consultation on a microgeneration strategy

© Urban Forum 2011

CONSULTATION: Encouraging microgeneration in homes, businesses and communities

Urban Forum are keen to hear members views about certain aspects of the Government's Microgeneration Strategy, which will seek to create a decentralised energy revolution, grow the local energy economy and encourage small scale energy generation in homes, businesses and communities. It is crucial that the community sector are vocal in suggesting ways to drive this strategy forward and so Urban Forum are seeking views on a couple of important areas of the strategy.

If you're interested in contributing to Urban Forum's response, please read the consultation document here, and email any responses to This e-mail address is being protected from spam bots, you need JavaScript enabled to view it .

On the 22nd December 2010 the Government (Department of Energy & Climate Change) launched a consultation on a new Microgeneration Strategy (as committed by the Green Energy Act 20091). The basis of this strategy is to help promote microgeneration technologies like solar, wind, heat and hydro power to home owners and communities, as well as to provide information on savings to consumers when coupled with the Green Deal, smart meters, Renewable Heat incentive and Feed-in-Tariffs.

Climate Change Minister Greg Barker stated at the launch of the consultation: "I am planting the seeds for growth so we can see small scale energy generation flourish in homes, businesses and communities." He added, "We‟ve already pledged financial support to encourage people to install kit like solar panels and heat pumps, today‟s consultation will ensure that the industry and consumers have the confidence to invest."

The Microgeneration Strategy consultation - key questions

The consultation seeks views on four key areas that the Government hopes can help decarbonise the way we heat our homes and businesses, reducing the UK‟s CO2 emissions and contributing to the UK target for sourcing 20% of all EU energy from renewables by 2020.

The four key areas looked at in the strategy are:
 Quality: ensuring that equipment and installation services are reliable, thereby building consumer confidence
 Skills: developing the microgeneration supply chain and creating and sustaining jobs in the UK
 Technology: improving products, using existing intelligence and increased testing of technologies new to the UK to grow the industry
 Information and Advice: improving accessibility to advice and information to consumers.

The final section of the Microgeneration Strategy looks at the broader issues which focus on community based solutions and decentralised energy.

This briefing will focus mainly on relevant sections of the provision of information and advice and the broader more cross-cutting issues, focusing on community based energy initiatives.

Technologies covered under the Microgeneration Strategy
The electricity generating technologies that will be under the strategy will be those that are less than 50kW2 in size. The heat generating technologies will be those less than 300kW in size. This includes:
 air, ground and water source heat pumps
 solar photovoltaics (PV)
 solar thermal water heating
 biomass boilers
 micro Combined Heat and Power (micro CHP)
 micro wind turbines
 fuel cells
 micro hydro schemes
 passive flue gas recovery devices.

Background
The Microgeneration Strategy is part of a wider package of work which is taking place to grow the green economy. Aside from commitment within this strategy, there are a further 31 actions set out to support the transition to a secure, low carbon energy system. Some progress has been made on policies already such as the Green Deal, Renewable Heat Incentive and the Energy Bill.

'The 2050 Pathways Analysis', an interactive web-based tool that allows users to try out various low carbon scenarios.illustrates that some small scale solutions such as heat pumps will make a crucial contribution in helping the UK meet our legal target of 80% reduction in domestic greenhouse gas emissions by 2050, and all can play a part in reaching the target of 15% energy coming from renewables by 2020.

Government Commitment
The Coalition stated as part of its 2010 Agreement that it would roll out a smart grid to facilitate the management of two way flows of electricity on the local network coming from microgeneration. The first step towards this is smart meters which will be implemented over the next decade. The Low Carbon Networks Fund4 is trialling new ways of operating the network between now and 2015. Work is also underway to look at what reforms of the electricity market are needed to reach future goals. This is part of the supply and demand chain which aims to reduce our reliance on imported fossil fuels.

A number of incentives and policy measures are supporting this transition to a low carbon and less centralised energy economy such as:
 £850 million funding for the Renewable Heat Incentive (RHI) to be introduced in June 2011
 Feed-in Tariffs (FITs) will continue (whilst being focused on the cost-effective technologies)

Whilst microgeneration is seen as less cost-effective than larger scale installations (particularly in relation to electricity generation), this cost-effectiveness needs to be challenged and improved by industry and therefore the consultation focuses on the issues and barriers which may prevent microgeneration reaching its full potential (even in light of financial incentives).

