Lesley Riddoch: Lights out on community energy projects

Hydro and other schemes may be difficult for communities to launch without tax relief and agreed feed-in tariffs
Hydro and other schemes may be difficult for communities to launch without tax relief and agreed feed-in tariffs
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The latest round of UK government cuts will devastate the community energy sector, writes Lesley Riddoch

This Friday signals the end of growth in the UK’s thriving/fledgling community energy sector. It’s the last day claims can be made for tax relief on investments in community renewables and the last in a series of blows by Westminster that virtually ends new community wind, solar, hydro or biomass projects in Scotland.

Ironically, this comes a week after one of the most astonishing community energy achievements.

Last week, a remote Highland community of 228 people hit its target of three quarters of a million pounds invested in a small community-owned hydro scheme in just five weeks. The Applecross Community Hydro project – run by the aptly named “Apple Juice” Community Benefit Society – will now produce hydro electricity from one of the short but dependable and vigorous rivers in remote Lochalsh.

According to Alison Macleod, Society Secretary, the hydro will give a steady income to the tiny community, virtually cut off by the famous Bealach na Ba (Pass of the Cattle) whose steep zig-zag road deters all but the hardiest visitors. When the longer northern coastal road opened in the 1970s, the peninsula’s regular ferry link with Kyle of Lochalsh was mothballed. Now restoring that link is back on the cards – just one of the projects community hydro income makes possible along with accommodation for the elderly, improved energy efficiency and small grants for local business. Re-opening the Toscaig to Kyle ferry link would mean Applecross children who currently board at Plockton High School might get back home every night. An infrastructure improvement like that could be a game-changer for this fragile community – but it wouldn’t be possible without the Apple Juice cash. Yet, if it was being launched today, the community hydro scheme would have no chance of success – despite the phenomenal support just demonstrated by the public.

The reason is depressingly familiar – UK Government cuts. The Treasury used to offer tax breaks for community renewable investors. Those who were part of the first £150k got 50 per cent tax relief – the remainder got 30 per cent and although the average Apple Juice investor put in around £3k, the tax relief encouraged crucial larger investors (the biggest was £40k) – vital when it became clear the scheme would be scrapped in November.

This is just the last of three blows delivered since the May election ended the coalition government and the mitigating influence of Lib Dems such as Energy Minister Ed Davey. Far more destructive was the end of pre-accreditation in September of this year. Before that date, community energy projects which had crossed the “Big Three” hurdles (having ownership or a long lease of land, planning permission and a grid connection) could register with Ofgem and get a guaranteed price for their energy if the project was completed in two years. Getting all that done was a very tall order for communities – but they could then construct a business plan safe in the knowledge that feed in tariff subsidies wouldn’t change – a bit like fixed rate mortgages. In September though, that certainty vanished. Community energy schemes which hadn’t reached the pre-accreditation stage could no longer get a fixed, agreed feed-in tariff for their projects – at a stroke that made it impossible to construct realistic business plans. This came on top of the earlier blow to community projects – the ever dwindling prices being offered in Ofgem tariffs since the Tories’ victory in May. This triple whammy delivered by the UK Government has made it next to impossible for new community energy schemes. Landowners and farmers with land and financial reserves may feel it’s still worthwhile forging ahead without tax relief or an agreed price for their electricity. But community projects spend so much time getting these basic resources in place that extra work and uncertainty is probably fatal.

In the case of Apple Juice, negotiating a lease from the Applecross Estate took years. The community project came at the same time as other proposed commercial energy projects by RWE/Npower and the estate was slow to accept different rental terms for the community scheme, even though the small project has hardly any physical imprint on the land, save the location of a small hydro house in the corner of a field grazed by deer. The burn must still run, according to Scottish Environment Protection Agency (SEPA) regulations and the water returns to the burn once it’s been through the hydro. Additionally, since none of the Applecross Estate trustees lives locally and there’s normally only one local meeting a year, negotiating a viable lease and reasonable rent took much longer than first envisaged.

Establishing a grid connection was another lengthy and unpredictable task. The desired 99.2KW connection proved unaffordable – but another application later 90KW was offered at a much reduced price. The community based their business plan on this – but in the end SSE only offered a 50KW connection. So 40KW will now be used for a local district heating scheme which took extra time to devise, design and cost. To complete the work within the two year limit the Hydro had to be financed and built simultaneously. If Highland Eco Design – the hydro engineers – had not put up the money themselves, the project would have run aground.

And of course, before any of these Herculean tasks could be tackled, Applecross volunteers had to fund a feasibility study of eight burns, pay for an SSE grid survey, produce initial design studies and select the best burn, then make an application for cash to fund more work on local hydrology, community consultation, acquiring a SEPA licence and employing a local worker. This preparatory work took three years and without a Scottish Government Climate Challenge Fund grant and guidance from Community Energy Scotland (CES) staff the project would not have begun. Sadly many CES staff are now facing redundancy.

Exhausted readers might wonder why community volunteers persevere. One reason is that cash from energy projects gives communities real clout with supersized councils the Scottish Government will not shrink and community councils Ministers will not empower. The community hydro schemes that have battled through all these hurdles are probably safer investments than houses and a website’s been set up to guide would-be investors to projects than can still beat Friday’s deadline.

But until energy policy is devolved to Scotland it seems that, shamefully, is the end of that.

www.energydash.org/