9. The Co-operative Model Works
£18.5m+ raised through FSA regulated public
offerings by Energy4All/Baywind
•
•
•
•
•
•
•
•
•
•
Baywind – £1.9m
Boyndie
– £730k
Westmill – £4.6m
Fens
– £2.9m
Skye
– £1.0m
Great Glenn
– £1.2m
Kilbraur
– £1.0m
EP
- £ 1.0m
Drumlin
- £2.5m
S.o.L.
- £1.7m (to date)
10. In development
• Devon Community Wind Co-op
• Easterly Wind Energy Co-operative
• Four Winds Energy Co-operative
• Baywind II (Harlock Hill repower)
• Hampshire Renewable Energy Co-op
• West Solent Solar Co-op
• Multi-roof solar
12. Pioneering A New Model for Community
Renewable Energy
by
Andrew Clarke
The Resilience Centre
@
Coop Community Energy Conference
19th October 2013
13. A Social Purpose Business - aims to help build
resilience in society in the context of climate change and
diminishing resources.
Self Financed – No direct grants or state aid
Community Renewables - we aim to remove barriers to
entry and maximise returns to the community and local
economy, through our Resilient Energy partnerships
All our profits are reinvested in our social purpose
business
13
14. Challenges – Community
Joint Ownership
Need to provide a low risk/low
cost entry for
Communities/Landholders by
removing majority of the „At Risk‟
Planning & Development costs eg £45-60k risked instead of
£180k-£240k+ for a wind turbine
Need to ensure only suitable
projects are progressed – we
screen 10+ Projects for every one
that proceeds
14
15. Challenges - Community Joint
Ownership
• Needs a simple model to ensure
maximum returns for Communities –
easy to lose all revenue on Admin &
„Reinventing the Planning Wheel‟ on
Community Projects
• Getting everyone to pull together,
often easier if a skilled 3rd party can
steer project around pitfalls
• Skill in negotiating a proportionate
response by regulators not defined
in NPPF – Community projects are
disproportionately affected by one
size fits all approach
15
16. Successes of the Joint Ownership Approach
Ensures communities make best use of any available
funds, we deliver projects for between 12-25% of typical
costs for 50% equity
Ensures landowners are engaged and fairly rewarded without them communities seldom achieve projects
Resilience facilitates growth of social capital in bringing
together projects to grow skills in local construction &
support services
We share standard legal documents and financial models
further reducing costs and timescales
Our model is very flexible, we are working on multiple
equity parties Community-Landowner-Ourselves
16
17. How Value Generated is Shared
Community „Crowd Funding‟ Investors get ~= 38% Gross
Revenue (8% Return on Capital)
JV Equity Partners ~= 23-25% Gross Revenue
Local Community gets 4% of Gross Revenue as a
Community Fund ~ £20k/yr
We work to ensure local social capital is developed for
installation, operation & maintenance ~= 16% Gross
Revenues for O&M with Apprenticeships established
We share standardised documents to allow local
professional services to setup & manage operational
projects ~= 7% Gross Revenues
We close the loop on energy provision by working with
Coop Energy to facilitate communities to buy back energy
& share in benefits of supply as well as generation
17
18. Local 50:50 JV Equity
Partners
23%
Local O&M
16%
Local Professional
Services
7%
Tax Incl. LA Business
Rates
11%
Community Investers
38%
Gross Revenue Distribution
The Resilience Centre Model
Contingency
Reserve
1%
Community Fund
4%
18
20. The role of large organisations in
supporting community energy
October 2013
21. The research
•
•
•
•
March – May 2013
Anafon case study
Interviews with 30 individuals
Benefits, barriers, role of the Trust
http://www.nationaltrust.org.uk/document-1355801605221/
25. Anafon
• 300kW scheme
• National Trust and
Natural Resources Wales land
• Funding from Ynni’r Fro,
Co-operative Community
Energy Challenge and
Waterloo Foundation
26. Barriers
Role of the Trust
•
•
•
•
•
•
•
•
•
•
•
•
•
•
Access to land
Finance
Planning and licenses
Skills, expertise, confidence
Long term, complex work
Differences of opinion
Inconsistent policy
Access to land
Providing credibility
Engagement with agencies
Sharing knowledge
Navigating the complexity
Providing case studies
Leadership and advocacy
27. Benefits to the National Trust
• Financial
– cost savings and income generation
• Accessing funding and support
– ‘at risk’ development funding
• Supporting policies
“These types of
projects make a
place
more
special”
– Going Local, Fit for the Future
• Other benefits
– inspiration, awareness, reputation, efficiency
28. Risks to the National Trust
• Development, operational & reputational risks
• Opportunity costs
• Regulatory risks
29. Opportunities
•
•
•
•
•
Many potential sites
Community energy catalyst
New sources of income
Connect people & landscape
Seen as valuable and relevant
“We have a huge potential to
harness the resources we own and
manage.”