Advice and Information
The purchase of a microgeneration system is a significant decision for consumers. Whether it is an individual or a community-level purchase, it's a significant financial commitment and a lack of good quality information from the outset is often a deterrent.

The provision of advice for householders, communities, the public sector and businesses can essentially be delivered through a variety of ways and it is essential that this advice should be coupled with energy efficiency to produce a whole-house approach.

The journey for a microgeneration customer can often look like figure 1.
In order to move from 'unaware' to a state of 'action' a very broad range of information is needed.

Overall awareness, knowledge and confidence
The majority of energy consumers do not know enough about microgeneration to consider it as a valid option for their homes, or have maybe heard things which deter them from using it.

Evidence and explanation of the need for change
One key barrier to the widespread roll-out of microgeneration is a lack of public understanding about the technologies. Demonstration projects can assist with this barrier and providing various demo technology opportunities was an aim of the previous Government via the "Low Carbon Buildings Programme" e.g. offering grants to install solar PV or small wind turbines on schools and public buildings. There are a number of similarprojects currently being assessed, in addition to case studies, but this information needs to be used effectively to build awareness and understanding. The Government have made it clear that their support for such schemes will be time-limited - despite the fact that there is still widespread lack of familiarity (particularly among people living in urban areas).

The Feed-in Tariffs (FiTs) have been set up as a long term financial incentive to replace the stop-start grants to a certain extent and there is a reliance on advertising to improve the public awareness of the technologies to which receive FiTs.

Proposal
DECC plan to review existing evidence on consumer attitudes and behaviours towards microgeneration, drawing upon research and assessments of existing schemes and support programmes from the Carbon Trust, the Energy Saving Trust etc.

The Government plan to disseminate the results of programmes such as Low Carbon Buildings Programme in order to provide case studies and exemplar demonstrations to householders and communities.

Decentralisation and cross-cutting issues
Microgeneration is normally associated with homes and businesses but it is increasingly gaining popularity at the community level , as understanding of the benefits of centralised energy systems increases. In an Energy Savings Trust survey it was found that 47% of respondents would sign up to a local heat and power scheme.

Community-level infrastructure simply means using the same technology but more of it. For example, the same solar thermal panels used on a roof space but across many more homes to create a solar thermal array6, providing hot water for a whole community building (see figure 2) or heat pumps, biomass boilers for a block of flats or combined heat and power plants for hospitals.

Using community or „decentralised‟ energy systems like district heating networks can present opportunities but at the same time create barriers and challenges such as the need for knowledge and expertise of delivering projects at a larger scale and ensuring that there are skills and a supply chain to support the developing market.

The scale of community energy and energy savings projects
Developing community energy can mean something as simple as clubbing together to bulk buy loft insulation or solar PV panels for houses. Economies of scale help to spread the costs so that those least able to contribute access the benefits of low carbon and renewable energy. Working together enables communities to be involved in partial or complete design of complex models, development and delivery of energy projects serving a much wider local area, e.g. the provision of heat or power to homes, businesses or buildings which provide education, health or local services to the community. This opens up doors to the community around levering finance, ownership, empowerment and having a direct stake and profit from those decisions.

Evidence and explanation of the barriers to community energy
As with many individual consumers, many communities remain unaware of opportunities both in terms of the technologies available to them and also the ownership and development of projects. Communities - most notably the Transition Towns7 movement - are developing energy strategies to reduce dependence on fossil fuels and maximize local resources - with many others looking to tackle fuel poverty.

Planning policy has always been flagged as a significant barrier with communities unsure of both what technologies their local authorities are willing to consider and where they would be considered. This creates a gulf between local aspiration and „official‟ opportunity.

Finally there are also important issues around skills. A wide range of skills are needed within the community to develop community energy schemes and this often results in premium prices being paid. Mentoring and training schemes, industry standards and the mainstreaming of core skills needs to happen for community energy to expand.

