CEC13 Slide Deck
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Transcript of CEC13 Slide Deck
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#CEC13
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Welcome
Ramsay DunningGeneral Manager
@Ramsaydunning @CoopEnergy
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Case StudiesAgamemnon OteroRepowering London
@RepowerLondon
John MaloneEnergy4All
@Energy4allltd
Andrew ClarkeThe Resilience Centre
@ResilientEnergy
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Co-operative Ownership of Renewable Generation
19 October 2013
Delivering Community Co-operatives
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The Co-operative Model Works£18.5m+ raised through FSA regulated public offerings by Energy4All/Baywind
• Baywind – £1.9m• Boyndie – £730k• Westmill – £4.6m• Fens – £2.9m• Skye – £1.0m• Great Glenn – £1.2m• Kilbraur – £1.0m• EP - £ 1.0m• Drumlin - £2.5m• S.o.L. - £1.7m (to date)
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In development• Devon Community Wind Co-op• Easterly Wind Energy Co-operative• Four Winds Energy Co-operative• Baywind II (Harlock Hill repower)• Hampshire Renewable Energy Co-op• West Solent Solar Co-op• Multi-roof solar
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Pioneering A New Model for Community Renewable Energy
by
Andrew ClarkeThe Resilience Centre
@Coop Community Energy Conference
19th October 2013
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A Social Purpose Business - aims to help build resilience in society in the context of climate change and diminishing resources.
Self Financed – No direct grants or state aid
Community Renewables - we aim to remove barriers to entry and maximise returns to the community and local economy, through our Resilient Energy partnerships
All our profits are reinvested in our social purpose business
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Challenges – Community Joint Ownership Need to provide a low risk/low
cost entry for Communities/Landholders by removing majority of the ‘At Risk’ Planning & Development costs - eg £45-60k risked instead of £180k-£240k+ for a wind turbine
Need to ensure only suitable projects are progressed – we screen 10+ Projects for every one that proceeds
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Challenges - Community Joint Ownership• Needs a simple model to ensure
maximum returns for Communities – easy to lose all revenue on Admin & ‘Reinventing the Planning Wheel’ on Community Projects
• Getting everyone to pull together, often easier if a skilled 3rd party can steer project around pitfalls
• Skill in negotiating a proportionate response by regulators not defined in NPPF – Community projects are disproportionately affected by one size fits all approach
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Successes of the Joint Ownership Approach
Ensures communities make best use of any available funds, we deliver projects for between 12-25% of typical costs for 50% equity
Ensures landowners are engaged and fairly rewarded - without them communities seldom achieve projects
Resilience facilitates growth of social capital in bringing together projects to grow skills in local construction & support services
We share standard legal documents and financial models further reducing costs and timescales
Our model is very flexible, we are working on multiple equity parties Community-Landowner-Ourselves
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How Value Generated is Shared Community ‘Crowd Funding’ Investors get ~= 38% Gross
Revenue (8% Return on Capital) JV Equity Partners ~= 23-25% Gross Revenue Local Community gets 4% of Gross Revenue as a
Community Fund ~ £20k/yr We work to ensure local social capital is developed for
installation, operation & maintenance ~= 16% Gross Revenues for O&M with Apprenticeships established
We share standardised documents to allow local professional services to setup & manage operational projects ~= 7% Gross Revenues
We close the loop on energy provision by working with Coop Energy to facilitate communities to buy back energy & share in benefits of supply as well as generation
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Local O&M16%
Local Professional Services
7%
Tax Incl. LA Business Rates11%
Contingency Reserve
1%
Community Fund4%
Community Investers38%
Local 50:50 JV Equity Partners
23%
Gross Revenue Distribution The Resilience Centre Model
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#CEC13
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The role of large organisations in supporting
community energyOctober 2013
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The research• March – May 2013• Anafon case study• Interviews with 30 individuals• Benefits, barriers, role of the Trust
http://www.nationaltrust.org.uk/document-1355801605221/
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National Trust energy shift
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Experience in energy
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Abergwyngregyn
• Gwynedd, N Wales• Pop 250 (100 households)• Abergwyngregyn Regeneration
Company
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Anafon• 300kW scheme
• National Trust and Natural Resources Wales land
• Funding from Ynni’r Fro, Co-operative Community Energy Challenge and Waterloo Foundation
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Role of the Trust• Access to land• Providing credibility• Engagement with agencies• Sharing knowledge• Navigating the complexity• Providing case studies• Leadership and advocacy
• Access to land• Finance• Planning and licenses• Skills, expertise, confidence• Long term, complex work• Differences of opinion• Inconsistent policy
Barriers
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Benefits to the National Trust• Financial
– cost savings and income generation• Accessing funding and support
– ‘at risk’ development funding• Supporting policies
– Going Local, Fit for the Future• Other benefits
– inspiration, awareness, reputation, efficiency
“These types of projects make a place more special”
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Risks to the National Trust
• Development, operational & reputational risks
• Opportunity costs
• Regulatory risks
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Opportunities• Many potential sites• Community energy catalyst• New sources of income• Connect people & landscape• Seen as valuable and relevant
• Limited resources• Opportunity costs• Organisational priorities• Legality / regulation• Organisational purpose
Constraints
“We have a huge potential to harness the resources we own and manage.”
