Our response to the ‘Unlocking community energy at scale’ Energy Security and Net Zero Committee inquiry

• Advice and support: The Local Power Plan should learn from existing community energy support schemes in the devolved nations, namely the Community and Renewable Energy Scheme (CARES) and the Welsh Government Energy Service. These provide proven, replicable models for a community energy capacity building and support mechanism for England. 
• To provide greater revenue certainty and enhance the economic viability of projects, mechanisms such as an enhanced Smart Export Guarantee or a community pot within the Contracts for Difference scheme should be considered. 
• Grid connections: Community owned renewables and shared ownership should be prioritised where possible in the grid connection queue. 
• Draw on lessons from other European nations which have introduced preferential policies for community energy projects to enable local supply from community owned generation. 
• Planning policy: National planning policy in England should be strengthened to consider community energy.
• More than just generation: Community energy has a role to play outside of electricity generation, including to enable flexibility, as well as support the delivery of energy efficiency and the transition to low carbon transport.

It is our understanding that Great British Energy, through the Local Power Plan, will deliver capacity building and knowledge sharing to support community energy. We recommend that the Local Power Plan builds upon and learns from existing community energy support schemes, in particular the Scottish Government backed Community and Renewable Energy Scheme (CARES) and the Welsh Government Energy Service. 

Community and Renewable Energy Scheme (CARES) 

CARES acts as a ‘one stop shop’ for communities in Scotland, supporting them with:

• Wholly community owned renewables
• Community shared ownership projects, which sees community groups investing in commercially owned renewables 
• The design and delivery of community benefit funds 
• Decarbonisation of community buildings 

Financial support is combined with wrap-around advice from local development officers to support communities with project development and delivery. Financial support has been delivered through grants, interest free loans and loans with write-off facilities.

Since inception, CARES has offered advice to over 1,150 organisations and supported the installation of 60MW of renewable energy in Scotland.

Welsh Government Energy Service 

The Welsh Government Energy Service offers support to community energy organisations, delivering financial support alongside expert, tailored advice to individual projects. The financial support available is broad in scope, including development grants and loans and access to capital grants and loans through the Welsh Government and the Development Bank of Wales respectively.

Since 2018, the Welsh Government Energy Service has supported the installation of 44.5 MW of new renewable energy capacity.

Lessons for the Local Power Plan

The level of wrap around support provided in Wales and Scotland has been absent in England. To be successful, the Local Power Plan will need to provide a consistent point of contact and access to advice at all stages of project development.

Communities tend to have limited time and capacity to develop the in-depth knowledge required to establish new community energy projects. Without support, the sector will struggle to grow and participation may be limited to communities with more capacity to engage.

Comprehensive advice at the level and depth provided by CARES and the Welsh Government Energy Service in England is therefore crucial to guide communities through the numerous barriers to project completion, as well as grow the sector. Advisors in both programmes are experts in supporting community energy organisations, with an understanding of the specific challenges within a given area, meaning they can tailor advice accordingly.

This type of end to end support enables better monitoring of the full pipeline of projects, allowing their full impact to be captured and learnings to be shared within the sector.

End to end advice should extend to communities approached by developers with shared ownership offers, given the legal and financial complexities and the contribution it will make to the UK Government’s 8GW target. Specific financial support for shared ownership should be considered as part of the Local Power Plan.

Lessons can be learned from the Welsh Government Energy Service’s shared ownership grant, which enables communities to secure specialist financial and legal assistance.

There should also be clear guidance for commercial renewable energy developers which sets out UK Government expectations for industry and outlines what constitutes ‘good’ shared ownership. These should learn lessons from the Scottish Government’s Good Practice Principles for Shared Ownership of Onshore Renewable Energy Developments. 

It will be important to support projects from an early stage to develop investable projects. From our experience delivering CARES on behalf of the Scottish Government, we know that development loans which can become grants if a project is found not to be viable reduces the risk for communities in the early stages of development. 

The programmes are responsive to the needs of community energy groups, aiming to provide solutions to as many barriers as possible for project completion. For example, the Welsh Government Energy Service introduced the Community Energy Resource Grant to overcome limited resources preventing community energy organisations from developing projects. The Local Power Plan could learn from this, given the need to build capacity in areas of England where community energy is less developed.

Both CARES and the Welsh Government Energy Service provide proven, replicable models for support and advice that have successfully enabled hundreds of community energy projects. The Local Power Plan should build on these established frameworks to deliver community energy advice in England, adapting them to England’s specific circumstances and needs while providing the consistent, comprehensive coverage that has made them effective elsewhere.

Integrating the Local Power Plan with existing services 

The Local Power Plan must work alongside these existing services rather than trying to duplicate what they do in the devolved nations.

In England, the Local Power Plan should also seek to integrate with existing community energy support like:

• The Community Energy Fund
• Net Zero Hubs
• The Community Energy Learning Network

This will ensure advice and financial support is straightforward to access. The Local Power Plan will need to ensure that all communities in England have access to advice and financial support that is not contingent on the availability of local authority support.

