Wednesday, 30 July 2014

What’s so great about community energy?

In fact, what do we mean by community energy? The government is so keen on it they now have a Community Energy Strategy [1]. The new report ‘City Energy: a new powerhouse for Britain’ from the IPPR recommends that our local authorities get involved in the energy market [2]. Existing community projects have formed a support organisation called Community Energy England [3]. Community energy can mean anything from co-operatively owned renewable energy projects to collective supplier switching or giving advice on how to save energy at home. It is very confusing. Here I list some of the benefits and examples of schemes that deliver them.

Beating up the big 6 energy companies
Apparently we have lost faith in the big six energy companies (half of whom are foreign owned, see below) so we like schemes where we can be independent of them, or at least do them some damage.

Competing as an energy supplier is a huge undertaking, You have to deal with the National Grid for distribution, buy from energy generators and deal with the energy regulators. Back in 2009 OFGEM invented a simplified licensing arrangement called ‘licence lite’ that allows a company to buy and sell energy in the market without having to participate in the balancing mechanism and other regulations. So far there has only been one application to run under the scheme – the Greater London Authority - and it has taken them 5 years to get this far. When the GLA finally gets going the profits will go to the local authority partners, benefiting local residents and ratepayers [2].

In the meantime there are other alternatives for consumers. I get my electricity from Good Energy which I chose because it is 100% renewable and Ecotricity is another one with a 100% green tariff – both are privately owned limited companies that are fully functional energy suppliers and have raised money with bond issues with special rates to their customers. Co-operative Energy is another candidate that has gone a step further in that it is owned by its customers.

Another way of getting back at the big six is to get hundreds of households together to negotiate a better deal. For example a co-operative called Community Energy Direct has engineered a number of schemes that together have saved an average of £173 for each of 600 households (community energy strategy). Plymouth Energy Community is another scheme and as well as the switching they offer a fuel debt advice service.

Environmental benefits
Generally speaking, renewable energy is good for the environment because it is low in carbon emissions but there can be other sorts of impact, especially on our landscape. Community energy schemes tend to be small and low impact. However, they also produce less electricity than larger schemes.

Keeping energy profits away from foreign hands
Large scale energy attracts big investors, often from overseas. Of the ‘Big Six’, British Gas, Scottish Power and SSE are British owned, Npower and E.on are German, EDF is French [4]. Where there are foreign shareholders, the profits go abroad.

Large renewable energy projects are usually funded by foreign investment too, even if they are owned by British companies. For example Hive Energy, a privately owned UK company, has 76 MW of large scale solar PV already operational and another 64 MW with planning permission[5]. It has raised much of the capital from foreign backers [6].

These schemes generate employment which is definitely a good thing, reduce our carbon emissions and improve our energy security but a large proportion of the profits go back to the investors wherever they are. This is especially painful when you consider that some of those profits come from renewable energy subsidies which we pay for through our energy bills.

Community owned energy projects have mostly local investors so the profits stay local. For example I recently described two investment opportunities: one from E2Energy, a private UK company and one from Wester Derry Wind co-op, a UK based co-op. Both are small schemes, only 250 kW of wind power and are likely to have mainly UK share holders.

However there is a fly in the ointment in that the smaller schemes get higher subsidy. For example, a wind farm up to 500 kW currently gets 14.82p/kWh generated from the Feed in Tariffs whereas 0.5 - 1.5 MW gets only 8.04p/kWh [7]. These rates help to make small schemes viable for community investors but they also mean higher energy bills for everyone.

Reducing householder bills
Community energy generation does not reduce bills, except for the people using the electricity generated. That is all very well for schools and businesses with solar panels on their rooftops but not for the rest of us.

Increasing competition in the energy supply market helps to keep down our bills so all of the schemes I mentioned for Beating up the big 6 energy companies help in this way but there is another option which is to use less energy. This doesn’t increase anyone’s profits, at least directly, but it does help people, and people belong to communities. For example many cities now have a scheme for showing off energy saving home retrofits, such as Bristol Green Doors and Cambridge Carbon Footprint’s Open Eco Homes. Do these count as community energy projects? The Smart Communities project based in Kingston Upon Thames certainly does. This was a partnership between a local school, Transition Town Kingston and researchers at Kinston University. Together they created a scheme where households could sign up, monitor and compare their energy use with similar homes and take part in many activities to help them learn how to reduce their energy use. It is immensely difficult to quantify how much these schemes actually save, but they surely help. Also, it is difficult to raise money to fund them – they only succeed by the good will and effort of dedicated volunteers.

Cutting energy waste
Reducing bills by using less energy reduces energy waste too. However, small scale distributed energy generation schemes reduce waste in another way, by cutting transmission losses. The losses are lower because energy is generated close to where it is used. In 2012, across the whole grid, 7.4% of electricity generated was lost in transmission (high voltage) and distribution (low voltage). Three quarters of those losses were at the low voltage end because the high voltage ‘electricity motorways’ are very efficient, but distance still matters [8]. Since most energy is used in cities, generating schemes in cities are good for reducing losses but the ideal is when projects use their own energy – for example when schools have rooftop solar panels they usually use most of the power generated, except during the holidays of course.

Community combined heat and power schemes (CHP) are another way of reducing waste, this time by increasing energy efficiency. Gas power stations generate a lot of heat which is wasted. Combined heat and power systems generate electricity when and where heat is needed, so all the heat is used. You can think of the electricity as a useful by-product of the heat. CHP schemes are hard to run efficiently in individual homes, if only because our electricity use is so variable. It goes up when you switch on the kettle or when the washing machine goes on spin or the dishwasher goes into heat mode – and then down again a few short minutes later. Community heating schemes can work better because when you average out lots of homes both heat demand and electricity demand are much steadier and predictable. Group heating schemes are not particularly popular in the UK among householders but there are some being built. For example an Energy from Waste plant in Edmonton is going to supply 5000 homes and businesses nearby. CHP reduces waste and carbon emissions but doesn’t necessarily save money as it is relatively expensive to install and has higher maintenance costs than regular boilers.

So what is so great about community energy?
It seems there are swings and roundabouts here. Community owned energy generators help to keep profits local and often cut transmission losses but they don’t reduce our energy bills, at least not for most of us. Energy switching schemes are great for reducing energy bills but don’t do much for the environment. Energy advice schemes can be quite effective but they don’t make a good business plan. Alternative electricity suppliers seem to me to offer a good combination of environmental benefits and savings on bills, whether or not they are community based.

Community Energy can bring environmental benefits, lower bills, better energy security and keep profits local – though rarely all of these at the same time. It is not a cure-all even though it will be a part of the solution.

[1] Community Energy Strategy ( April 2014-07-28
[2] City Energy: A new powerhouse for Britain (IPPR) July 2014-07-28
[3] Community Energy England
[4] Who are the "big six" energy companies? (BBC) March 2014
[5] RESTATS Planning Database Monthly Extracts (DECC)
[6] Hive creates buzz with 60 MW solar plans (Business Green) April 2013
[7] Tariff Tables (OFGEM)
[8[ Digest of UK  Energy Statistics 2013 (

1 comment:

  1. Nice review. I like the link from community energy to energy saving and energy efficiency. You could add another: increased energy literacy that comes from householders and communities having a stake in their own power generation. This, in turn, acts as an incentive and a tool for saving energy.


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