“We need to be clear about how important such approaches are to the Trust and why.”
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“Bees and Trees”“The bees are the small organisations, individuals and groups who have the new ideas, and are mobile, quick and able to cross-pollinate.
The ‘trees’ are the big organisations - governments, companies or big NGOs - which are poor at creativity but generally good at implementation, and which have the resilience, roots and scale to make things happen.
Both need each other.”
Mulgan et al, 2006
“When Bees Meet Trees: How large social sector organisations can help scale social innovation” by Owen Jarvis and Ruth Marvel, 2012 Clore Social Fellows
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Contacts
Keith JonesNational [email protected]@WalesEPA
Mark WaltonShared [email protected]@shared_assets
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#CEC13
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Getting StartedJon Halle
Shareenergy@shareenergy_uk
Jim BrownCommunity Shares Unit
@communitiesuk
Clare HieronsPure + Leapfrog@leapfrognews
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Getting started5 things we have learnt
Community Energy Conference19 October 2013
Jon Hallé[email protected]
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Co-operative helping people to set up renewable energy co-opsFounded 2011, spin-off from Energy4All28 co-ops set up across the technologies
• Finding projects• Setting up the co-operative• Financial planning• Landowner negotiation• Share offer setup, marketing• Administration
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Private SectorIndividual co-op members &
other co-ops
• Use local resources• Think bioregionally• Copy other people
Follow the land, follow the weather
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Private SectorIndividual co-op members &
other co-ops
• Choose who you work with• Choose people everybody knows• Tell a story people want to join up to
The team
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Private SectorIndividual co-op members &
other co-ops
• Financial planning from day one• Spend time on things that will work• The common currency – currency
Do your sums
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Private SectorIndividual co-op members &
other co-ops
• Work with the willing• Sign them up early• Make them work
It’s the landowner, stupid
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Private SectorIndividual co-op members &
other co-ops
• Development funding is easy• Selling shares is easy• Lots of people want to help
Resources are abundant
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Jon Hallé[email protected]
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Community Shares: an alternative form of community investment
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What are community shares?