Constraints
•
•
•
•
•
Limited resources
Opportunity costs
Organisational priorities
Legality / regulation
Organisational purpose
“We need to be clear about how
important such approaches are to
the Trust and why.”
30. “Bees and Trees”
“The bees are the small organisations, individuals and groups who have the
new ideas, and are mobile, quick and able to cross-pollinate.
The ‘trees’ are the big organisations - governments, companies or big NGOs which are poor at creativity but generally good at implementation, and which
have the resilience, roots and scale to make things happen.
Both need each other.”
Mulgan et al, 2006
“When Bees Meet Trees:
How large social sector organisations can help scale social innovation”
by Owen Jarvis and Ruth Marvel, 2012 Clore Social Fellows
35. Getting started
5 things we have learnt
Community Energy Conference
19 October 2013
Jon Hallé
jon@sharenergy.coop
www.sharenergy.coop
36. Co-operative helping people to set up renewable energy co-ops
Founded 2011, spin-off from Energy4All
28 co-ops set up across the technologies
•
•
•
•
•
•
Finding projects
Setting up the co-operative
Financial planning
Landowner negotiation
Share offer setup, marketing
Administration
37. Follow the land, follow the weather
• Use local resources
• Think bioregionally
• Copy other people
Private Sector
Individual co-op members &
other co-ops
38.
39. The team
• Choose who you work with
• Choose people everybody knows
• Tell a story people want to join up to
Private Sector
Individual co-op members &
other co-ops
40.
41.
42. Do your sums
• Financial planning from day one
• Spend time on things that will work
• The common currency – currency
Private Sector
Individual co-op members &
other co-ops
43.
44. It’s the landowner, stupid
• Work with the willing
• Sign them up early
• Make them work
Private Sector
Individual co-op members &
other co-ops
45.
46.
47.
48.
49. Resources are abundant
• Development funding is easy
• Selling shares is easy
• Lots of people want to help
Private Sector
Individual co-op members &
other co-ops
52. What are community shares?
“The sale of shares in enterprises serving a community
purpose, with the aim of raising at least £10,000 in
capital from no fewer than 20 members”
Powered by Withdrawable Share Capital
Unique to
co-operative
&
community
benefit
societies
Nontransferable,
nonspeculative
One Member
One Vote
Exempt from
regulation
under the
FSMA 2000
Interest
payment
only sufficient
to attract
investment
54. Community Shares Market Indicators
Over 400 new
societies
registered
Over 130 share
offers
undertaken
Est. £20m raised
from over
20,000 members
(£28m targeted)
Average offer
raised £200,000
Average
membership
200 members
Creative and
media
1%
Sports
3%
Food and
Farming
8%
Pubs and
Brewing
15%
Average
investment per
member £1,000
Regeneration
and
development
7%
Energy and
Environment
33%
Community
Retail
24%
Social Care
2%
Transport
2%
CLT and Housing
3%
Other
2%
55. Community energy and community shares
Renewable energy schemes using community shares since 2009
37 share offers
complete
(3 further live)
Median amount
raised: £150,000
£13.5m equity
raised
8,000 members
approx
Median
membership: 100
Average individual
investment (based
on medians):
£1,500
57. Four pillars of a successful share offer
Business
model
Community
engagement
Governance
Offer
document
Viable
Scale and
scope
Legal form
Accurate
Profitable
Attracting
support
Rules
Informative
Sustainable
Building
membership
Conduct
Share offer
„campaign‟
60. Get in touch
Jim Brown,
Strategic Adviser
Community Shares Unit
jim.brown@bakerbrown.co.uk
communityshares@uk.coop
www.communityshares.org.uk
www.microgenius.org.uk
62. Pure Leapfrog – What we do
We provide:
• Low cost debt to
finance, part finance or refinance renewables
projects
• Professional expertise to
help with the non-financial
barriers
63. Where to start….?
• The pioneers fought to get their
projects off the ground
• The battle isn’t over but its now time
to start professionalising and
?
standardising
?
• So what have we learned?
?
?
?
64. Sun Tzu, The Art of War
“Thus we may know that there are five
essentials for victory”
65. “He will win who knows when to fight and when
not to fight”
Pick your battles - don’t
re-invent the wheel
It’s not about limiting your
ambition! Every project is unique,
but:
• Use tried and tested techniques
and technologies
• Learn from others
66. “He will win who knows how to handle both
superior and inferior forces.”
Know your strengths but acknowledge your limits
• Community project teams wear many hats
• Work out which ones fit
• Be honest (but confident)
• Be clear on capacity of volunteers
67. “He will win whose army is animated by the
same spirit throughout all its ranks.”
