Written evidence submitted by Community Energy Scotland (NRG0024)

GB Energy and the net zero transition

Response from Community Energy Scotland

Introduction

Community Energy Scotland is a member-led organisation that works to increase community resilience and enable our members to play a significant role in a just energy transition. Community energy groups create locally controlled, decentralised solutions for meeting local energy needs. They are ‘more than profit’ groups that organise collective and locally-driven action to:

1. Generate renewable electricity or renewable heat,
2. Reduce energy or fossil fuel demand (e.g. through retrofitting or EV car clubs)
3. Positively impact energy systems e.g. demand side management, load balancing, flexibility or storage projects.

We provide technical assistance, training and knowledge-sharing forums, and we deliver projects including the Scottish Government-funded Carbon Neutral Islands project and the Islands Centre for Net Zero, and the UK-wide Energy Learning Network.

Community Energy Scotland would welcome the opportunity to provide evidence orally to the Energy Security and Net Zero Committee.
 

We have chosen to focus on the most relevant questions to Community Energy Scotland, so have not included all questions here.

4. What actions should the UK and Scottish Governments take to ensure the necessary generation and transmission infrastructure to support the development of Scotland’s renewables sector?

As part of supporting the development of Scotland’s renewables sector, both governments should work together to map out the potential for community-owned renewables, and create mechanisms that: create community capacity for timely engagement with opportunities, ensure appropriate and equitable access to infrastructure and provide community energy generators with long-term security of income. An example of the latter would be a Government-guaranteed floor price for electricity sales or a community Contract for Difference, in order to build business models and secure finance. Community energy projects do not require subsidies to create viable business models, and have a strength of being deliverable and often better supported by being locally embedded, but this often means they are necessarily smaller and cannot spread risk as much as now typical larger scale complex multiple-site project portfolios, and can mean that lenders need to see more security of income before providing financing.

Programmes such as SSEN's Accelerated Strategic Transmission Infrastructure programme will support development of Scotland's renewables sector. Infrastructure planning should take a long-term approach, i.e. undertaking larger grid reinforcements that futureproof for capacity needs in the long term rather than multiple small upgrades.

Where capacity is available or being made available through upgrades, there must be consideration as to how to ensure that there is a fair playing field, overcoming current barriers to community groups accessing grid space for new and repowering projects. We recommend that, as part of NESO’s Connections Reform process, they add criteria for ‘designating’ community-owned energy and storage projects, initially for Clean Power 2030 and then as needed for the Strategic Spatial Energy Plan. This would mean that those community-owned projects could be included within the reformed connections queue and be prioritised for queue position within a Gate 2 assessment process. These changes would need to be made to the Connections Network Design Methodology (CNDM) and project designation methodology. 

This is needed because the high risk currently involved in securing a grid connection is making it increasingly difficult for wholly owned community energy generation projects to secure funding. Further, when grid space does become available it is usually allocated first to developers. For example, when a 1.8GW interconnector was recently announced by SSEN in the Outer Hebrides, the capacity was rapidly allocated to developers, leaving no grid space for additional community projects or for current community generation projects to be repowered at a larger scale, putting the future of community generators in the Outer Hebrides at risk.

5. How can GB Energy, and other ways of backing industry (including funding), most effectively support employment, economic growth and the development of clean energy supply chains in Scotland?

If we are to see a Just Transition then we need to ensure that there are qualified professionals with green skills located across all areas, including rural and island areas. Consideration should be taken as to how training programmes can be delivered for those living and working in rural and remote areas, how people living in these areas can be incentivised to upskill to be ready for the green energy and net zero revolution, and how increased costs of importing materials or bringing additional skilled tradesmen to the areas could be covered. Large scale development such as wind farms should be obliged to offer apprenticeships and employment opportunities to local people.

This in turn would ensure that money spent on energy efficiency upgrades, renewable energy developments and other net zero projects remains within the area where the projects take place, and would create employment opportunities to ensure economic and population stability in these regions.

Shortages of suitably qualified local people have led to significant delays in the roll out of smart meters, installation of heat pumps and other low and zero carbon technologies. Lack of understanding of local contexts including weather and sea air (with higher salt content) have also led to unsuitable installations that cause damage and further costs down the line to repair or rectify.

