Farm Power: Community energy is the future
Involving local communities in renewable energy schemes can help farmers get projects off the ground and deliver benefits well beyond the farm gate.
Community energy schemes are still in their infancy in the UK compared with elsewhere in Europe, but momentum is clearly building.
More than 5,000 community groups have undertaken energy initiatives in the last five years and the publication of the UK’s first Community Energy Strategy (CES) last year promised a “step change” for the sector and a significant expansion over the next three years.
See also: Shared ownership of farm renewables set to grow
Government is encouraging local communities to take a greater share in green energy projects rather than individual businesses reaping all the rewards.
For many farm businesses renewable energy has proved a reliable means of shoring up cash flow. However some farms struggle to get a project off the ground despite having a viable site.
Dairy and beef farmer, Rodney Arbuckle from Northern Ireland was a case in point. There was no way he could finance the development of a promising wind energy site on his land before he set-up the Drumlin Wind Energy Co-operative.
Deciding to make a community share offer, he raised £2.7m to build four 250kW wind turbines, pioneering a community energy approach to project development otherwise unheard of in Northern Ireland.
Community energy schemes are complex and require a level of involvement and time that most farmers would struggle to invest.
However community involvement may offer a means of delivering renewable energy projects for farm businesses that previously would have been out of the question.
Despite their complexity, there are benefits for farmers in taking a community energy approach. Not least is the potential to help through the planning process, says Charles Ward, of consultancy NewStream Renewables.
“It’s a misconception to say you’ll get an easy ride through planning with a community scheme, but it will certainly help.
“The challenge for farmers is how much ownership they want to relinquish and how much the local community buys into the project.”
It’s not just about achieving planning permission says Nicky Conway of Forum for the Future.
“Involving your local community at an early stage brings an emotional buy-in to what you’re doing and establishes a foundation to talk to the community about new enterprises that you might wish to develop in the future.”
More funding options
Funding for community-based groups is on the rise, with much aimed at the riskier feasibility stages, says Paul Phare of Energy4All.
Examples of funding sources include:
- Rural Community Energy Fund: a £15m programme, funded by Defra and DECC, providing up to £150,000 towards feasibility and pre-planning development work for English communities developing an energy project
- Scottish Government CARES fund provides loans towards the pre-planning consent stages of projects which have significant community engagement and benefit
- Greater support for community energy projects up to 5MW under the Feed-in Tariff, such as allowing two projects to share grid connection and receive separate tariffs, and a longer preliminary FiT accreditation window.
- DECC will also consider other measures to benefit community schemes when it reviews FiTs this year.
Clarity is key
When developing any community energy project, solicitor Gareth Williams from Hewistons says it is vital to be clear who the “community” is and how this will be brought together into a single entity that has legal responsibility for the project.
“There will be contracts and agreements that have to be entered into, whether that’s opening a bank account, signing deals with suppliers, leasing land, or registering for FiTs.”
The most common community project structure is a company limited by shares with a board of directors responsible for decision making, he says.
“Ideally you want a range of people on the board with different skills and interests, from marketing to technical or financial,” says Mr Phare. “Co-ops are not just there to benefit the community and deliver social outcomes, but are also about giving individuals the chance to invest.”
It is also worth considering how those involved feel about the risks during the early stages of projects where money often has to be spent on planning applications, surveys, grid connection, with no guarantee the project will proceed, says Mr Williams.
Community energy options
- Community-owned renewable electricity installations
- Renewable heating schemes, such as a heat pump or biomass boiler
- Community groups supporting energy saving measures funded through the Green Deal
- Working with the local Distribution Network Operator (DNO) to pilot smart technologies
- Collective purchasing of heating oil for off gas-grid communities (e.g. Agricole oil brokerage)
- Collective switching of electricity or gas suppliers.
See also: Weigh up your renewable energy options
Peer-to-peer energy marketplace
A pilot project promising a new way to buy and sell electricity through an online platform is being launched this summer by energy firms Open Utility and Good Energy.
The six-month Piclo trial is essentially “ebay for energy” where electricity generators can register their project and set prices while commercial consumers choose who they buy from.
“Buyers will have a portfolio of suppliers and can select anyone, so may prioritise local sources, technology types, or select by price,” says Open Utility’s Nima Taba-tabai.
The scheme is aimed at larger energy-intensive businesses on half-hourly metering that want to improve their sustainability credentials and that could gain a marketing advantage from showing how they buy energy, he says.
“It’s not about providing the cheapest energy, but we expect prices to be competitive.”
