Innovating with investment opportunities in local solar farms

by Leonie Greene, STA

The Solar Trade Association has amended its influential 10 Commitments on solar farms. We now expect best practice to include offering investment or shared ownership opportunities to local communities.

As an industry trade body this means we are backing up DECC’s efforts to share the financial benefits of solar farms to communities. But where we have disagreed with DECC is on the narrow framing of ‘community energy’. There is a very wide range of community actors beyond legally constituted Registered Societies that need to be clearly recognised in the community energy agenda. Local authorities are case in point, yet they have no representation on the Shared Ownership Taskforce, set up by DECC to drive this agenda under a Voluntary Agreement. Likewise there is a very wide range of investment instruments available, and market research shows far more people are comfortable owning simple and FCA regulated investments like bonds, rather than shares.

The STA was successful at getting partnerships with local authorities recognised in the Voluntary Agreement and we hope that DECC will fully recognise this in their official response to the Agreement. Local authorities present a professional point of engagement for the solar industry and serving communities is their raison d’etre. From a practical point of view they have access to large amounts of land and roof space as well as superb borrowing rates. They also have the ability to sell power direct to their own public services without the difficulties of private wires or complex licensing arrangements. We’ve been impressed with how many local authorities are moving forwards with ambitious solar schemes, recognising that solar provides a stable and low-risk income as well as clean power.

Developers and local authorities will know that local communities vary hugely in terms of their capacity to engage and their resources. At the STA we’re educating our members early on the full range of possible approaches to community investment and shared ownership to identify successful approaches. Unfortunately Government doesn’t always make this easy. The Government’s 10MW community Feed-In Tariff proposal, where the community can own 5MW and the developer 5MW while sharing grid connection assets is attracting huge interest from both the industry and community groups. But the way the scheme is set up, barely any schemes could be built before the Tariff was cut to totally uneconomic rates.

Policy can often be particular insensitive to local authorities who tend to have longer project development times, as well as legal tender obligations that can be time consuming. The solar industry moves very fast, not least to keep up with a complex regime of subsidy reduction. Little wonder then that, at our recent Community Energy Masterclass, local authority experts looked forward to the day that solar hits parity with grid electricity.

The direct sale to the local community of local solar power would bring this prospect closer by transforming the economics of solar. The first question local people ask tends to be; why can’t I buy the power? Innovations by the Greater London Authority and Ovo energy may be bringing this prospect nearer to reality, so we are all watching that space.

Developers must remain sensitive to the fact that people in some local communities simply don’t have money to invest – fuel poverty is more concentrated in rural communities after all. We’re learning from the experience of the wind industry in how to reduce local energy bills as a form of sharing revenue – one of the most socially equitable ways to engage.

Investment opportunities in solar will have to be done very efficiently given disproportionate costs on this technology. From April, the solar industry alone will be capped at 5MW under the RO – yet some costs are fixed. For CfD solar the cost pressures are overwhelming. That’s why we’re committing to innovate where it is commercially viable. But there is a big potential prize here as we enter a period of innovation in the solar industry. The end goal is to give people a more direct financial stake in accelerating the deployment of renewable power that is now so essential to all our futures. It is this end result that we should all be aiming for.