Call to Community Energy Scotland Members - Recent UK government changes to renewable energy support
You may be aware that the UK government has recently announced some changes to the support mechanisms
for renewable energy schemes. These will affect most energy projects which have not already secured
contracts for Renewable Obligations Certificates (ROCs) or Feed-in Tariff (FiT) payments. Community energy
projects not yet built will need to carefully re-work their business case with the new rules. Some may no longer
be financially viable. You can read the full announcement here.
We have been contacted by the Scottish Government to consult with our on these major announcements and
the adverse effect of these proposed changes on community energy projectss in Scotland. Scotland’s Energy
Minister seeks specific examples of any community projects which have either become unviable through the
effect of these changes or will suffer significant loss of revenue if already generating or close to generating. If
you are able to estimate the potential loss of revenue, this would be very useful. The Minister is in ongoing
exchange with the UK Secretary of State for Energy, Amber Rudd on these effect of these changes on
renewable energy development in Scotland.
Community Energy Scotland requests our Members to respond to this call for evidence. We will collate
your responses into our report to the Minister, to strengthen our stated view that these proposed changes
will have a disproportionate impact on community energy projects.
We have summarised the proposed changes below, as well as confirming what line Community Energy
Scotland is taking on each of these issues (blue font).
Thank you for your help and we look forward to hearing from you if you have examples of community energy
projects adversely affected by these recent announcements.
Summary of changes
1
Early closure of the Renewables Obligation (RO) scheme
The RO scheme was introduced in 2002 to provide incentives for the deployment of larger-scale renewable
electricity in UK. The RO is being replaced by Contracts for Difference (CfDs). This is a more complex system
that involves large generators bidding into an auction to supply a certain amount of clean electricity for a
certain price. The transition from RO to CfD was scheduled for April 2017 but the recent announcement
brought forward that date for onshore wind to April 2016, reducing the time for new registrations by 60%.
There are a few exclusions for projects with certain milestones in place, but projects aiming for the 2017 date
are having to think again.
Community Energy Scotland is recommending to DECC that community energy projects seeking to accredit
under the RO are given an extended grace period until March 2018, with less onerous qualifying conditions,
to allow for the longer lead times for project development.
2
Removing pre-accreditation process for Feed-in Tariff (FiT)
The UK Government is also currently consulting on removing the pre-registration and pre-accreditation for
FiTs. This mechanism is broadly used by community groups to reduce the risk to projects from the fall in FiT
rates ('degression') which happen according to the installed capacity in each quarter or year. It provides a level
of certainty before they launch a share offer or arrange other finance. As community groups do not have the
same resources as commercial developers or even private landowners, the time taken to develop projects is
generally much longer and therefore further changes to the FiT levels may have taken place. Consultation
document here, closing date 19 August 2015.
Community Energy Scotland is recommending to DECC that a separate budget for community energy
projects under the Feed-in Tariff is established, and that the pre-accreditation process is retained for
community energy projects which need the greater certainty it provides.
3
Changes to the LEC and Climate Change Levy
The decision to remove Levy Exemption Certificates (LECs) for renewable energy projects will also impact on
projects, both for new projects and those already in operation. The loss in income is dependent on the size of
the project and level of generation, but the value of LECs is approximately £5.5 per MWh. For operational
community energy projects in Scotland the loss of income over £20 years is approximately £20m, with the
income from the Levy now going directly to the UK Treasury. There was no consultation prior to the Climate
Change Levy announcement and the damage to investor confidence in renewable energy will have a
disproportionate effect on community schemes.
4
Consultation on closure of RO to small PV (up to 5MW)
Currently, PV installations below 5MWp can opt for ROC payments rather than FiT. The proposal is to remove
this option from 1 April 2016. If accepted, it would mean that such solar projects would have to either apply
for FiT payments (if eligible) or bid into the CfD auction. Consultation document here, closing date 2
September 2015. Please let us know if you think you will be affected by this change.
Community Energy Scotland
30 July 2015