Additionally, through our work managing the Energy Redress scheme for Ofgem, we have directed additional funds to supporting development of community energy projects which also demonstrate how community owned renewable energy can support consumers in vulnerable situations. It is envisaged that some of these projects will help to develop a pipeline ready for the Local Power Plan.

Local Electricity Bill 

Currently, community energy organisations are not able to sell electricity to properties in their local area unless they become a licensed energy supplier, the cost and complexity of which presents a significant barrier. The proposed Local Electricity Bill would help resolve this issue by placing a requirement on larger suppliers to collaborate with community energy organisations to sell the power they generate to people and businesses within their local area.

Lessons from other jurisdictions 

Lessons can be learned from the European Union’s Renewable Energy Directive (REDII), which introduced the concept of Renewable Energy Communities who have the right to produce, consume, store and sell electricity. 

We were also a partner in the recent EU Heroes Horizon 2020 project which brought together seven European nations with the aim of supporting the development of community owned solar. The project aimed to identify new business models to enable better grid integration and develop subsidy free solar.

One of the key findings from this project was that community energy groups will need to increase their degree of self-consumption to be viable as incentives for solar are phased out. An example from the project where national law has supported this was Greece, where policy provision for virtual net metering allows energy communities to participate in the self-consumption and sale of electricity or heating/cooling services from renewable energy schemes.

However, this has not been without its challenges regarding uptake and there are still gaps in implementation of the legislation.

Our involvement with the EU Heroes project and our membership of the European Energy Network makes us well placed to support the Committee in identifying international best practices of support for communities to supply energy locally. 

More financial certainty for community energy projects could be provided by enhancing the Smart Export Guarantee (SEG) and the Contract for Difference (CfD) scheme. We also recommend several further proposals to enable community energy to scale. 

Smart Export Guarantee 

The SEG currently falters on two fronts:

• It does not provide revenue certainty beyond 12 months. 
• It does not provide a minimum export price.

The SEG does little to allow projects to demonstrate the guaranteed, long term income necessary to secure investment. An enhanced SEG which guarantees a fixed price for energy exported to the grid by community projects should be considered. Long duration contracts should also be standard to provide certainty for projects. 

Lessons can be learned from the newly introduced small-scale renewable electricity support scheme (SRESS) in the Republic of Ireland (ROI). The SRESS provides a guaranteed tariff over 15 years and community energy projects receive a higher tariff rate to reflect the barriers they face in securing planning permission and connecting to the grid.

Contracts for Difference (CfD) 

The CfD scheme is only available to larger onshore renewable projects over 5MW, meaning small scale renewable energy projects are ineligible. The CfD scheme could include a separate pot for small scale community owned generation. Community owned projects could be offered an enhanced strike price to reflect the social and environmental benefits they provide.

The CfD scheme could also encourage shared ownership of renewables by requiring developers receiving support to offer shares to communities. 

Power Purchase Agreements 

PPAs allow community energy projects to secure a guaranteed income. We would highlight Egni Coop as a pioneer of this approach, who we have supported through the Welsh Government Energy Service.

We recommend a standardised approach to setting up PPAs for public buildings identified by local authorities as suitable for community owned renewables. This would simplify the process for both communities and local authorities.

Renewable electricity generators can secure better terms if they can guarantee a large volume of supply, which is typically more than most community owned renewables produce alone.

We would therefore recommend a mechanism and toolkit with template documents to enable a consortia of community owned renewables to sign PPAs. This would enable them to aggregate their supply, secure a better price for their electricity and enhance the benefits to their communities.

Prioritise community energy on public land 

The UK Government should also look to learn lessons from Forestry and Land Scotland who, as part of their land auctions and lease agreements, have included requirements around: 

• payment of community benefit
• giving communities the option to invest in renewable energy projects 

Community led projects should be prioritised when renewables are being developed on the public estate, such as forestry, crown estate and local authority owned land and buildings. Where this isn’t practicable, options should be contingent on requirements for community benefit payments and preferential terms for community investment (shared ownership) as part of the lease agreement.

The high cost and long delays for grid connections are challenging for community energy projects who are often less well-resourced than commercial projects and have limited access to significant upfront capital. They are also confined to a particular area and are unable to move to where a connection may be available cheaper or earlier. There are several recommendations we propose:

Investing in distribution ahead of need 

Investing in local distribution ahead of need would help to reduce constraints on the grid network. Ofgem should reform the price control process to require Distribution Network Operators to invest based on a pathway of energy needs in line with net zero.

Prioritise community projects in the grid connection queue 

To guarantee that the additional social and economic value of community energy is reflected in the grid connection process, we recommend that:

• social value is considered and prioritised
• projects that include shared ownership with communities should also be prioritised.

There could also be an option for smaller community energy projects to be fast tracked within the grid connection queue. The social and local economic benefits of community owned projects could be reflected in connection costs.

The UK Government recently published their Clean Power Action Plan, which pledged to reform the connection queue to be strategically aligned with this mission. However, as most of the capacity ‘needed’ is already in the connections queue, there is a risk that new community projects will be unable to proceed.