Common purpose
• Projects will need a lot of
energy – everyone needs to be
on the same page
• Make sure everyone is agreed
on the ‘why?’ even if the
‘what?’ moves around
• Know how will you make
decisions when the goalposts
move
68. “He will win who, prepared himself, waits to take
the enemy unprepared.”
You need a plan
• Work out what you don’t know
• Plan to plan
• Stay agile!
69. “He will win who has military capacity and is not
interfered with by the sovereign.”
Leadership
• Absolutely essential to the
success of any project
• Needs support of the team
• Mustn’t be afraid to ask for
help
Interference is another issue –
hopefully improving!
85. Project Structure
Owners
Investors
Financing &
Security
Agreements
Operator
Operation &
Maintenance
Agreement
Construction
and Supply
Contracts
Construction
Supplier
Fuel supply
(if relevant)
Government/
local authority
Shareholders Agreement
Articles of Association
Share issue
Licences and
permits
Subsidies
Project
Company
Land
Agreements
Power Purchase or
Connection
Agreement
Land Owners
Offtaker/
Network
Operator
86.
87. risk
• noun 1 a situation involving exposure to danger. 2 the possibility that
something unpleasant will happen. 3 a person or thing causing a risk or
regarded in relation to risk: a fire risk.
• verb 1 expose to danger or loss. 2 act in such a way as to incur the risk
of. 3 incur risk by engaging in (an action).
— PHRASES at one’s (own) risk taking responsibility for one’s own
safety or possessions. run (or take) a risk (or risks) act in such a way as to
expose oneself to danger.
— ORIGIN Italian risco ‘danger’.
Source: Oxford English Dictionary
88.
89.
90. Opportunity to allocate the risks...
• Where does the risk sit?
• Possible to eliminate
the risk?
• If not, mitigate it or
allocate it.
• Who is best placed to
take it?
• Who will pay for it?
91. How do we deal with risk?
Eliminate it
Mitigate it
Allocate it
92. “Classic” Project Risk
Construction/Completion – construction contracts, sponsor support, contractor ability
Technology – proven
Developer – Experience/financial/track record
Environmental/Social
Insolvency – any of the parties
Offtake – price, market forces,
incentives
Operational risk – experience, term
Currency – liabilities in one currency, funding in another
Force majeure
Political – regime, tax, permits
Legal risk – enforceability, dispute resolution
93. Community Specific Issues
• Team
– Experience
– Commitment
– “Stretched”
• Contracts
–
–
–
–
Counterparty
“Robust”
Risk allocation
Formalities
• Co-finance
– Who?
– Commitment
• Multiple stakeholders
– Objectors
– Engagement
• Consents and Permits
– Conditions
– Local concerns
102. Overview
1.
2.
3.
4.
5.
6.
The state of play
The paradigm shift we need
The role of government?
“The Community Renewables Economy”
How should government respond?
Next steps
102
103. The state of play
•
•
•
•
•
Failings of the state and the market
The UK’s energy market
30 licenced suppliers vs Germany’s 900
0.3% community renewables vs Germany’s 46%
Localities have been airbrushed out of the market
103
104. The paradigm shift we need
Communities should be
enabled to participate
in the market, not be
subject to it
104
105. The role of government
Buerger Energie
St-Peter
Government
should provide the
policy framework
to enable
community energy
to flourish
105
106. The role of government
Stadwerke München
Ambitious, successful
, local…
but danger of local
monopoly?
