Four steps that would make Wales a leader in locally owned energy
This post is by Shea Buckland-Jones, project co-ordinator of Re-energising Wales at the Institute of Welsh Affairs.
The potential benefits of local and community involvement in energy range widely. One report on small and community hydro in Wales suggested that local and community ownership could almost double local economic impact, compared with national, commercial developments.
Given such benefits it’s perhaps surprising that community energy has not played more of a role at the regional or UK level. Local communities face a number of barriers to becoming involved in renewable energy and these have proved to be significant since 2000.
We have been clear at the Institute of Welsh Affairs, through our Re-energising Wales reports, that we need policy change to enable significant involvement of local communities in making Wales self-sufficient in renewable electricity by 2035. We estimate this will require investment of £25 billion over the next two decades.
The Welsh Government has recognised the benefits of locally and community owned renewable energy projects, setting a target for 1GW of renewable electricity capacity to be locally owned by 2030, and for all new projects to have an element of local ownership by 2020. We are already more than halfway towards meeting the 1GW target.
Locally owned projects comprise just 20 per cent of all renewable energy capacity in Wales and the development of locally owned schemes is likely to become more difficult with the reduction in UK government policy support for renewables. In this light, the latest strand of our project has explored some of the specific levers and uniquely Welsh factors that could drive more scale in community and local ownership of onshore renewable electricity generation in Wales.
In our new report, produced in partnership with Regen, we’ve set out how Wales could become a world leader in community and local energy, at the same time as genuinely benefiting its people.
What’s clear from our research is that the change of scale needed in energy generation, use and supply cannot happen without public backing. The development of renewables must engage local communities to maintain the active backing and local investment needed.
From our own research, as well as our interviews with stakeholders, we reached the following conclusions about how to transform action and grow community energy in Wales:
There should be more shared ownership
Whilst 100 per cent community owned projects tend to deliver the most value to communities, for Wales to achieve 1GW of local ownership by 2030 there will have to be more partnership projects with commercial developers. The Welsh Government should require all new renewable energy projects in Wales above 5MW to have between five per cent and 33 per cent community and local ownership by 2020.
Another approach to supporting shared ownership is through business rates. We recommend that the Welsh Government should require local authorities to offer 50 per cent business rate relief on the community percentage of projects, and a sliding scale of business rate relief for the developer proportionate to the community share. For example, if the community share is 15 per cent, the developer would get 15 per cent business rate relief. This would be a good incentive for shared ownership projects.
A new local energy company for Wales
We think the Welsh Government should look at the viability, and potential benefits, of a local energy company for Wales. It could act as a local supplier, an aggregator of flexibility services or be a developer, building energy projects at scale.
Improve planning and land access
Natural Resources Wales, which manages seven per cent of the Welsh land area, have an important role to play in supporting more community projects at scale. It should allocate at least five sites for a minimum of 15MW per year, from 2019 onwards, for 100 per cent community and local authority owned renewable energy developments, offered at a nominal rent. At least three sites for at least 60MW per year from 2019 onwards should be allocated for shared ownership schemes.
Make sure there is affordable grid connection
Accessing affordable grid connection is important to get local electricity generation projects off the ground. The Welsh Government should engage closely with Ofgem to ensure there is sufficient investment in the network to support these types of projects.
If it does nothing to help this sector, Wales could fail to grasp the opportunity of a thriving local energy economy and the more resilient society it envisages in its groundbreaking Well-being of Future Generations (Wales) Act 2015. But if it takes up our recommendations, Wales would become a leading light in the growth of local and community energy.
[Image: Alltwalis Wind Farm near Pencader, Wales. Courtesy of Takver via Flickr]