Proposals and actions to support community energy

Financial incentives
The Feed-in Tariffs to incentivise small scale (less than 5MWe) low carbon electricity generation was introduced in April 2010 (and above this the existing Renewables Obligation applies). The tariffs are designed to allow many people to invest in small scale developments in return for a guaranteed payment for the electricity they produce and export.

The Government‟s Spending Review also confirmed the objective to move from 1% to 12% of all heat being generated from renewables by 2020 with over £850 million in funding from the Renewable Heat Incentive (RHI). This should drive a tenfold increase of renewable heat over the coming decade. The RHI will introduce payments calculated on the annual amount of renewable heat produced per year, with tariff levels dependent on the technology chosen.

Community Energy Online
In response to concerns about difficulties in assessing information and support available for communities, and in particular local authorities seeking to develop their own projects, the Government launched „Community Energy Online‟ in November 2010. This is a web portal bringing together best practice, advice and case studies with information about funding opportunities, links to credited installer schemes and advice on the best contacts for help and support.

Local authority opportunities
Local authorities have a vital role in shaping their communities to support delivery of the UK‟s long-term energy and climate objectives, and this includes preparing for and supporting the development of community energy solutions. The opportunity for Government to sell electricity was introduced last year and there is also work going on to ensure that communities can keep the business rates from local renewable energy schemes.

Changes to make the planning system more responsive have also been made in the form of the Localism Bill, with „Neighbourhood Planning‟ being the key element of the bill which should help communities fast-track renewable energy applications in their area.

Developing decentralised energy technologies will ultimately involve the local authority at some stage. The most important work to undertake when setting up a district heating system, for example, is heat mapping and energy master planning. One of the other underpinning factors which will ultimately affect the deployment of local community energy
is the ability to make decisions on long-term energy use which affect communities and businesses. A number of pioneering local authorities are already embarking on such exercises, building evidence bases to support this long-term investment. Other important roles of local authorities include brokering relationships to ease contractual issues over access and land right as well as more direct planning support and helping to co-ordinate sales of heat or electricity to the wider public sector locally, for example where this relates to road, rail networks, hospitals and schools etc.

Private sector opportunities
Developing small scale energy projects in communities also offers new opportunities for private sector businesses to engage with the community. There will be new opportunities for products and services, and the new synergies with other developments in the energy market such as the introduction to smart meters and the Green Deal.

Best practice and research to support communities
The Low Carbon Communities Challenge is a three year research programme designed to test community-level delivery options for achieving ambitious cuts in carbon emissions. DECC is providing financial support and advice to 22 pilot communities. The learning process will help challenge and shape government policy and galvanise local support and action.

There is also currently a £20.96m grant programme providing support to 13 exemplar district heating projects across England (case studies will be available on the Community Energy Online).

Finally, it is crucial that successful business models which have enabled communities to develop and own renewable energy schemes can be replicated. The Government are ambitious to see decentralised energy all over the country, not just restricted to certain exemplars.

Cross-cutting and future issues for community energy
Green Deal
The Green Deal will help reduce energy demand and carbon emissions in homes and non-domestic properties by providing opportunity for people to benefit from energy efficiency measures and improvements at no up-front cost. Additionally, it is anticipated that significant business and employment opportunities will be generated. Green Deal finance will provide households and businesses with energy efficiency improvements with bill-payers repaying through the savings that they make on their energy bills. An Energy Company Obligation to meet carbon reduction targets through energy efficiency measures will run in parallel with and serve to underpin the Green Deal programme. The obligation will focus particularly on the poorest, and hard to treat properties which cannot achieve financial savings without support.

Similar to the microgeneration framework, the Green Deal will be consumer led and driven by the private sector. Local authorities may also choose to act as Green Deal providers themselves in partnership with the private sector.

The legal framework for the Green Deal will be set out in the Energy Bill framework with secondary legislation setting out in more detail how the scheme will operate.

Further information relating to the Microgeneration Strategy and Community Energy can be found at: http://www.decc.gov.uk/en/content/cms/consultations/microgen_strat/microgen_strat.aspx & http://www.urbanforum.org.uk/research-reports/community-power-empowers