With levels of confidence in the Big Six energy providers close to an all-time low, it is perhaps not surprising that increased attention is being given to how to help community energy projects establish themselves. DECC published their Community Energy Strategy in January this year, which was a promising start but only indicated what more needed to be done if these sorts of projects were to attract wider support. And this week, on 25 June, environmental law organisation, ClientEarth, published Community Power: Model legal frameworks for citizen-owned renewable energy, which argues that community power is an essential element in Europe’s low carbon energy transition and needs the legal and regulatory measures to realise that potential. All of which suggests that it would be useful and timely to reprise the conclusions of Paper 10 of SF’s GB Electricity Demand Project: The Electricity Demand-Side and Local Energy, published in January this year.
The paper explored the intuitive premise that underpins many community projects – that it would be somehow “better” if local demand for electricity could be met by local generation of electricity – but took this a stage further by recognising that this local matching has also benefits for the rest of the electricity system and therefore could earn income as well as creating a cheaper local source of power. Being able to reduce local peak demand (net of local generation) at a particular location has benefit to the local electricity distribution network operator in avoiding the need for network reinforcement. And reducing net local demand at times when electricity generation costs are high across the overall electricity system has benefit to the electricity suppliers in keeping those costs down.
But can these benefits be realised? The paper reviewed a number of community demand-side case studies, from the Ashton Hayes low energy village through commercial demand-side trials to energy balancing on the Isle of Eigg. The short answer appears to be not completely yet, unless you are a large commercial user of electricity. If you are, then your electricity price already contains a locational element and is priced according to time of day and year through a meter that records your usage on a half-hourly basis. So you are already paying the full cost of your electricity and anything you can do to change your pattern of usage brings direct benefit. With a little extra reward from agreeing arrangements to help the network operators at times of emergency or extra high load, the system is already in place and it works.
It is different if you are a domestic electricity user or even a group of consumers: be that at a street, neighbourhood or community level. The network charge element of your electricity bill is different in different parts of the country for historical reasons; but it does not distinguish between rural or urban locations or, whether your part of the network is heavily loaded or under-utilised. Unless you are on Economy 7, your electricity is the same price, day or night, winter or summer, and so you would get no benefit from avoiding peak times or from assisting your local distribution company to avoid local network reinforcement. That is, even if your efforts could be noticed, because it will not be until we all get smart meters that the time at which you use or generate your electricity can be recorded and, as a result, perhaps be incentivised or ‘rewarded’. And the current regulatory and commercial framework was not set up with smaller, community-led projects in mind. While the weight of detailed licence conditions is an overhead that large companies can bear and may indeed be needed for the larger companies, it is a massive and unnecessary burden for small projects. Although some encouragement has been provided with the introduction of Licence Lite, much greater focus is needed from the Government and Ofgem on removing the barriers if community projects are to succeed. This would be worth the effort because, not only are community projects good in themselves and politically popular, but, as Paper 10 argues, they provide a useful and enthusiastic test bed for the introduction of low carbon technologies and experimenting with demand-side response.
So, for community projects to be able to get the full benefit of local balancing, we need to get the technology in place, remove the administrative barriers and, ideally, make some move towards making electricity prices more cost-reflective. But here we reach a dilemma, which we will be exploring in a later paper and blog: the general feeling at present is that electricity tariffs are currently too complex and need simplifying. And is it fair to charge people high prices for their electricity if they are not able to respond to the price signals, for instance, because they are house-bound? Will we have achieved enough if we only rely on the enthusiasts who are willing to change their behaviour? And if only the knowledgeable and well-informed change their behaviour and reap the benefit, will this just push even more costs onto the people who are least able to afford it? This brings us back to community energy projects and the “free rider” problem: what do we do about the people who do not want to take part in the project, but because the benefit is gained by the whole community they get the benefit in any case?
Clearly more thought is needed before community projects can achieve their full potential.