues (for instance aviation)
- Financial – Realistic advice on costs associated with project stages, external finance, operational and ownership models, revenue streams etc
- Environmental and planning – Even if localism confers permitted development rights to a scheme other aspects may require consideration (for instance European Protected Species)
Engineering and design
There are a number of engineering companies who can provide advice in this area and it is prudent to seek it early in the design process. The process of developing renewable projects is now well articulated but certain facets (for instance negotiating grid connection) require an in depth understanding of process. Furthermore the choice of technology is critical to the ultimate success of the project. For instance, in the small wind sector (>1MWe) only some turbines have a proven performance record whilst other options have disproportionately high operational costs.
Financial and Legal
Again this is an area where realistic specialist advice is required especially in relation to governance structures, project stages, external finance, operational and ownership models, revenue streams, procurement etc. It is helpful to think in stages; development, construction and then ongoing operation and maintenance. The following information is intended as a broader overview only.
Development stage funding generally comes through a combination of grants, community share issues and commercial loans. Grants are available from a large number of regional, national and European sources. Identifying the right financing opportunities is a complex task and expertise will be required.
Co-operative structures in the shape of Industrial and Provident Societies have worked successfully in community renewable projects. If a private developer of a renewable energy scheme is paying revenue into a community trust (a low risk model) various organisational models can be used, including a charity, a community interest company (CIC) or Industrial and Provident Societies (IPS).
In terms of operational revenue streams five components make up the total value of electricity generated for sub 5 MWe schemes. By far the largest component of the value is the Feed in Tariff (FIT). This is paid for every kilowatt-hour of electricity generated regardless of whether it is consumed on-site or exported. Generators that are larger than 50 kW still have the option of joining the Renewable Obligation Certificates (ROCs) scheme instead of the FiT, but generally speaking the FiT provides a greater financial return.
Environmental and planning
Community projects benefit from being designed by the community which hosts the development and hence has to live with potential or perceived impacts. This local involvement means that one of the key risks during the planning stage is largely removed; namely significant local objections. None the less planning is more complex than purely building local support for a scheme. The acceptability of a planning application, or NDO to confer deemed planning, will be driven by the technology, location and perceived risks.
Successful planning is an exacting and time consuming process which collects information and via consultation develops proposals which balance environmental, social and economic impacts and benefits. It is important to stress that for most projects some environmental information will be required to support the development (even for schemes with NDOs) for instance:
- Traffic – related to delivery of components to site
- Ecology – protected species especially birds and bats for wind development
- Noise – ensuring noise levels are acceptable at nearby properties
- Landscape – how the scheme sit within the wider landscape
Other environmental aspects may well require consideration and the development will need to demonstrate alignment with planning and wider environmental and safety regulations.
Localism as an Enabling Tool
Localism is being promoted as enabling communities to draw up NPs to shape development. NPs will need to be in-line with relevant local authority plans and national policy, but they could include renewables such as wind turbines/ hydropower projects conferring permitted developments rights to these aspects (when the plan has been put to a referendum and adopted). An important caveat here is that the development would have to be non-Environmental Impact Assessment (EIA) development to benefit from these rights. Projects could then be built and operated via a NDO.
Whether a NP is the best means to develop a community energy scheme is dependent on a range of factors and for some developments other means might be more effective. For instance recent changes allow local government to participate in renewable energy projects which opens the way for collaboration. In some instances a well supported planning application might be the path of least resistance. The identification of the correct route is the key to developing a successful project.
Please do not hesitate to get in touch and we will be happy provide provisional pro bono advice on strategic options and use of the current and new mechanisms to help community projects get the most efficient outcome dependent on their individual circumstances.