106
111. Community Renewables Economy
IMPORTANCE OF JOINT OWNERSHIP
• Key to significant growth
• Partner with private developers, public sector
entities or businesses
• Greater capacity, resource and financial capability
• 20.6 MW of community-owned projects jointlyowned with commercial developers
111
112. How should government respond?
1. Incentivise joint ownership
2. Broker partnership opportunities
3. Profile leading local authorities and develop good
models of co-operation
4. Encourage local institutions to act as financial
intermediaries
5. Dissolve the planning barriers
6. Enable wider participation: Community
Commissions
112
113. Next steps
•
•
•
•
Beyond individual generation
Participation in wider local market
Opportunities for local demand and supply
Incorporate role of communities in wider energy
market reform
• Transform energy infrastructure and market to a
model that benefits all
113
117. What I will cover…
Connection issues for community energy projects
–
–
–
–
what the problems are
what is being done
what can be learned from other countries‟ experience
recommendations
Competition in short-term and long-term offtake market
– FiT generators opting out of export tariff
– market shares and activity of smaller suppliers
The CfD FiT
– government actions to improve offtake market
• better understanding, targeted interaction, but needed now
118. Connection issues (1)
Cooperatives UK asked us to consider issues faced by
community energy projects with network connections
– Overcoming grid connection issues for community energy projects
Several barriers in connection process were
identified, including:
– Distribution Network Operators (DNOs) vary significantly in
timeliness and consistency and this has impact on project
timescales and costs of connection;
– a number of process issues should be standardised with adoption of
best-practice by DNOs;
– high and variable connection cost quotations, dependent upon
location, can cause surprises and derail projects; and
– grid reinforcement can be a major problem for community schemes
as it has the potential to significantly increase costs
119. Connection issues (2)
Case studies
We have had access to project details, including
connection costs, for 21 community schemes that have
suffered grid connection issues
Substantial variation in cost of connection
– £150,000/MW to £7.4mn/MW
19 of the projects reported very expensive connection
costs as being primary reason for projects being reduced
in size, delayed or abandoned
– many of these were less than 1MW
– projects scaled down to ensure they were financially viable
120. Connection issues (3)
DNO actions
DNOs have made some progress with communicating with
generators
– DG forum is an annual event led by the regulator
• meetings start in London next week
– a new licence condition was imposed in Apr 2010 on DNOs to make
more information publically-available
– DG Standards Direction took effect from Oct 2010
• budget estimations for connection, quotations, and post connection scheduling
More still needs to be done to improve:
– the transparency and predictability of grid connection processes
and charges; and
– the communication channels between the DNOs and generators
121. Connection issues (4)
International comparison
Other European countries have more focused policies to
support community energy projects
Costs of connections are socialised in Denmark and
renewables receive priority grid access
– this is despite many changes to government policies over the
past 10 years as clear grid connection policy is in place
Grid connection process in Germany is transparent
– generator receives a detailed timetable for grid connection
– renewables also receive priority access to the grid
– almost a half of all renewable energy projects are communityowned
122. Connection issues (5)
Recommendations
Provide priority grid access to community energy projects
Allow community projects to pay back site-specific connection
costs over time
– one option is through perhaps through FiT payments over 20 years
Connection offers based on standard cost assessments with
differences recovered in general cost recovery by DNOs
Socialisation of wider costs of reinforcement to reduce
financial burden of works on one generator
– combination of these two recommendations is that overall cost of
achieving connection to grid is “shallow”, not “deep”
A further six informational remedies to improve
transparency, consistency and communication
123. Route to market (1)
Long-term power purchase agreements (PPA)
Issues for offtakers (acknowledged by DECC, Baringa)
– economic climate has made lenders increasingly risk averse
– risks of managing PPAs (including balancing costs) have led to
higher discounts
– Big Six generally don‟t need Rocs
– becoming increasingly difficult for community energy and other
independents to obtain bankable long-term PPAs
124. Route to market (2)
Short-term PPAs
Larger FiT generators have tended to opt out of the
guaranteed export tariff in favour of taking export to
market
– in some cases this has seen generator almost double its export
revenue
Generation tariff within FiTs can be seen by lenders as a
floor price
– projects can sell power in more competitive short-term offtakes
– discounts to full value of 2%-10% in short-term vs. 10%+ in longterm
Community energy projects will be able to receive FiT for
schemes up to 10MW
– provides further optionality for projects
125. Route to market (3)
Share of small-scale FiT capacity by
supplier
Many independent
suppliers punching
above their weight
Good Energy has
more FiT customers
than retail supply
customers
126. Route to market (4)
How will CfD impact the market?
CfD FiTs should “eliminate price risk, lower cost of
capital and pull through investment”
Not the full picture
– significantly increase in market complexity vs. RO and FiT
RO and FiT
•
•
•
•
Relatively simple
Well documented
Quick to accredit
No allocation risk
CfD
•
•
•
Allocation rules being
defined
First-come-first-served
Supply chain plan for
larger projects
– do not diminish need for PPAs
– systematic disadvantage once auctions kick in?
127. Route to market (5)
Backstop offtaker (PPA of last resort)
DECC recognises the PPA issue and has put forward a
proposal for a backstop offtaker
– guaranteed route to market for generators with guarantees on all
revenues for output at a fixed % of strike price
– costs or benefits associated with offtaker are socialised across
market
By effectively providing a
floor price it may lead to
more projects able to sell
in short-term PPAs
Should enable increased
competition in PPAs
128. Key points
Grid connection complexity and cost is a major barrier
for community energy projects
– connection costs can be a postcode lottery and disproportionate
to the scheme
– 10 recommendations put forward to help community energy
projects connect to the grid
Renewables projects struggling to achieve “fair value” for
their output through long-term PPAs
– small-scale FiT scheme is seeing projects able to sell in more
competitive short-term PPAs
– CfD most suited to companies able to trade directly
– DECC is acting to improve PPA market for CfD projects through
backstop PPA proposal, but needed now