December 2015 was a dismaying month for the UK’s solar energy sector. Just days after the historic UN climate change conference in Paris – in which the UK agreed to move quickly towards a low-carbon future – the government announced deep cuts to its popular Feed-in Tariff scheme.
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Originally, sub-10kW solar schemes had received 12.03p/kWH in subsidies but from February this year it would fall to 4.39p/kWH, a reduction of 63.5%. Medium-sized PV systems fared little better, with tariffs plummeting from 10.90p/kWH to 4.59p/kWH. According to the government’s own impact assessment study, the cuts would cost the UK solar industry up to 18,700 jobs.
The consequences were immediate and far-reaching. In February and March, just 21MW of small solar was installed, compared with 81MW in the same period of 2015. By April, the Guardian reported that a number of solar companies had been forced to shut-up shop.
A spokesperson for the Department of Energy and Climate Change said: “It’s only fair that the costs on people’s energy bills to support solar projects should come down as the industry establishes itself and costs fall. Ultimately, we want a low-carbon energy sector that can stand on its own two feet rather than relying on subsidies.”
The implication here is that the interests of solar energy groups are at odds with the interests of the taxpayer. Energy and Climate Change Secretary Amber Rudd went so far as to specify that ‘hard-working families and businesses’ had been footing the renewables bill, presumably to their own detriment.
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By GlobalDataHowever, many of these hard-working families and businesses would beg to differ. Since 2010, when the subsidies first took effect, the number of energy co-operatives had been growing quickly. These use Feed-inTariffs to support micro-renewable generation facilities, which are explicitly designed to benefit local people.
A dual focus on fuel poverty
South East London Community Energy (SELCE) is a prime example. A not-for-profit enterprise in Greenwich and Lewisham, the group was set-up by local residents in 2014 as a means of tackling local energy issues. It narrowly made the window for the higher government subsidies, having pre-accredited its solar schemes just before the change in legislation.
“We were lucky, we got going before the cuts hit – I know other community energy groups have been pretty much decimated by this,” says Dr Giovanna Speciale, director and co-founder of SELCE. “A lot of the more nascent groups weren’t able to pre-register sites, or haven’t had time to be able to develop those projects. Just when this sort of community energy model was getting going, it’s been further cut down.”
For SELCE itself, the picture is somewhat brighter. Through raising two community share offers, it has been able to install 326kW of solar across seven schools. Over the 20-year lease of these projects, the schools will save money and the investors will receive 4% interest on their investment, while all surplus funds will be used to tackle fuel poverty and any extra electricity will be returned to the grid. This is not to mention the carbon emissions reduction, estimated as 60 metric tonnes (mt) of CO2 a year for the second project alone.
“SELCE has always had a dual focus on addressing fuel poverty and renewables development,” says Speciale. “People were excited by our renewables work, and were very supportive of it, but we live in an area of massive energy inequality, which they’d very much like us to be addressing.”
Fuel poverty is not a negligible issue in Britain – each year, more than 8,000 people die as a direct result of living in cold homes. Within Greenwich and Lewisham, around 8% of households struggle to afford their heating, often facing the unenviable choice between basic warmth and other essential items.
SELCE estimates that its second community share offer will raise £40,000 for fuel poverty over 20 years, backed up by grant-based funding. So far, the team has used its grant money to hold ‘energy cafés’, which provide informal yet professional energy advice to residents, alongside various community workshops.
“We were fortunate to have a number of directors who were skilled at enabling people to reduce their energy bills,” says Speciale. “At the last count, SELCE has helped over 1,000 households with energy advice. Obviously we would like to build on that, and up the ante with what we do to tackle local fuel poverty.”
A win-win renewables situation
The renewables work was somewhat harder to get off the ground. SELCE needed to find the sites, convince them to join, put legal agreements in place with the relevant local authorities and attract the requisite investment. It was a labour-intensive, and at times disheartening, task for a group without much marketing budget.
“Our model requires the solar array to be on the school for 20 years, and signing up to a 20-year agreement is quite daunting for our solar partners,” says Speciale. “So the legal agreements were tough, and it was a year and a half before we had any solar arrays in place.”
By the time the second project got underway, the relevant parties were much more amenable to the idea. Compared with first time round, the reaction was overwhelming, in fact, the share offer needed to close early because it was oversubscribed. Speciale says this is due, in part, to the low financial risk for investors.
“Risk is about uncertainty, and there are relatively few uncertainties involved in this particular financial model,” she explains. “We pre-registered the installs, so we knew which Feed-in-Tariff rate we were getting, and once you install them, that is guaranteed for 20 years.”
It also speaks to a wider support for what SELCE is hoping to achieve. Some investors said they were primarily interested in reducing carbon emissions, while others cited the benefits to local schools. Around 85% of them live close to where the solar panels have been installed.
Evidently, the community energy model is something of a win-win situation for all concerned; testament to what can be achieved with a good idea, a dedicated team, and an auspicious Feed-in-Tariff.
Adapting the solar model
Unfortunately, this kind of model is no longer quite so viable. Following the subsidy cuts, there is now less scope for community buildings to save money on their electricity rate, removing their incentive to participate. Additionally, it will no longer be possible to deliver a return to investors, or to put funds aside for fuel poverty.
Speciale says that if SELCE undertakes more solar developments, the model will need to be adapted considerably.
As a result, the SELCE team is planning to switch up its focus. The group has received a grant to look into renewable heat for public swimming pools, and it’s interested to see whether a similar business model might be possible for different technologies. It has also built a portable solar generator, which they’re thinking of hiring out to local events.
“We’re looking at diversifying, and that’s what a lot of other groups are doing too – they’re looking at other technologies and other things they could do,” says Speciale. “But it’s not a good time, the policy landscape isn’t great. This government doesn’t seem to be a renewables-friendly administration.”
She characterises the last two years as a ‘rollercoaster ride’. While government changes have certainly made these kinds of enterprises more difficult, SELCE is going strong, sustained by a great deal of energy and optimism.
“The community energy ball is rolling and you’re not going to stop us,” she says. “I would never have imagined that it would be this difficult, but then I would never have imagined that it would be this rewarding either.”
