cec13 slide deck

#CEC13

Welcome

Ramsay DunningGeneral Manager

@Ramsaydunning @CoopEnergy

Case StudiesAgamemnon OteroRepowering London

@RepowerLondon

John MaloneEnergy4All

@Energy4allltd

Andrew ClarkeThe Resilience Centre

@ResilientEnergy

Co-operative Ownership of Renewable Generation

19 October 2013

Delivering Community Co-operatives

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)

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

Tel: 01229 821028

john@energy4all.co.uk

www.energy4all.co.uk

www.twitter.com/Energy4AllLtd

Pioneering A New Model for Community Renewable Energy

by

Andrew ClarkeThe 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

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

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

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

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

18

Local O&M16%

Local Professional Services

7%

Tax Incl. LA Business Rates11%

Contingency Reserve

1%

Community Fund4%

Community Investers38%

Local 50:50 JV Equity Partners

23%

Gross Revenue Distribution The Resilience Centre Model

#CEC13

The role of large organisations in supporting

community energyOctober 2013

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/

National Trust energy shift

Experience in energy

Abergwyngregyn

• Gwynedd, N Wales• Pop 250 (100 households)• Abergwyngregyn Regeneration

Company

Anafon• 300kW scheme

• National Trust and Natural Resources Wales land

• Funding from Ynni’r Fro, Co-operative Community Energy Challenge and Waterloo Foundation

Role of the Trust• Access to land• Providing credibility• Engagement with agencies• Sharing knowledge• Navigating the complexity• Providing case studies• Leadership and advocacy

• Access to land• Finance• Planning and licenses• Skills, expertise, confidence• Long term, complex work• Differences of opinion• Inconsistent policy

Barriers

Benefits to the National Trust• Financial

– cost savings and income generation• Accessing funding and support

– ‘at risk’ development funding• Supporting policies

– Going Local, Fit for the Future• Other benefits

– inspiration, awareness, reputation, efficiency

“These types of projects make a place more special”

Risks to the National Trust

• Development, operational & reputational risks

• Opportunity costs

• Regulatory risks

Opportunities• Many potential sites• Community energy catalyst• New sources of income• Connect people & landscape• Seen as valuable and relevant

• Limited resources• Opportunity costs• Organisational priorities• Legality / regulation• Organisational purpose

Constraints

“We have a huge potential to harness the resources we own and manage.”

“We need to be clear about how important such approaches are to the Trust and why.”

“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

www.ntenvironmentalwork.net

Contacts

Keith JonesNational Trustkeith.jones@nationaltrust.org.uk@WalesEPA

Mark WaltonShared Assetsmark@sharedassets.org.uk@shared_assets

#CEC13

Getting StartedJon Halle

Shareenergy@shareenergy_uk

Jim BrownCommunity Shares Unit

@communitiesuk

Clare HieronsPure + Leapfrog@leapfrognews

Getting started5 things we have learnt

Community Energy Conference19 October 2013

Jon Halléjon@sharenergy.coopwww.sharenergy.coop

Co-operative helping people to set up renewable energy co-opsFounded 2011, spin-off from Energy4All28 co-ops set up across the technologies

• Finding projects• Setting up the co-operative• Financial planning• Landowner negotiation• Share offer setup, marketing• Administration

Private SectorIndividual co-op members &

other co-ops

• Use local resources• Think bioregionally• Copy other people

Follow the land, follow the weather

Private SectorIndividual co-op members &

other co-ops

• Choose who you work with• Choose people everybody knows• Tell a story people want to join up to

The team

Private SectorIndividual co-op members &

other co-ops

• Financial planning from day one• Spend time on things that will work• The common currency – currency

Do your sums

Private SectorIndividual co-op members &

other co-ops

• Work with the willing• Sign them up early• Make them work

It’s the landowner, stupid

Private SectorIndividual co-op members &

other co-ops

• Development funding is easy• Selling shares is easy• Lots of people want to help

Resources are abundant

Jon Halléjon@sharenergy.coopwww.sharenergy.coop

Community Shares: an alternative form of community investment

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”

Unique to co-

operative & community

benefit societies

Non-transferable,

non- speculative

One Member One Vote

Exempt from regulation under the

FSMA 2000

Interest payment

only sufficient to

attract investment

Powered by Withdrawable Share Capital

Growth in community shares registrations

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

Average investment per member

£1,000

Creative and media2% Pubs and

Brewing15%

CLT and Housing

3%Regenera-tion and develop-

ment7%

Community Retail24%

Other2%

Transport2%

Social Care2%

Energy and Envi-ronment

33%

Sports 3%

Food and Farming8%

Renewable energy schemes using community shares since 2009

37 share offers complete

(3 further live)

£13.5m equity raised

8,000 members approx

Median amount raised:

£150,000

Median membership:

100

Average individual

investment (based on medians):