The massive growth in the need for clean energy and net zero technologies and parts in Scotland provides a huge opportunity to build a supply chain in Scotland. A mapping exercise should be undertaken to identify which technologies and parts are currently imported and where there are opportunities to meet those needs locally. Challenges with financial subsidies should be introduced for SMEs and manufacturers to gear up to meet these needs. Not only does this have the potential for significant economic growth through the creation of new businesses and jobs, but it will also reduce costs for projects through reduced cost and time for the transport of technologies, and reduced down time of generation technologies whilst parts are ordered, made and delivered from abroad. Incentives should also be considered for organisations that recycle and refurbish existing technologies, as we start to see the technologies from the first mass-market roll out come to the end of their lives.

6. How should GB Energy work with the Scottish Government and other Scottish bodies to identify appropriate funding and other mechanisms?

The UK Government must work closely with the Scottish Government and with the community energy sector in Scotland to design and dovetail the new community energy funding with existing schemes such as CARES. This should include genuine consultation events, as well as ensuring that the Scottish Community Energy sector is represented on GB Energy board and steering groups.

Continuity and enabling uninterrupted growth of the community energy sector is key, so certainty around funding is required as soon as possible. The Community Energy Fund should be extended and expanded to the devolved nations, until the Local Power Plan funding starts to be awarded. 

The Local Power Plan must include increased funding for capacity building for community energy groups. We’d like to see increased, multi-year funding both for development officers within community groups to take projects forward, and for support organisations like Community Energy Scotland, Community Energy England and Community Energy Wales, to enable the provision of more capacity-building support direct to community groups. This would be used to support community groups across all aspects of community energy, particularly:

1. Supporting community groups with upskilling, community engagement and capacity building, and creating governance structures and processes to allow them to self-organise and take forward their own projects.
2. Early stage options appraisals, project development and feasibility studies for new and repowered installations.

Local Power Plan funds must be co-designed with the sector and local authorities to ensure collaboration, rather than two strands of activity that compete and conflict at a local level. Any finance distributed to/via local authorities must have a mandatory requirement in grant/loan conditions to pass on the finance to community groups and/or ensure that communities are the main beneficiaries and have a proactive role in project planning and implementation (rather than being passive recipients). Local authorities that receive funding under the Local Power Plan should also be required to work with community groups. This should be both mandated by grant (and loan) conditions, and encouraged by incentives and education and support programmes for councils and communities.

The Local Power Plan should ‘fill the gaps’ in devolved nations where current support for community energy does not meet all of the need. For many years, the Scottish Government has been leading the way in Scotland by delivering the CARES programme, which has had a significant impact in Scotland, not least because the programme delivery is multi-annual, providing community groups with time to build capacity and develop proposals. However, more funding is needed for these aspects of community energy: 

• Capacity building and support programmes for communities / areas that have not engaged in community energy to date
• Resource funding for development officers to take forward projects
• Pre-planning project development

• Large-scale, ambitious community generation projects
• Feasibility and project management support
• Shared ownership – handholding support service to help local communities maximise opportunities 
• Post installation support, monitoring and evaluation
• Funding support for maintenance, repairs and repowering

The Local Power Plan should encourage local authorities to take concrete actions to enable community-led and community-owned energy projects in their area, including: 

• Making local authority-owned land & buildings (e.g. rooftops for solar) available for community groups looking to develop their own renewables or energy storage projects. (For example, Glasgow Council’s Community Renewable Energy Framework, which sets out how the council will identify suitable sites currently categorised as vacant & derelict land, and streamline the land lease process.)
• Entering into Power Purchase Agreements (PPA) with community energy groups. This could be encouraged by including an ‘option’ for public bodies to enter into a PPA with a local community-owned energy group in each nation’s National Framework Agreement for the Supply of Electricity.
• Offering local communities the opportunity for shared ownership of all local authority energy developments, following good practice guidelines in each devolved nation.

