Can the 'Power' of Community Reshape Britain's Energy Market?

The UK government recently launched Britain’s first Community Energy Strategy – outlining new opportunities for communities to take charge of their energy.
Published: Thu 27 Feb 2014

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The ambitious and wide-ranging strategy sets out the policies which support its delivery and it outlines a series of initiatives and investments to enable the growth of community energy, as well as remove barriers. It aims to start what it describes as an ‘energy efficiency revolution’ in the UK, writes John Peters, Managing Director of Engage Consulting, who shares his thoughts on this latest development.

Community energy schemes

Since 2008, 5,000 community groups have been established across the UK and the Government's new strategy aims to support the creation of hundreds more.

There also appears to be significant consumer interest in community energy schemes. This is partly driven by people’s desire to reduce their energy bills. According to a DECC survey, over half the people surveyed said that saving money on bills would be a major motivation for getting involved with community energy schemes. Figures show that 40% say they are interested in joining a community energy group and want to take part in collective switching or collective purchasing schemes.

However, the government’s vision is far more ambitious. It wants every community, with a desire to set up an energy scheme, to be able to do so and believes that ‘community led action’, such as collective switching, will give people the power to reduce bills and encourage competition. More significantly, it sees local communities as the ‘energy producers’ of the future because if more local communities generated energy, they would drive down prices through increased competition, create warmer homes, cut carbon emissions and diversify the energy mix.

The government believes that community involvement in generating electricity – whether fully community-owned projects or part community ownership of larger commercial projects – can also help achieve the country’s goals of decarbonising the power sector and achieving a 15% renewable energy contribution by 2020. In addition, community energy schemes can also deliver wider social and economic benefits.

By being involved in projects, communities will become stronger as people are given the opportunity to develop new skills and experiences. Communities have the opportunity to create a sustainable and reliable source of income when they generate and sell their own energy.

Funding and support

To help communities generate energy, the government has launched a £10m Urban Community Scheme. This scheme will provide neighbourhoods with up to £150,000 each to generate their own renewable energy from wind turbines, solar panels or hydro-electric plants. This investment follows the £15m DECC / Defra Rural Community Energy Fund (RCEF), launched in 2012, to provide finance for rural communities in England to explore the feasibility of, and planning for, electricity and heat projects.

Through this scheme and funding, communities will be encouraged to collaborate and collectively apply for funds and the support of a newly created advice team to install the renewable energy plants and take greater control of their utility bills.

Local neighbourhood groups will be invited to apply for grants of up to £20,000 for feasibility work, while loans of up to £130,000 will be made available to support projects from planning applications through to grid connection.

The government has also pledged to work with communities and Ofgem to look at ways in which to enable communities to supply energy. This includes promoting schemes such as ‘Licence-lite’ which removes barriers for smaller and community-owned suppliers and makes it easier and more affordable for them to enter the market and sell their energy.

To help communities save energy, the government announced a community energy saving competition in January which offers £100,000 to communities to develop innovative approaches towards saving energy and money.

Another key focus is to help communities purchase energy at a good price. Guidance and co-ordination will be offered for community energy purchasing projects. A £1m “Big Energy Saving Network’ Fund has also been pledged to support the work of volunteers helping vulnerable customers to reduce their energy.

Lastly, the strategy also covers the management of energy demand. Ofgem’s Smart Grid Forum is tasked with considering barriers to the development of Smart Grid which includes community energy schemes and community storage. The government is working with the Smart Grid Forum to ensure a co-ordinated and integrated approach during the formulation of policies and regulation. The government also ensures that community stakeholders are involved in this process.

The government’s strategy is bold and ambitious. It has the potential to fundamentally change Britain’s energy market as communities take control of collectively purchasing and generating energy, as well as playing an integral role in maintaining supply and reducing carbon emissions.

For this vision to be realised, the strategy needs major support - from regulators, local authorities, consumers, the developers of Britain’s energy infrastructure, as well as financial investment.

Britain’s energy retail market could look very different in years to come. But, the jury is out on whether this strategy will start an ‘energy efficiency revolution.’ Only time will tell.