Blog Post 22 October 2024

How community energy can help deliver affordable power

Policy

The UK Government says GB Energy is key to bringing down energy bills and CO₂ emissions. The publicly-owned green power company is a central part of its plan to ‘make Britain a clean energy superpower’.

However, there has been much less focus on the role of its Local Power Plan.

This aims to generate 8GW of power, enough to supply over 4m homes, by setting up local and community-owned renewable energy projects.

In turn, this will decrease the UK’s reliance on fossil fuels.

It’s a simple concept – local renewable energy sources can generate cheap electricity from wind, sun or waves. This electricity could then be sold to local people at a price reflective of those low costs.

It’s not just rural communities next to wind farms, solar farms or new infrastructure that could benefit. Urban communities could benefit as well.

There are regulatory and legal challenges that make it difficult for smaller generators to sell power locally without becoming a licensed supplier, the costs of which are huge. But some community energy organisations are overcoming these challenges with innovative solutions to turn their clean power into lower energy bills. This provides safe and warm homes at a local level.

Here are a few examples of successful community energy setups.

Brixton Solar focuses on fuel poverty

In 2012 Brixton Energy Solar Co-operative made history by becoming the first urban community energy project in the UK. The co-operative did this by installing a solar panel system on a local housing estate.

The project benefitted from the UK Government’s Feed-in Tariff (FiT) available at the time. This guaranteed revenue for the solar energy generated and sold to the National Grid. The project has funnelled surplus revenue into home energy efficiency and fuel poverty initiatives to benefit local residents.

The Brixton project wanted to go further, letting residents see the direct benefit from the solar on their rooftops through lower bills. They did this by partnering with EDF. Their CommUNITY innovation trial gave each household an allocation of solar power and any excess could be sold to their neighbours.

They installed a battery, storing surplus solar energy for use at night and providing flexibility services to the grid. According to EDF, the trial saved residents around £8.20 on their electricity bills every month.

Energy Local Clubs have expanded the ability of community energy to deliver bill savings

Through the Energy Local Club model, participating households and community renewable generators agree a price for when households match their energy demand to local supply. For example, turning on their washing machine when the local hydro plant is generating energy.

The club works with an existing energy supplier who provides top-up power when the project isn’t generating enough power to meet the local needs. The existing supplier also provides all billing services to customers. This way, the Energy Local Club overcomes the obligation to become a licensed supplier.

In the absence of the Feed-in Tariff, this gives generators a higher price for their electricity than if they sold it to the National Grid. It also means that households pay less for their electricity when they match it to local supply – a win-win situation.

Although energy bill savings vary by location and behaviour, it’s estimated that participating households can save between 10% and 30% annually.

Through the Welsh Government Energy Service, we’ve supported local generators who participate in Energy Local Clubs. This includes a 55kW hydro scheme in Corwen in North Wales where members can buy from the hydro plant from 13p/kWh. This model has also been demonstrated in inner city areas.

For example, Energy Local Roupell Park lets members benefit from electricity that rooftop solar panels generate. This can be as little as 6.3p/kWh, much less than 24.50p/kWh under the current energy price cap.

Innovative trials are paving the way for cheaper bills

Communities are pursuing more innovative and complex approaches to reduce their energy bills. For example, the Net Zero Terraced Streets project in Lancashire is aiming to develop a smart local energy system, integrating community renewable energy and community heat.

The main objectives are to:

Reduce energy costs.
Develop a community alternative to decarbonising heat in properties where space limits the installation of air source heat pumps.

The project installs energy efficiency home improvements like insulation to ensure the community heating system runs as efficiently as possible.

Electricity would come from household rooftop solar and community-owned solar panel systems in the local area. The idea is that there will be no upfront cost to the households participating. The intention is that a standing charge to residents will repay the costs of the system.

Rooftop solar panel system in New York, USA with the skyline in the background

Looking further afield, we can see how it can be even easier

These projects all require a high level of engagement from the local community, which might not always be achievable. So how can we make it even simpler for households looking to benefit from local, clean power projects? The UK Government can learn lessons by looking at the United States.

In the US, community solar projects let customers subscribe to or own a portion of the energy a nearby solar panel system generates. As part of the subscription, they get a discount of between 5% and 20% on their energy bills as a result.

Several states run schemes to encourage this model, such as New York’s Inclusive Community Solar Adder (ICSA). This scheme provides a subsidy to community solar projects that achieve a high proportion of subscribers from households who can’t get solar panels. For example, this includes private renters or those who live in flats.

Incentivising cheap, clean power to flow directly to low-income households is something the UK Government can learn from as it develops the Local Power Plan.

The challenge? Getting started

These projects demonstrate that local and community power has untapped potential to reduce energy bills in communities across the country. Yet significant barriers remain for community energy projects to sell their energy directly to their community.

For the local community, their energy bills remain tied to expensive fossil fuels that top up the National Grid. This is even the case when projects generate cheap, clean power on their doorstep.

The UK Government therefore needs to ensure local and community-owned generators can pass on the benefits of this power to households through lower bills.

We also need to recognise that these projects won’t happen by themselves. Community energy organisations face complex challenges in getting projects off the ground. This includes developing robust business models to applying for planning permission. They may also be time and resource poor and will require expertise to undertake such a complex project.

Also, disadvantaged and marginalised communities will be most at risk of being left behind. To engage with the process of starting a project from the ground up, these communities may need:

support to build skills
knowledge
time
resources

If all communities are to benefit from the Local Power Plan, there’s a clear need for expert, tailored advice that supports them throughout project development. This type of support has been absent in England.

Our latest briefing showcases the programmes we deliver on behalf of the Scottish and Welsh Governments. If the Local Power Plan is to achieve its ambitions and contribute to bill savings, we recommend that this level of support must be available in England too.