In July 2015 the Department of Energy and Climate Change launched a four week DECC Feed-in Tariff accreditation consultation on removing the preliminary accreditation from the Feed-in Tariff.
This will have the effect of removing the link to the tariff guarantee for installations currently able to pre-accredit under the FIT, such that installations will only receive the tariff rate as at the date they apply for full accreditation. This will mean that a developer will not be certain of the level of support they will receive under the scheme until the point at which their application for accreditation is received by Ofgem.
Community Energy Plus is a Cornwall-based charity and social enterprise which supports a variety of innovative projects relating to energy efficiency and renewable energy, including community ownership models.
We recognise that the withdrawal of Feed-in Tariff pre-accreditation will require community energy projects, smaller scale developers and individuals to take a gamble on the level of Feed-in Tariff they will be able to claim at the completion stage of their project. The higher level of risk associated with new projects will undoubtedly effect the availability and cost of debt finance and without the reinstatement of FiT pre-accreditation, we expect to see many of the community projects that have taken months and in cases years to develop, fail to be brought to fruition.
Our response to DECC’s consultation is as follows:
Consultation Question 1: Do you agree that, in the context of deployment and spend under the FIT scheme significantly exceeding expectations, it is appropriate to remove the ability to pre-accredit from the FIT scheme?
We do not believe that the removal of pre-accreditation is necessary to decrease deployment levels alongside FiT degressions and reviews established to meet the same end. As pre-accreditation is included within budgets at time of registration and plays a part in effecting degressions it does not produce an unexpected impact on or risk to planned budgets.
It is also extremely disappointing to see that the FiT, established to increase the uptake of renewable energy technologies is now proposed to be restructured to actually decrease deployment which goes against the key objective of the scheme.
Consultation Question 2: Are the assumptions made above on the impact of removing pre-accreditation reasonable? Please provide robust evidence to support your response.
Yes we believe that removing pre-accreditation will decrease developer confidence but this impact is likely to be felt unevenly across development sectors as large energy companies or developers backed by large sums of equity will have the ability to quickly deploy their own capital with little reliance on debt whilst the community energy sector, smaller scale developers and individuals will likely be reliant on debt (at least in the first instance), the availability of which will decrease as a result of this action, not only effecting availability but also competition and its direct impact on the cost of available debt finance.
This action will again have the direct consequence of focusing ownership of generating capacity within large scale utility or development companies. This monopolisation will not increase competition for energy suppliers and will not therefore help to push consumer’s energy bills down.
We would also agree that decreasing certainty will require a project to have a higher rate of return but again this will only serve to concentrate development and ownership in the hands of a smaller group of developers and energy companies that already have their own equity available. This monopolisation will certainly not open up competition on the energy market that has the capacity to decrease cost to the consumer and is likely to drive us back to a pre FiT position with the already wealthy companies or individuals further increasing their wealth and control of the energy market.
Consultation Question 3: Are there additional measures which could achieve the objectives of encouraging deployment under the scheme while ensuring value for money under the LCF?
Removal of pre-accreditation will have a direct impact on confidence and investment in the industry that is likely to push technology costs up rather than down and will not increase value for money but in fact have the opposite effect.
Support for community energy with the ability for pre-accreditation can have a direct effect on value for money under the LCF as the majority of qualifying community organisations have broader objectives of reducing carbon and energy use alongside clean renewable energy generation.
Only enabling pre-accreditation for community energy installations and removing it from commercial ventures will have the effect of driving more commercial development into 100% community ownership or joint ventures with local communities which will offer more value for money and reinvestment into energy and carbon reduction activities which meet many of the objectives for creating the FiT in the first instance.
Consultation Question 4: Are there groups or sectors where it may be appropriate to reintroduce pre-accreditation in the future?
Qualifying community energy groups that do not seek to maximise returns to their investors or owners but have wider environmental, social and economic objectives that benefit local communities.
We are a registered charity and through our research, direct action and promotion of sustainable energy use and renewable power generation, we are working to lessen the impacts of climate change, relieve poverty and improve health outcomes. In better understanding existing energy use, our activities benefit the communities we work with, as they learn to conserve and reduce demand and prepare for future energy challenges.
As a charity we are necessarily risk adverse but the confidence provided by pre-accreditation has enabled us to launch our own solar rooftop PV scheme for commercial and community facilities (in line with recent policy statements and strategies from DECC) with the deployment of the technologies supporting our carbon reduction aims whilst any surplus generated is reinvested directly back into our charitable activities. We do not have large reserves or wealthy investor backing and will be reliant on debt to initially finance the developments. Any actions that reduce investor confidence, decrease available finance options and increase project hurdle rates will directly impact on our abilities to develop and deliver renewable energy schemes that can provide increased value for money by reinvestment in further energy and carbon reduction activities.
Without pre-accreditation our initially approved source of finance for our proposed community solar scheme will become increasingly difficult to access and will require constant monitoring and reprojecting to try to match FiT revisions. The increased work load and level of risk will also have a direct impact on our ability to make clear, justified decisions in progressing renewable energy developments that can provide far reaching benefits for our local communities.