Community energy: how to boost local energy markets

Community energy in the UK is facing increasing risk and lack of support, according to a recent report. However, several innovative approaches may overturn figures
Published: Thu 26 Jul 2018

As the inaugural Engerati Meets on transactive energy would suggest, there are multiple projects on transactive energy, community energy and peer-to-peer (P2P) energy trading blooming across the globe.

Several startups and companies in the energy sector are turning their attention towards such goals, such as Verv, a British startup integrating artificial intelligence and machine learning into their peer-to-peer trading platform, and Energy Bazaar, a Netherlands-based company that seeks to provide a platform for local energy trading of renewables in developing countries.

However, such projects may not yet be the norm in the energy sector, especially in the community energy niche, according to a recent report conducted by non-profit organisations Community Energy England and Community Energy Wales, alongside research and consultancy organisation Scene Connect and energy industry partners.

Community Energy England presents an overview of the status of the community energy sector in the UK in 2017.

The report shows that community energy in the UK experienced a decline in 2017: only one new community organisation was constituted in that year, with 30 fewer successful projects and 31% less generation capacity installed or acquired compared to 2016.

Challenges faced by the community energy sector

According to the report, such dwindling figures are probably a result of reductions in subsidy schemes and tax incentives for onshore renewables. For example, 2015 saw significant cuts to feed-in tariffs, which are incentives paid to individuals, businesses and communities producing their own renewable energy.

Additionally, the report points out, the removal of pre-registration for new rooftop solar schemes has increased the risk of many proposed community renewable projects. As such, the removal of several tax incentives has increased financial risk for these projects, which meant that they became less attractive to potential funders and investors.

This unsupportive policy landscape, coupled with the financial barriers that resulted from increased financial risk and lesser returns on investment, has visibly deterred the growth of the community energy sector in the UK. Other barriers detected included challenges during the planning process, where communities needed to review the planning processes due to its complexity, lack of transparency and certainty of outcome. In addition, communities also faced difficulties in gaining access to suitable project sites to develop renewable energy installations.

Innovation can boost the sector

Despite there being a plethora of challenges and barriers faced by the community energy sector, the report also notes that such factors do not appear to be hindering the intrinsic motivation of carrying out such projects. It states that innovative approaches certainly have the potential to boost the sector, and these would include, for example, innovative technologies, new business models, partnerships approaches, and more holistic approaches to energy development such as local energy planning.

A graphic displaying the biggest challenges identified for the development of community energy in the UK.

One technology that can significantly help projects is battery storage, as it can be connected to existing or planned solar photovoltaic (PV) installations to offset energy consumption and the intermittent patterns of renewable generation. Additionally, one way to gain access to potential sites of renewables installations is to engage in community-installed solar PV on public buildings, such as schools and hospitals. This would allow the community to retain community benefit revenue stemming from energy generation and to reduce energy bills for the project partners.

Finally, the report highlights that another important area of investigation for communities is potential partnerships with investment organisations to purchase existing renewable energy farms. For example, Mongoose Energy - a UK-based energy investment company that develops and manages community-owned renewable energy installations - purchased a solar farm with a power capacity of 14.7MW in 2017 to be transitioned into the ownership of three separate community organisations in the local area.

Utilities can naturally be valuable project partners in community energy projects as well. In addition to aiding the integration of renewable energy, it can be an opportunity to access new services and revenue streams: "Northern Powergrid champions support for community and local energy stakeholders where we continue to see interest and development of projects involving renewable generation and energy efficiency," says Jim Cardwell, Head of Trading and Innovation at Northern Powergrid, an electricity distribution utility in Northern England.

"Our role is to use our knowledge to leverage the hard work from communities across our region to provide a helping hand through engagement, education, communication, funding and offering accessible services," adds Cardwell.

Northern Powergrid is involved in a study on distributed storage and solar power near Barnsley, in Northern England. The project’s aim is to understand how customers’ energy bills can be reduced by capturing energy from solar panels and delaying its use with domestic batteries.

"We appreciate the sector is going through a challenging time, but it is showing resilience and flexibility to adapt and these are skills that will be essential to take advantage of the opportunities the future will present," commented Helen Seagrave, Community Energy Manager at Electricity North West, the distribution network operator responsible for the northwest region of England.

"We aim to deliver a new network-led approach which focuses on where supporting community and local benefit could help deliver other objectives such as protecting vulnerable customers, improving energy efficiency or reliability," said Seagrave.

Electricity North West, in turn, was involved in the Value of Lost Loads (VoLL) project, which aimed at developing a new way of valuing the social loss of electricity supply to different groups of customers.

Despite regulatory and financial challenges that have affected the growth of the sector, community energy remains an area of significant potential for more widespread renewables integration, and an area where innovation - including innovative partnerships between communities and utilities, for example - can deliver significant environmental, social and economic benefits.