£1,500

Community energy and community shares

Community renewable societies

Four pillars of a successful share offer

Business model

Viable

Profitable

Sustainable

Community

engagement

Scale and scope

Attracting support

Building membershi

p

Governance

Legal form

Rules

Conduct

Offer document

Accurate

Informative

Share offer ‘campaign’

Community Shares Unit

enterprises

supporters

advisers

Developing best practice

Get in touch

Jim Brown, Strategic AdviserCommunity Shares Unit

jim.brown@bakerbrown.co.uk communityshares@uk.coop

www.communityshares.org.ukwww.microgenius.org.uk

energising communities

Getting Started……..or who dares wins

Clare Hierons19th October, 2013

Pure Leapfrog – What we do

We provide:

• Low cost debt to finance, part finance or re-finance renewables projects

• Professional expertise to help with the non-financial barriers

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? ?

? ??

?

Sun Tzu, The Art of War“Thus we may know that there are five

essentials for victory”

“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

“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

“He will win whose army is animated by the same spirit throughout all its ranks.”

• 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

Common purpose

“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!

“He will win who has military capacity and is not interfered with by the sovereign.”

• 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!

Leadership

Getting ready for battle………

………becomes doing business

Be careful out there!

Talk to us ...Eden House, 23-25 Wilson St, London, EC2M 2TE

+44 (0)20 7825 4140clarehierons@carbonleapfrog.org

www.pureleapfrog.org

energising communities

#CEC13

FinanceMary Walsh

London Community Energy@LDNCommEnergy

Bruce DavisAbundance Generation

@AbundanceGen @Oikonomics

Community EnergyGetting Investment Ready

Mary Walsh

Halton Lune Hydro

What kind of investment?

Project Structure

Power Purchase or Connection Agreement

Financing & Security

Agreements

Construction and Supply Contracts

Licences and permits

Subsidies

InvestorsOwners

Government/ local

authority

Offtaker/Network Operator

Project Company

OperatorOperation & Maintenance Agreement

Shareholders Agreement Articles of Association

Share issue

Land Owners

Land Agreements

ConstructionSupplier

Fuel supply (if relevant)

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

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?

How do we deal with risk?

Eliminate it

Mitigate it

Allocate it

“Classic” Project RiskConstruction/Completion – construction contracts, sponsor support, contractor ability

Developer – Experience/financial/track recordTechnology – proven

Political – regime, tax, permits

Environmental/SocialInsolvency – any of the parties

Currency – liabilities in one currency, funding in another

Legal risk – enforceability, dispute resolution

Force majeure

Operational risk – experience, termOfftake – price, market forces, incentives

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

Risk vs Return

Contact Us

#CEC13

Workshop Part 2To what extent should community energy groups

operate as a business?

What to retain?What to lose?

#CEC13

PolicyCaroline Julian

ResPublica@res_publica @CarolineLJulian

Dr. Jim RobinsonDECC

@DECCgovuk

Ben HallCornwall Energy

@Renewablesvoice

Rebecca WillisCo-operatives UK@cooperativesuk

101

Community Energy ConferencePolicy Session

Caroline JulianSaturday 19th October 2013

102

Overview

1. The state of play2. The paradigm shift we need3. The role of government?4. “The Community Renewables Economy”5. How should government respond?6. Next steps

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

104

The paradigm shift we need

Communities should be enabled to participate in the market, not be subject to it

105

The role of government

Buerger Energie St-Peter

Government should provide the policy framework to enable community energy to flourish

106

The role of government

Stadwerke München

Ambitious, successful, local… but danger of local monopoly?

107

Community Renewables Economy

108

Community Renewables Economy

BARRIERS

1. Planning2. Lack of guidance and access to data3. Lack of financial support and investment4. Lack of legal, financial and technical expertise

109

Community Renewables Economy

110

Community Renewables Economy

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 jointly-

owned with commercial developers

112

How should government respond?

1. Incentivise joint ownership2. Broker partnership opportunities3. Profile leading local authorities and develop good

models of co-operation4. Encourage local institutions to act as financial

intermediaries5. Dissolve the planning barriers6. Enable wider participation: Community

Commissions

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

114

ResPublica

www.respublica.org.uk

@Res_Publica@CarolineLJulian

ResPublica (UK Think Tank)

Policy

Dr. Jim Robinson

Connection and route to market issues

19 October 2013

Ben Hall

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

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

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

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

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

community-owned

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

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

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 long-

term

Community energy projects will be able to receive FiT for schemes up to 10MW– provides further optionality for projects

Route to market (3)

Many independent suppliers punching above their weight

Good Energy has more FiT customers than retail supply customers

Share of small-scale FiT capacity by supplier

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

– do not diminish need for PPAs – systematic disadvantage once auctions kick in?

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

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

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

Policy

Rebecca Willis

Tom HoinesRenewables Manager

@THoines

Closing Session

We want to buy your Power!

• Bankable Power Purchase Agreements (PPAs) • Long Term Prices/Contracts• Competitively priced• Member Owned!

Thank You!#CEC13