All types of funding should be announced as early as possible for every strand of the programme, to give community groups adequate time to self-organise, conceptualise a project and submit an application. Transparency about when funding rounds will take place should be released a minimum of three years ahead, so that communities with greater capacity can act immediately, while investment in capacity building and project development support can take place for more nascent or under-resourced communities, with the confidence that funding will be available as their capacity and plans mature.

7. What does a just transition look like for workers and communities across Scotland’s highland and island communities, and what role might community energy and community benefits play in this?

In answering this question, we are using the Just Transition Commission’s definition of a Just Transition: “The imperative of a just transition is that Governments design policies in a way that ensures the benefits of climate change action are shared widely, while the costs do not unfairly burden those least able to pay, or whose livelihoods are directly or indirectly at risk as the economy shifts and changes”

A just transition requires a fair energy deal for communities across the whole of the UK, including in Scotland’s Highland and island communities. The renewables revolution is generating vast profits, but much of this is being extracted out of Scotland. We are all funding the energy transition through our energy bills, and yet far too many communities are struggling with fuel poverty, even (and sometimes especially) those that host big energy generation projects right on their doorstep.

We recommend the following policy changes to address this injustice:

1. Support the growth of community-owned renewables assets as a share of overall energy infrastructure across Scotland.

Community-owned energy developments have a significantly higher positive impact on local economies, local businesses and supply chains than private developments. An average of 70% of community groups’ organisational expenditure is spent locally.[1] By reinvesting revenue locally, community groups generate about tenfold additional local employment and income impact.[2] Revenue to communities from 100% community-owned wind farms is 34 times higher than community benefits from private wind farms.[3] That income is reinvested in community assets, local businesses, services and activities which create jobs and generate further wealth. For examples see our case studies paper. Community energy creates additional social value as it is fundamentally about strengthening communities and improving lives in a way that builds enthusiasm for further sustainable behaviour, which will be essential for achieving Britain’s net zero goals.

Over the next 15 years, an increasing number of commercial wind farms will need to be repowered (replaced or refurbished at the end of their initial working life). This means they will need to reapply for leases and planning consents. This presents an opportunity for a portion of commercial generation to be transferred into community (and municipal) ownership, through shared ownership or community buyout opportunities at the point of repowering. Some initial ideas to support this include:

• When commercial installations reach the end of their lives, the developers should be required to offer local community groups a chance to buy out the development, or take on shared ownership when they repower. Existing community benefit arrangements should also be renegotiated and should meet (at minimum) the Scottish Government’s Good Practice Principles (currently being reviewed).
• The UK Government should fund organisations such as Community Energy England, Community Energy Scotland and Community Energy Wales to support and build capacity of communities to negotiate buy out and shared ownership options and/or improved community benefit funds.
• The UK and Scottish Governments should designate ownership as a material consideration for planning. This should give priority to fully community owned developments over private corporate developments, as well as to encourage developers to offer credible shared ownership, with a minimum stake of 20% available to communities when they apply for planning permission repowering.
• When renewables on public property or land approach the end of their life, the sites should be offered in the first instance to local communities for repowering as community energy.

2. Mandatory Community Benefit Payments from clean power developers

The former UK Government committed to explore a mandatory approach to community benefits from new electricity grid transmission infrastructure. This is a welcome first step and should be implemented, but the UK Government should go further and require Community Benefit Fund (CBF) contributions from all onshore and offshore clean power projects, including transmission and storage. The requirement to enter into a Community Benefit arrangement should apply to all developer-led energy projects, including those that offer shared ownership. For details, please see our policy paper on New Standards for Community Benefit Funds, p. 3: https://communityenergyscotland.org.uk/wp-content/uploads/2024/12/New-Standards-for-Community-Benefit-Funds-Dec-2024.pdf

3. Mandatory reporting on Community Benefit payments

In order to improve transparency around CBFs, developers should be required to report on the funds they provide. The UK should follow the example set by Ireland where the national Sustainable Energy Authority maintains the Community Benefit Fund National Register. A publicly available national register would satisfy the Just Transition Commission recommendation that there should be “enhanced disclosure of funds allocated” to ensure “scrutiny and accountability”, and would allow scrutiny as to whether benefits are being shared equitably across communities and regions. For details, please see our policy paper on New Standards for Community Benefit Funds, p. 3: https://communityenergyscotland.org.uk/wp-content/uploads/2024/12/New-Standards-for-Community-Benefit-Funds-Dec-2024.pdf

4. Reduce barriers to community energy repowering, to avoid losing existing community energy developments.

By 2035, 50% of existing community wind generators in Scotland will need to be repowered (replaced or refurbished at the end of their initial working life).