Community owned and shared ownership projects should be recognised as ‘needed’ for 2030, given their importance to reaching the 8GW Local Power Plan target and this should be recognised in the connections queue reform process.

Ensure community energy projects are not penalised under NESO proposals

We would highlight the implications of NESO’s Financial Instrument Proposal, which was consulted on in November 2024, proposing the introduction of a £20,000/MW capacity commitment fee for projects. We know from our delivery experience that community energy projects tend to operate on relatively thin margins.

They are unlikely to have access to financing to cover these additional costs and the introduction of a £20,000 per MW capacity commitment fee would be detrimental to real projects. We would encourage NESO to consider how to mitigate against this so as not to create an unnecessary barrier to the UK Government’s target of 8GW of local and community power.

Consider allowing community energy projects to only pay for distribution costs 

Local energy generators are currently required to pay for the use of the entire electricity network, including transmission costs. There is a case to be made for transmission costs to be borne only by those projects that need to access it if local distribution continues to grow, reducing the import and export of electricity to the transmission network.

This should be considered to reduce the costs of connection for local supply focused community energy schemes as well as prevent the underdevelopment of the distribution network.

Yes, we agree local benefits of community energy projects should be formally recognised as a material consideration in planning decisions.

Yet, in the Wright v Resilient Energy Severndale and Forest of Dean District Council ruling in 2019, it was established that community benefits cannot currently be recognised in planning decisions. The Court found that it was for Parliament to consider whether it was necessary to expand the factors which could be treated as a material consideration in planning.

To change this, the UK Government would need to amend the National Planning Policy Framework, given that it is a material consideration for planning applications and appeals, or introduce new primary legislation.

Strengthen national planning policy in England 

Proposed reforms to the National Planning Policy Framework (NPPF) in England in 2024 did not include any proposals to give community owned renewables more weight in planning decisions. We recommend strengthening national planning policy to ensure that community ownership and the associated benefits are given weight in planning decisions at a local level, with explicit reference to the 8GW target.

Lessons can be learned from the clear direction that has been provided by the Welsh Government, who have stated:

“Planning Policy requires planning authorities to plan positively for the use of locally generated electricity and heat to help meet the national target of one Gigawatt by 2030… The social, environmental and economic benefits associated with any development should be fully factored into, and given weight in, the decision making process.”

Economic benefits arising from community shared ownership should also be considered as a material consideration in the planning process. At the planning stage it would need to be clear that a developer’s shared ownership offer aligns with agreed ‘good practice’ to ensure that the offer is likely to be both fundable and commercially beneficial to the local community. 

Local Area Energy Plans (LAEPs) have a role to play in identifying sites that would be suitable for community energy projects. These give community organisations a clear view of potential sites and serve as the basis on which they receive planning permission.

If public consultation is also done well when developing LAEPs, it could build support for, and raise awareness of, community energy projects. 

However, there is no national framework for how LAEPs should be developed in England and no guidance on how to engage the public in their development. Doing public engagement well takes time, expertise and money, all of which local authorities don’t have enough of.

We would highlight research undertaken by Citizens Advice in 2023 that developed a Citizens Charter which outlines a set of principles for local authorities when engaging with the local population. We would stress the need to ensure all demographics are engaged and that diverse voices are heard during the consultation process.

The UK Government should implement a national framework for the development of LAEPs in England that includes community engagement. Funding support for the development of LAEPs would ensure consistency in their development and in the ability of local authorities to facilitate public engagement. 

There is significant potential for community energy groups to incentivise consumer demand side flexibility. Their non-commercial approach means they can act as a trusted partner to engage and motivate the local communities. As such, community energy organisations are in a strong position to act as aggregators to create a larger flexibility offering.

There are community energy organisations that have already engaged in trials around flexibility. This includes Bath & West Community Energy’s ‘Flex Community’ project.

This project aimed to recruit households with low carbon technologies to facilitate demand side response and test the role of the community aggregator model. This project confirmed the value of the intermediary role community energy can play in generating interest and building trust at a local level.

Through the Energy Redress scheme, we have supported Energise Barnsley, who have installed solar PV and batteries on social housing through a social enterprise model. This also allows social housing tenants to benefit from shifting their demand, such as through saver sessions.

This example shows the potential role of community energy in ensuring social housing tenants and vulnerable consumers can participate in flexibility.

We would highlight the need for clearer guidance and processes for how community energy organisations could best deliver flexibility services, enabling further development of local offerings in flexibility markets.

We would highlight that, while our response has focused largely on community owned generation, there is significant potential for community energy organisations to be involved in other projects that support the wider transition to net zero. This includes the decarbonisation of heat and transport. For example, 319 community energy organisations are involved in energy efficiency activities.

We would encourage the UK Government to consider how community energy could support their proposed Warm Homes Plan. We also know from the projects we have supported through the Plugged In Communities grant fund on behalf of Transport Scotland the role of communities in reducing transport emissions.