Government casts a cloud over community solar schemes

Imagine you are a community energy entrepreneur in the UK. How will you be feeling after the government’s action to tackle the “solar farm threat”?

You’ve said no to going to the pub at weekends more times than you can remember. You wonder if you should have given up your dull, but well-paid, job for a career that won’t make you financially rich.

But you’re excited when you arrive at your shabby yet friendly office because today is a ‘milestone day’ – you are going to submit your planning application for installing solar PV panels on the local secondary school. This will be paid for by local shareholders in the energy cooperative you run and a loan from a loan fund forcommunity energy projects.

The clean electricity generated will be enough for most of the school’s needs, plus 20 local homes. Today more than ever, it feels real. Later on, you have an interview set up with a local journalist. Soon, the town will know. You feel a bit apprehensive, but mostly excited, maybe you will go to the pub this evening.

You’re making a cup of tea, waiting for your knackered, donated PC to fire up. Eventually there come the ‘bings’ of new emails, lots of them. “Why so many”, you wonder as you scan your inbox. Then you see the same subject line repeated down your screen: ‘Huhne takes action on Solar farm threat’.

You knew that the government was concerned about energy bill payers subsidising fields full of solar panels, so you were half expecting it to limit them in the review of ‘feed-in tariff’ subsidies next year. Now you read that the review of these ‘solar farm’ scale subsidies will be ‘fast-tracked’ this summer. That raises your blood pressure, but you tell yourself that the school project is no ‘solar farm’. Of course it isn’t, it’s on the roof! But hang on, why does it say the review covers projects over 50 kWp. Our school project is for 90kWp! Why on earth would they do that, why would they want to stop our project, and those like it up and down the country!

You look at your planning application, your drafted share issue information pack and your wall calendar with the launch date circled in four weeks. You break into a cold sweat as you realise that now everything is unknown, just like it was when you started. You can’t complete the project before the review finishes, so you don’t know if there will be subsidies after that. Your investors will need to know what they will earn so there’s no point asking people to buy shares. No bank will lend to you. Suddenly you feel a pang of panic: how will you pay the mortgage? Your mobile rings. It’s the journalist. What will you tell them?

I’m sorry to say that this tale is very real. I have been involved in our Climate Finance project at Forum for the last two years, working with a group of experts to support community energy groups in creating and realising viable business plans for community owned energy projects, sponsored by the Ashden Trust.

We all welcomed the feed-in tariffs that started in April 2010. They have led to an explosion of interest and activity in community-owned energy, and commercial investors are awake to the opportunities as well.

Already the costs of solar are dropping as we achieve some scale and new factory capacity is creating UK green jobs (which are now under threat). Britain badly needs these new business models to transform the way we generate and use energy and create meaningful jobs.

We also are working on ways to incentivise the long-term investments that we need to switch to a sustainable economy. Community energy entrepreneurs are making this long-term investment. They thought it was matched by a long-term programme of subsidies – feed-in tariffs - that wouldn’t change until at least April 2012. That gave investors long-term certainty, enough for the large banks to invest and enough for the entrepreneurs to take huge personal risks. They also trusted that the government understood the scales of solar projects: it is obvious that with the ‘threatening’ solar farms being larger than 1MW, there is scant chance of solar PV projects under 500kWp, let alone the 50kWp limit chosen, exhausting the funds for households, communities and small businesses.

The horrid irony is that this 50kWp scale is fundamental to these vital creators of a sustainable energy system. The threat of this shock review goes beyond solar PV too. As Gareth Hughes, from Beetle Capital Partners, says “I worry for the damage done to investors’ confidence across the board [wind, hydro and solar]. How can they possibly look out 25 years and make a safe assumption that the rules won't change. At the very least the cost of capital will increase to reflect the enhanced risks, which will make many projects hard to finance.”

I want you to hear what two of the leaders we have been working with have to say of this decision:

Managing Director of OVESCo, Chris Rowland: “It is infuriating that just as we are about to launch our first scheme that is in line with Greg Barker’s ‘big society ambition’, we are hit by this lack of vision at the top which totally scuppers the plans of many community groups across the UK. Perhaps the minister did not mean to destroy the plans of the groups he also wants to see succeed, but without a stable and viable feed-in tariff, community energy will never happen.”

Barbara Hammond, Chair of West Oxford Community Renewables: “Our biggest installation so far is 100kWp of solar PV on our local secondary school. It seems very strange indeed to be suddenly considered a large developer of PV. As a small community-owned SME, the income stream coming into our community from our projects will have a huge impact on our ability to address climate change in a deep, long-term way. We are only just starting to understand how powerful our model could be, and are starting to share our learning with other communities. This momentum will be lost if the structure and size of the feed-in tariff is constantly in question.”

My fear is that these ‘little guys’ have been stung too many times and will just give up. But, in my heart I know that they will carry on because they have come this far and so many people want them to succeed. Too many realise how powerful their model for change is. I often wish I could have their courage.

I hope that the government will now realise that once you set out on a policy path, there will often be unintended consequences, but that changing the rules suddenly should only be done after careful consideration. The uncertainty this unplanned meddling createsdoes very real damage to people’s lives and our ability to invest for the long term.