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FITs support for community energy projects not to be increased

In May this year the government launched a consultation on support for community energy projects under the Feed-in-Tariff (FITs) scheme. Part of that consultation sought views on proposals for increasing the maximum specified capacity ceiling for eligible community projects from 5MW to 10MW. The government's response to the consultation has now been issued. It has been decided that support for community energy projects under the FIT scheme will not be increased. Instead, the government is going to implement a package of new measures under the existing FIT scheme which will, it claims, have a positive effect on the community sector.

Why has the government decided not to increase support for community projects under the FIT scheme?

  • Any increase from 5MW to 10MW for community projects would require State aid approval from the European Commission. Approval would only be given if there was strong economic evidence that the costs of community projects on the larger scale would be significantly different to non-community projects. There was also no evidence from the consultation responses that larger community projects could only be assisted through additional FITs support, rather than other types of measures or incentives.
  • Any notification to the Commission to increase the ceiling to 10MW would trigger the need to introduce broader modifications to the FIT scheme to comply with the Energy and Environmental Aid Guidelines (EEAG). This would have an impact on the support provided to schemes of less than 5MW.
  • It is likely that the majority of community schemes will, in any event, be less than 5MW. Therefore, it would be counter-productive to increase support for schemes of between 5MW and 10MW and make it more difficult for schemes of up to 5MW to receive support via the FIT scheme.

If the government is not increasing support via FITs, what is it doing?

The government is introducing a number of new measures for community energy projects up to 5MW under the current FIT scheme. These are intended to make a practical difference to communities trying to deploy projects, and can be introduced quickly. The measures set out in the consultation response involve:

  • Widening the definition of "community organisation" to include registered charities and wholly owned trading subsidiaries of them;
  • Introducing a further exemption to the "site rule" to allow two projects to share one grid connection and receive separate tariffs; and
  • Increasing the length of the current preliminary accreditation validity periods for community projects for six months across all technologies, to give communities more time to raise funds.

It is envisaged that the legislation to implement these changes to the FIT scheme will have effect from 1 April 2015.

The government also intends to:

  • Issue guidance to confirm the treatment of different community ownership models under the FIT scheme and to help community groups to come to an agreement with a commercial developer over sharing FITs payments. This guidance should be published by 1 April 2015.
  • Issue guidance on the types of activities that can be supported by publicly funded grants without affecting eligibility for FITs payments. It is envisaged that this guidance will be available before the end of the year.

What about projects over 5MW?

Community projects of over 5MW will not receive additional support, and will have to continue to apply for support under the existing regime. Support is currently available under the Renewables Obligation (RO) scheme, although this scheme will close in April 2017 (and earlier, in April 2015, for solar projects). Support is also available under Contracts for Difference (CfD), and community projects over 5MW will have to apply for support via the CfD process once the RO has been phased out. See update on the Government response to solar PV consultation for further information. 

The government envisages that its proposals in relation to the shared ownership of onshore renewables projects will also assist in the deployment of more community energy schemes. See article on what community involvement means for onshore wind developers in our renewables newsletter for further information. 

"The recent publication of the Shared Ownership Taskforce report demonstrates the increased impetus behind community energy. Instead of seeing the fact that the FITs support will not be increased as a potential barrier, let us consider the measures the government will introduce as a counter balance and the recent confirmation from DECC that community groups and commercial developers will be able to share a grid connection for jointly developed renewable electricity projects under the Feed-in Tariff. You could conclude that what we are actually seeing is the creation of a powerful incentive to co-develop schemes with community groups." Maria Connolly.

Contributor: Alexandra Holsgrove Jones

This publication is intended for general guidance and represents our understanding of the relevant law and practice as at November 2014. Specific advice should be sought for specific cases; we cannot be held responsible for any action (or decision not to take action) made in reliance upon the content of this publication.

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