Figure 1- research by Community Energy Scotland

However, community groups are facing substantial barriers to repowering. If these barriers are not reduced, we risk losing the community-owned renewables that we currently have, which would mean going backwards on the Government’s targets for community- and locally-owned energy. It would also mean removing a significant income stream from the communities that own renewables, who are reinvesting that revenue into local economies. (An average of 70% of community groups’ organisational expenditure is spent locally.[4] By reinvesting revenue in local social services, community groups generate about tenfold additional employment and income impact.[5])

We recommend that the UK Government and devolved administrations should create a joint short-life working group to address the repowering challenge. We have received positive indications from the Scottish Government that they would be interested in such a group being convened, which should also include stakeholders from all relevant sectors including representatives from the Ofgem, NESO, local authorities, community energy groups and renewables developers. 

Replacing turbines will almost always require a new process for energy consenting or new planning permission, new grid connection offer, new Environmental Impact Assessments and new insurance.  This is not only because previous consents have expired but also because technology has moved on significantly and in most cases it will be impossible (and financially not the best decision) to replace like with like. This all requires raising significant capital (this can be over £1 million, not including the turbines themselves) and requires a significant time commitment from the community group. Community energy groups need much more support to see this process through to completion, as well as to engage in opportunities to take over corporate developments that are repowering.

8. Can the UK learn lessons from international examples about how to effectively manage Scotland’s energy sector transition?

Yes.

A key lesson demonstrated by Norway and their sovereign wealth fund from oil revenue is that we should retain more of the wealth being generated from our natural resources, instead of allowing the majority to be extracted out of local communities, out of Scotland and out of the UK. We are recommending to the Scottish Government that they establish a Scottish Community Wealth Fund, to equitably redistribute a share of the profits being generated from Scotland’s renewable resources, leaving no community behind. This would not require Government investment; instead it could be seeded with devolved Dormant Assets funds and possibly with a portion of the ScotWind revenue. Ongoing income to the fund would come from a number of sources, including a proportion of community benefits payments from new offshore wind and transmission upgrades. The fund would consist of three strands: local (distribution to locally impacted communities, maintaining connection between developer and community); national (available to any constituted community organisation across Scotland wishing to invest in long term revenue generating assets like land, renewables, community businesses or buildings); and a legacy fund (invested to generate returns to grow the fund). For more information please see our paper on a Scottish Community Wealth Fund: https://communityenergyscotland.org.uk/wp-content/uploads/2024/11/Proposal-for-a-Scottish-Community-Wealth-Fund-Nov-2024.pdf

The UK can also learn from Denmark, which in 2008 introduced legislation requiring all new wind farms to be at least 20% community owned. This has helped reduce resistance to turbines, because communities genuinely benefit from them. It has enabled Denmark to transform its energy system from being heavily reliant on fossil fuels to having substantially more wind power, more than half of which is owned by citizens. However, we would recommend that UK legislation require the share offers to be made available only to constituted community groups, to ensure that the benefits are made available to all members of a community, not only those who can afford to buy in.

Lastly, we recommend that the UK Government look to Ireland’s Small-Scale Renewable Electricity Support Scheme (SRESS) package, which includes a Feed-in Premium (FiP) tariff for community and SME energy export projects. A higher rate is provided for community projects due to the additional barriers they face, and in order to help meet EU targets for community energy projects. We would welcome a support measure like this in the UK, alongside a simplified Community Contract for Difference mechanism or Government-backed guaranteed floor price for electricity for community energy projects.

Taken together, these measures would support a rebalancing of ownership, responsibilities and benefits from our energy system, ensuring a just transition for Scottish communities as we progress towards Clean Power 2030.  

January 2025