“The sale of shares in enterprises serving a community purpose, with the aim of raising at least £10,000 in capital from no fewer than 20 members”
Unique to co-
operative & community
benefit societies
Non-transferable,
non- speculative
One Member One Vote
Exempt from regulation under the
FSMA 2000
Interest payment
only sufficient to
attract investment
Powered by Withdrawable Share Capital
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Growth in community shares registrations
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Community Shares Market Indicators
Over 400 new societies
registered
Over 130 share offers undertaken
Est. £20m raised from over 20,000
members (£28m
targeted)
Average offer raised
£200,000
Average membership 200 members
Average investment per member
£1,000
Creative and media2% Pubs and
Brewing15%
CLT and Housing
3%Regenera-tion and develop-
ment7%
Community Retail24%
Other2%
Transport2%
Social Care2%
Energy and Envi-ronment
33%
Sports 3%
Food and Farming8%
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Renewable energy schemes using community shares since 2009
37 share offers complete
(3 further live)
£13.5m equity raised
8,000 members approx
Median amount raised:
£150,000
Median membership:
100
Average individual
investment (based on medians):
£1,500
Community energy and community shares
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Community renewable societies
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Four pillars of a successful share offer
Business model
Viable
Profitable
Sustainable
Community
engagement
Scale and scope
Attracting support
Building membershi
p
Governance
Legal form
Rules
Conduct
Offer document
Accurate
Informative
Share offer ‘campaign’
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Community Shares Unit
enterprises
supporters
advisers
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Developing best practice
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Get in touch
Jim Brown, Strategic AdviserCommunity Shares Unit
[email protected] [email protected]
www.communityshares.org.ukwww.microgenius.org.uk
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energising communities
Getting Started……..or who dares wins
Clare Hierons19th October, 2013
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Pure Leapfrog – What we do
We provide:
• Low cost debt to finance, part finance or re-finance renewables projects
• Professional expertise to help with the non-financial barriers
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Where to start….?
• The pioneers fought to get their projects off the ground
• The battle isn’t over but its now time to start professionalising and standardising
• So what have we learned? ?
? ??
?
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Sun Tzu, The Art of War“Thus we may know that there are five
essentials for victory”
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“He will win who knows when to fight and when not to fight”
Pick your battles - don’t re-invent the wheel
It’s not about limiting your ambition! Every project is unique, but:
• Use tried and tested techniques and technologies
• Learn from others
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“He will win who knows how to handle both superior and inferior forces.”
Know your strengths but acknowledge your limits
• Community project teams wear many hats
• Work out which ones fit
• Be honest (but confident)
• Be clear on capacity of volunteers
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“He will win whose army is animated by the same spirit throughout all its ranks.”
• Projects will need a lot of energy – everyone needs to be on the same page
• Make sure everyone is agreed on the ‘why?’ even if the ‘what?’ moves around
• Know how will you make decisions when the goalposts move
Common purpose
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“He will win who, prepared himself, waits to take the enemy unprepared.”
You need a plan
• Work out what you don’t know• Plan to plan• Stay agile!
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“He will win who has military capacity and is not interfered with by the sovereign.”
• Absolutely essential to the success of any project
• Needs support of the team
• Mustn’t be afraid to ask for help
Interference is another issue – hopefully improving!
Leadership
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Getting ready for battle………
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………becomes doing business
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Be careful out there!
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Talk to us ...Eden House, 23-25 Wilson St, London, EC2M 2TE
+44 (0)20 7825 [email protected]
www.pureleapfrog.org
energising communities
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#CEC13
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FinanceMary Walsh
London Community Energy@LDNCommEnergy
Bruce DavisAbundance Generation
@AbundanceGen @Oikonomics
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Community EnergyGetting Investment Ready
Mary Walsh
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Halton Lune Hydro
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What kind of investment?
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Project Structure
Power Purchase or Connection Agreement
Financing & Security
Agreements
Construction and Supply Contracts
Licences and permits
Subsidies
InvestorsOwners
Government/ local
authority
Offtaker/Network Operator
Project Company
OperatorOperation & Maintenance Agreement
Shareholders Agreement Articles of Association
Share issue
Land Owners
Land Agreements
ConstructionSupplier
Fuel supply (if relevant)
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risk • noun 1 a situation involving exposure to danger. 2 the possibility that something unpleasant will happen. 3 a person or thing causing a risk or regarded in relation to risk: a fire risk.
• verb 1 expose to danger or loss. 2 act in such a way as to incur the risk of. 3 incur risk by engaging in (an action).
— PHRASES at one’s (own) risk taking responsibility for one’s own safety or possessions. run (or take) a risk (or risks) act in such a way as to expose oneself to danger.
— ORIGIN Italian risco ‘danger’.
Source: Oxford English Dictionary
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Opportunity to allocate the risks...
• Where does the risk sit?• Possible to eliminate
the risk?• If not, mitigate it or
allocate it.• Who is best placed to
take it?• Who will pay for it?
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How do we deal with risk?
