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Policies to support local energy systems: do they go far enough?

Jim Watson, Research DirectorUK Energy Research Centre

EG&S KTN Annual Conference, London, 27th March 2014

3. Innovation systems & developmentLocal energy: back to the future?

3. Innovation systems & developmentCurrent / future role of local energy

More attention to local energy in recent years, but still plays a minor role in energy policy

Community Energy Strategy: ’Putting communities at the heart of energy policy’

Modest ambitions, e.g. community renewables could supply 1.4% of electricity by 2020

Also important for public engagement and legitimacy?

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3. Innovation systems & developmentLocal investors less important than in some other EU countries

• 11.3% of electricity in 2012 (41TWh)• EU target implies ~ 30% by 2020

Source: DECC

14-15% in 2013?

3. Innovation systems & developmentPolicies to support local energy:some considerations

Governance not government Key role for government, but many

other actors are also involved The UK is a centralised state: how

can government enable diverse, bottom up action?

Community benefits debate: benefits for which members of communities?

Not just an energy policy agenda Community development (CLG) Financing and incentives (Treasury) Transport (DoT)

3. Innovation systems & developmentPolicies to support local energy:some considerations

Government at several levels National government (UK), including devolved

administrations with significant differences EU legislation is part of national policy framework Local authorities: capacity varies; some already leading

developers and/or supporters of community schemes

Scaling up and replication Can community energy become more ‘professionalised’?

Is this appropriate for this type of local energy? Importance of local context for many initiatives: some

limits to learning and knowledge transfer

3. Innovation systems & development

Electricity Market Reform Mainly focused on large scale, low carbon electricity

generation and the provision of large-scale capacity But it highlights the risk of a ‘missing middle’ in energy

policy; local energy could fall between the cracks Larger community / local projects are eligible for long

term contracts, but the mechanism is complex Fairer power purchase agreements for smaller players

has been discussed extensively, but not fully resolved Links to broader issues of competition in energy markets:

see today’s Ofgem announcement!

Electricity market reform

Click to add titleElectricity market reform‘To complement EMR, we should unleash a completely new model of competition and commercial opportunity … we will need companies, communities, public sector and third sector organisations to grab the opportunity to generate their own energy at real scale and start to export their excess energy on a competitive, commercial basis. Not just a few exemplars, but tens of thousands of them.’

Minister of State Greg Barker MP, Sep 2013

3. Innovation systems & developmentOther economic incentives

Demand-side incentives Opportunities for more ‘collective’ local action through

ECO and the Green Deal Dedicated incentives for communities & Green Deal Both policies struggling due to politics and slow uptake

Energy supply incentives Grant schemes and FITs have both been essential for

community energy; frequent policy changes problematic Proposal to raise FIT threshold to 10MW welcome More support for local heat network development from

central government

3. Innovation systems & developmentA key role for Local Authorities?

Many Local Authorities are already developing and implementing projects and/or have energy strategies

But many less active, and do not have significant capacity to act

Key barriers include attitude to risk, lack of competencies

Multiple targets and restrictions from central government

Prudential borrowing is possible, but risk aversion reinforced by pressure for them to reduce debt levels

3. Innovation systems & developmentInnovation and learning

Many local energy schemes are not innovative from a technical perspective: they use familiar technologies

But institutional / financial arrangements and business models are often less well known (at least in the UK)

Important to support demonstrations see ‘what works’ Some notable examples:

• Ofgem Low Carbon Network Fund• ETI Smart Systems and Heat programme

Not enough emphasis on learning from experience, both for future implementation and future policy development

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Thankshttp://www.ukerc.ac.uk

https://twitter.com/watsonjim2