Unlike standard Power Purchase Agreements, prices are not fixed so it will be down to market forces to determine the equilibrium, says Mr Taba-tabai.
“Energy generators will have flexibility to change prices, but while some users may be willing to pay slightly more for a local source or particular type, if prices go too high producers price themselves out of the market.”
Good Energy will handle contracts, billing and other administration, and will also supply additional energy to users if there is a shortfall in energy production from their portfolio.
It will also buy excess energy generated by members.
The pilot will feature 25 generators and 25 consumers and if successful it is hoped to be released nationally in 2016.
“There is a lack of real solutions for community involvement in renewable energy, but this scheme will give people – generators and consumers – more control and the ability to make informed choices,” says Mr Taba-tabai.
Case study: Drumlin Wind Energy Co-operative
When Northern Ireland dairy and beef farmer Rodney Arbuckle was approached to have a wind turbine installed on the family farm four years ago, he had little idea the project would develop into a pioneering community energy scheme that others are following.
Drumlin Co-op has raised £2.7m through a community share offer to build four 250kW turbines on four sites across Northern Ireland (Cavanoneill, Aghafad, Ballyboley and Parkgate) and two more are in the pipeline.
Before starting the project Mr Arbuckle says he knew wind energy had potential on the farm, but raising funds in-house was never an option.
“We had recently built a new farmhouse and bought some adjoining land. With the milk price down at 16-17p/litre and the economy still in recession it wasn’t a good time to consider any major investment.”
Then he was approached by consultant Andrew McMurray of NRG Solutions and given the opportunity to lease out a small plot of land for 25 years and receive a percentage of turbine returns.
“We decided to go for it. It offers a top-up to the farming business and spreads risk.”
Raising bank finance for the turbine remained a challenge however, so community funding was considered.
Mr McMurray approached Cumbria-based Energy4All, which specialises in establishing and running community energy schemes – Energy4All was created from the UK’s first community-owned wind farm, Baywind.
This led to the formation of Drumlin Co-op in 2012, an industrial & provident society, run by a board of directors, of which Mr Arbuckle remains the only landowner on the board.
While Energy4All led the feasibility and planning process and developed the share offer, he took an active role in trying to gain local support.
Mr Arbuckle’s wife Karen took on PR work for the co-op and the whole family helped distribute leaflets and talk to people about the project.
There were articles in local press and radio, plus an official launch outside the Stormont Hotel, Belfast.
A public consultation meeting was held close to each site, but attendance was extremely disappointing.
“We were a guinea pig for such a scheme in Northern Ireland and many people didn’t really grasp the concept of buying shares in a turbine, so it was a slow grind,” says Mr Arbuckle.
Some locals did invest, but the offer was also widened to Energy4All’s existing contact base. “We eventually raised enough for the first two turbines (£1.4m), then extended the share offer until we had enough for all four.”
Three turbines were built last year and the final turbine at Mr Arbuckle’s farm was commissioned on 3 February 2015.
The co-op has just launched a second share offer to raise a further £1.2m for two more 250kW turbines at Ballyrobert, Co. Antrim and Cavanakill, Co. Armagh.
“Word has got out about the project and once people could see how it worked it led to more community co-operatives, such as a smaller-scale rooftop solar scheme where members get reduced rate electricity at one-third of the full price.”
How the share offer works
The Drumlin share offer allows people to invest from £250 to £20,000, with a projected pre-tax relief return of approximately 7.2% over 20 years.
Electricity is sold to the grid through a PPA and the co-op receives income through the Renewables Obligation.
Surplus profits after operating costs such as maintenance, rent, insurance and administration, will be distributed as a share interest payment to the members of the co-op and there will also be a community fund available to support local initiatives, starting at £2,000 for each turbine site.
From year four of turbine operation, ithe intention is to repay a portion of share capital each year and all members’ original investment is expected to be paid in full by year 21.
As well as receiving a rent for the site based on a percentage of revenue generated, Mr Arbuckle and his family have also invested in the share offer on the same terms as other members.
“It has been a big learning curve, but we are very proud to be involved with something that people are taking more interest in.”
The Farm Power project aims to bring about a step change in the uptake of sustainable farm-based energy across the UK.
Farm Power was founded by Forum for the Future, Farmers Weekly and Nottingham Trent University, and is guided by a steering committee made up of National Grid, United Utilities, NFU, Business in the Community, The Farm Energy Project, Lely, Thompson Farms, Lightsource Renewable Energy, Endurance Wind Power, and additionally funded by The Ashden Trust and the Esmeé Fairburn Foundation.