Eliminate it
Mitigate it
Allocate it
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“Classic” Project RiskConstruction/Completion – construction contracts, sponsor support, contractor ability
Developer – Experience/financial/track recordTechnology – proven
Political – regime, tax, permits
Environmental/SocialInsolvency – any of the parties
Currency – liabilities in one currency, funding in another
Legal risk – enforceability, dispute resolution
Force majeure
Operational risk – experience, termOfftake – price, market forces, incentives
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Community Specific Issues
• Team– Experience– Commitment– “Stretched”
• Contracts– Counterparty– “Robust”– Risk allocation– Formalities
• Co-finance– Who?– Commitment
• Multiple stakeholders– Objectors– Engagement
• Consents and Permits– Conditions– Local concerns
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Risk vs Return
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Contact Us
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#CEC13
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Workshop Part 2To what extent should community energy groups
operate as a business?
What to retain?What to lose?
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#CEC13
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PolicyCaroline Julian
ResPublica@res_publica @CarolineLJulian
Dr. Jim RobinsonDECC
@DECCgovuk
Ben HallCornwall Energy
@Renewablesvoice
Rebecca WillisCo-operatives UK@cooperativesuk
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101
Community Energy ConferencePolicy Session
Caroline JulianSaturday 19th October 2013
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Overview
1. The state of play2. The paradigm shift we need3. The role of government?4. “The Community Renewables Economy”5. How should government respond?6. Next steps
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The state of play
• Failings of the state and the market• The UK’s energy market• 30 licenced suppliers vs Germany’s 900• 0.3% community renewables vs Germany’s 46%• Localities have been airbrushed out of the market
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The paradigm shift we need
Communities should be enabled to participate in the market, not be subject to it
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The role of government
Buerger Energie St-Peter
Government should provide the policy framework to enable community energy to flourish
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The role of government
Stadwerke München
Ambitious, successful, local… but danger of local monopoly?
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107
Community Renewables Economy
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Community Renewables Economy
BARRIERS
1. Planning2. Lack of guidance and access to data3. Lack of financial support and investment4. Lack of legal, financial and technical expertise
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109
Community Renewables Economy
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110
Community Renewables Economy
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Community Renewables Economy
IMPORTANCE OF JOINT OWNERSHIP
• Key to significant growth• Partner with private developers, public sector
entities or businesses• Greater capacity, resource and financial capability• 20.6 MW of community-owned projects jointly-
owned with commercial developers
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How should government respond?
1. Incentivise joint ownership2. Broker partnership opportunities3. Profile leading local authorities and develop good
models of co-operation4. Encourage local institutions to act as financial
intermediaries5. Dissolve the planning barriers6. Enable wider participation: Community
Commissions
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Next steps
• Beyond individual generation• Participation in wider local market• Opportunities for local demand and supply• Incorporate role of communities in wider energy
market reform• Transform energy infrastructure and market to a
model that benefits all
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ResPublica
www.respublica.org.uk
@Res_Publica@CarolineLJulian
ResPublica (UK Think Tank)
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Policy
Dr. Jim Robinson
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Connection and route to market issues
19 October 2013
Ben Hall
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What I will cover…
Connection issues for community energy projects– what the problems are– what is being done– what can be learned from other countries’ experience– recommendations
Competition in short-term and long-term offtake market– FiT generators opting out of export tariff– market shares and activity of smaller suppliers
The CfD FiT– government actions to improve offtake market
• better understanding, targeted interaction, but needed now
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Connection issues (1) Cooperatives UK asked us to consider issues faced by
community energy projects with network connections– Overcoming grid connection issues for community energy
projects
Several barriers in connection process were identified, including:– Distribution Network Operators (DNOs) vary significantly in
timeliness and consistency and this has impact on project timescales and costs of connection;
– a number of process issues should be standardised with adoption of best-practice by DNOs;
– high and variable connection cost quotations, dependent upon location, can cause surprises and derail projects; and
– grid reinforcement can be a major problem for community schemes as it has the potential to significantly increase costs
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Connection issues (2)
