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Call for evidence

Technological Innovations and Climate Change: Community Energy

1. The Environmental Audit Committee is conducting an overarching inquiry looking at technological innovations which could contribute to tackling climate change. Each part of the inquiry will look at a specific technology or strategy currently in use or in development and consider its potential and how Government policy can facilitate the UK making the best and most cost-effective use of that technology.

2. This inquiry will be an opportunity to highlight UK-based examples of innovation and excellence, and the Committee is particularly keen to hear from those at the cutting edge of each sector.

Community energy

3. The next session of this inquiry will look at the role of community energy projects in the UK energy sector. Community energy projects are those where groups of people come together to purchase, manage, generate or reduce consumption of energy, including the local generation of renewable power or heat, the collective purchasing or peer-to-peer trading of energy, and energy efficiency improvements.1 Projects may be wholly owned and/or controlled by communities or through partnership with commercial or public sector partners.2

4. Since most community energy projects focus on renewable power and/or energy efficiency, they could play a vital role in decarbonising energy and heat production, reducing energy consumption, and contribute to distributed energy generation. This will help the UK reach its legally binding target of net-zero greenhouse gas emissions by 2050. This session will consider the potential contribution community energy can make to the UK’s energy supply, identify barriers to its progress/adoption, and how the UK could make the most of the community energy resource.

5. As of 2020, community energy contributes 278MW of renewable energy and heat to the energy system.3 By 2030 the community energy sector could grow by 12-20 times, powering 2.2 million homes and saving 2.5 million tonnes of CO2 emissions every year, but requires appropriate funding and policy support.4

6. Community energy projects offer a dynamic and flexible approach to energy generation, where renewable technologies can be chosen to best suit the local environment.5 Their flexible approach encourages the decentralisation of energy generation away from large, remote power stations, so reduces energy losses (and subsequent costs for consumers) associated with power transport and distribution.6 However, the wide variety of potential projects means communities need guidance on the most appropriate schemes for their area.7 Regulations will have to discourage the emergence of infrastructure monopolies in energy data and smart energy systems, preserving space for small actors to manage their own energy and associated benefits.8

7. Community projects sell energy to customers at prices well below typical retail rates,9 potentially helping to reduce fuel poverty which has affected 10-11% of households in England since 2012.10 However, the ability of communities to sell the energy produced locally is limited in the UK’s centralised regulatory system, meaning that projects often have to sell energy directly to the grid, then buy it back at additional cost.11

8. In addition to energy security, community energy projects boost local economies by providing jobs, local investment opportunities and encouraging skill sharing between communities. Many projects use money from tariffs to run community benefit funds, which support local educational and environmental initiatives – in 2019, community energy contributed £4.6 million to local economies.12 However, moving into new areas of activity in which regulations are still being developed can be financially risky, especially for small scale community groups.13

9. In 2014, the UK Government published its first Community Energy Strategy, suggesting that by 2020 community projects could provide 0.5-3GW of energy.14 Until 2017, there was steady growth in the UK community energy sector, largely driven by the UK Government’s Feed-in Tariff (FiT) scheme providing payments to individuals who generate their own renewable energy. However, the scheme limited funding from 2016 and was closed to new applications on 1st April 2019.15 Growth in community renewables projects has slowed significantly: from 2016 to 2018, new community energy organisations dropped by 81%, and in 2019 new community energy capacity was only 15% of the capacity growth in 2016.16

10. From 1st January 2020, the Government introduced the Smart Export Guarantee (SEG) as a new initiative to remunerate small-scale low-carbon generators forelectricity they export to the grid. Unlike the FiTs, the SEG pays for excess energy put into the grid, rather than all energy produced,17 and is offered by the UK’s electricity suppliers on an open market basis with no minimum price (other than zero).18,19

11. The £10 million Rural Community Energy Fund (RCEF) was set up in 2019 and supports rural communities in England to develop renewable energy projects. This helps with the costs of setting up a scheme, but it only covers rural areas and does not aid ongoing financial viability.20

12. The Committee is inviting written submissions to inform its forthcoming evidence session. These should focus on, but not be limited to:

• What contribution could community energy (through renewable power and/or energy efficiency) make to achieving net-zero by 2050 in the energy sector and its potential role in decarbonising the heat and transport sectors?

• How well are the financial and technical needs of setting up and running community energy projects met by existing Government support mechanisms? What changes would be needed to the access or nature of support to develop community energy further?

• What are the main barriers to development of new community energy schemes under the current regulatory regime? Do lack of connection or high access charges to the electricity grid pose an obstacle? How could these be overcome?

• What role should Ofgem play in supporting community energy and resolving regulatory issues, such as decentralisation and incorporating community energy projects into smart electricity grids?

• What role can local authorities play in developing community energy, for example in planning, decision making and the availability of sites for energy generation?

• How can policy ensure that community energy projects maximise their positive impacts (social, environmental, economic) on the local communities?

• What are exemplars of successful community energy systems from across the UK’s urban and rural communities; what makes them so successful?

We encourage members of underrepresented groups to submit written evidence. We aim to have diverse panels of Select Committee witnesses and ask organisations to bear this in mind when we ask them to choose a representative. We are currently monitoring the diversity of our witnesses.

Written evidence should be submitted through the Committee’s web portal. It is recommended that all submitters familiarise themselves with the Guidance on giving evidence to a Select Committee of the House of Commons which outlines word count, format, document size, and content restrictions.

References

1 Good Energy. 2016. Community Energy

2 WPI Economics. 2020. The future of community energy

3 Community Energy England. 2020. Community Energy 2030 Vision

4 WPI Economics. 2020. The future of community energy

5 PFI0030 (Scottish Renewables)

6 Good Energy. 2016. Community Energy

7 PFI0030 (Scottish Renewables)

8 PFI0034

9 PFI0034

10 BEIS. 2020. Annual Fuel Poverty Statistics in England, 2020 (2018 data)

11 Good Energy. 2016. Community Energy

12 Community Energy England. 2020. Community Energy State of the Sector 2020

13 PFI0034

14 DECC. 2014. Community Energy Strategy.

15 OFGEM. 2020. Changes to the FIT scheme

16 Community Energy England. 2020. Community Energy State of the Sector 2020

17 WPI Economics. 2020. The future of community energy

18 PFI0034

19 Community Energy England. 2020. Community Energy State of the Sector 2020

20 WPI Economics. 2020. The future of community energy

This call for written evidence has now closed.

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