Case studies We have had access to project details, including
connection costs, for 21 community schemes that have suffered grid connection issues
Substantial variation in cost of connection – £150,000/MW to £7.4mn/MW
19 of the projects reported very expensive connection costs as being primary reason for projects being reduced in size, delayed or abandoned– many of these were less than 1MW– projects scaled down to ensure they were financially viable
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Connection issues (3)
DNO actions DNOs have made some progress with communicating
with generators– DG forum is an annual event led by the regulator
• meetings start in London next week
– a new licence condition was imposed in Apr 2010 on DNOs to make more information publically-available
– DG Standards Direction took effect from Oct 2010• budget estimations for connection, quotations, and post connection
scheduling
More still needs to be done to improve:– the transparency and predictability of grid connection processes
and charges; and– the communication channels between the DNOs and generators
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Connection issues (4)
International comparison Other European countries have more focused
policies to support community energy projects Costs of connections are socialised in Denmark and
renewables receive priority grid access– this is despite many changes to government policies over
the past 10 years as clear grid connection policy is in place
Grid connection process in Germany is transparent– generator receives a detailed timetable for grid connection– renewables also receive priority access to the grid– almost a half of all renewable energy projects are
community-owned
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Connection issues (5)Recommendations Provide priority grid access to community energy projects Allow community projects to pay back site-specific
connection costs over time– one option is through perhaps through FiT payments over 20 years
Connection offers based on standard cost assessments with differences recovered in general cost recovery by DNOs
Socialisation of wider costs of reinforcement to reduce financial burden of works on one generator– combination of these two recommendations is that overall cost of
achieving connection to grid is “shallow”, not “deep”
A further six informational remedies to improve transparency, consistency and communication
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Route to market (1)
Long-term power purchase agreements (PPA) Issues for offtakers (acknowledged by DECC,
Baringa)– economic climate has made lenders increasingly risk
averse– risks of managing PPAs (including balancing costs) have
led to higher discounts– Big Six generally don’t need Rocs – becoming increasingly difficult for community energy
and other independents to obtain bankable long-term PPAs
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Route to market (2)
Short-term PPAs Larger FiT generators have tended to opt out of the
guaranteed export tariff in favour of taking export to market– in some cases this has seen generator almost double its export
revenue
Generation tariff within FiTs can be seen by lenders as a floor price– projects can sell power in more competitive short-term offtakes– discounts to full value of 2%-10% in short-term vs. 10%+ in long-
term
Community energy projects will be able to receive FiT for schemes up to 10MW– provides further optionality for projects
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Route to market (3)
Many independent suppliers punching above their weight
Good Energy has more FiT customers than retail supply customers
Share of small-scale FiT capacity by supplier
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Route to market (4)How will CfD impact the market? CfD FiTs should “eliminate price risk, lower cost of
capital and pull through investment” Not the full picture
– significantly increase in market complexity vs. RO and FiT
– do not diminish need for PPAs – systematic disadvantage once auctions kick in?
RO and FiT
• Relatively simple• Well documented• Quick to accredit• No allocation risk
CfD
• Allocation rules being defined
• First-come-first-served
• Supply chain plan for larger projects
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Route to market (5)
Backstop offtaker (PPA of last resort) DECC recognises the PPA issue and has put
forward a proposal for a backstop offtaker– guaranteed route to market for generators with
guarantees on all revenues for output at a fixed % of strike price
– costs or benefits associated with offtaker are socialised across market By effectively
providing a floor price it may lead to more projects able to sell in short-term PPAs
Should enable increased competition in PPAs
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Key points
Grid connection complexity and cost is a major barrier for community energy projects– connection costs can be a postcode lottery and
disproportionate to the scheme– 10 recommendations put forward to help community
energy projects connect to the grid
Renewables projects struggling to achieve “fair value” for their output through long-term PPAs– small-scale FiT scheme is seeing projects able to sell in
more competitive short-term PPAs– CfD most suited to companies able to trade directly– DECC is acting to improve PPA market for CfD projects
through backstop PPA proposal, but needed now
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Policy
Rebecca Willis
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Tom HoinesRenewables Manager
@THoines
Closing Session
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We want to buy your Power!
• Bankable Power Purchase Agreements (PPAs) • Long Term Prices/Contracts• Competitively priced• Member Owned!