Introduction
The
major barriers to community involvement can be summed up under four categories:
·
Access to information: Communities are often unaware that they
can become involved in RE projects, and of the ways of doing so. Much of the
information, for wind energy, is negative, biased and often factually incorrect.
This has led to a certain reluctance on the part of the public to invest in
something that is seen as controversial and negative.
·
Access to knowledge: This refers to the ‘how’ of the project.
The community may not have the necessary specialist skills to develop a project
and these costs may be beyond the reaches of the community particularly in
the early stages of a project.
·
Access to finance: Securing finance can be very difficult and
the trading of shares is closely regulated, and the open advertising of shares
is strictly controlled.
·
Access to markets: With the demise of NFFO and the introduction
of the new trading arrangements, securing long-term contracts with a guaranteed
purchase price and accounting for balancing charges pose a real threat to
the development of local and community schemes.
This paper details
how these barriers have been addressed and overcome in the Dulas Valley through
the development of a community–owned wind turbine project and the establishment
of a Renewable Energy Investment Club. The paper commences with a brief review
of the status of community renewable energy initiatives in the UK.
Status of community
re initiatives in the uk
There has been
little practical experience of community development and investment in renewable
energy projects to date. Many reports and studies have been undertaken but
very few projects have actually reached fruition. However, over the past
2 years substantial progress has been made, both with the instigation of new
projects and new initiatives which could facilitate new RE developments. These
are summarised as follows:
Baywind Energy Co-operative
The Baywind
Energy Co-operative offers a different model and was the first UK co-operative
to own wind turbines. Its objective is to promote the development of renewable
energy and, at the same time, to promote domestic demand-side energy management.
To assist with the latter it is established the Energy Conservation Trust.
Baywind began by establishing an Industrial and Provident Society in 1996
in order to facilitate community wind investments in Cumbria. A Board of
Directors was formed from seven initial members of the Ulverston and Barrow
local communities.
Between September
1996 and February 1999, over £1.9 million was raised in share capital. Returns
to investors are based on the level of profit gained by the sale of electricity
from the turbines. Baywind offers a minimum investment option of £300 and
a maximum of £20,000. Baywind Energy Cooperative currently owns three wind
turbines in Cumbria with a rated capacity of 1.7MW. Baywind is currently in
the process of expanding its portfolio and aims to acquire another 5 wind
turbines with the launch of a new share offer early next year.
Awel Aman Tawe project
In South Wales, earlier
this year the Awel Aman Tawe Community Wind Project had a positive response
to its local referendum on developing a community windfarm. Assuming planning
can be obtained and finance can be raised, this project would be capable of
earning between £250,000 and £350,000 a year for local community development
or renovation initiatives. Planning an alternative “community” model to
Baywind, the Awel Aman Tawe project is attempting to find public grant aid
and loan finance that can be used as a kind of local regeneration fund which
plugs into the wind project to make the pot grow every year. These monies
could provide much needed financial input into a locality which has suffered
enormously since the demise of the coal industry here.
Planet Energy
Planet Energy
was established by the wind power developer Farm Energy Ltd to act as a vehicle
for community investments into wind power projects developed by Farm Energy.
Planet Energy is a 'Society for the Benefit of the Community', a co-operative
incorporated under the Industrial and Provident Societies Act 1965.
PE will
be launched with a share issue early in 2002. It is likely to operate in a
similar way to the Baywind Energy Co-operative.
Wind Works
Wind Works is
a new scheme launched by National Wind Power which offers a ‘one-stop-shop’
service to offer farmers and landowners with suitable land holdings the opportunity
to develop small wind projects typically comprising 1 to 3 wind turbines on
their land. Community groups with an interested landowner could participate
in the scheme in association with the landowner to develop a community-owned
project. NWP provides the access to information, knowledge, markets and where
required financing of the project, in return for a long-term income stream
to the landowner.
Countryside Agency
‘Community Initiative’
The Countryside
Agency recently launched the community-initiative to ‘provide joined up delivery
of community-led renewable energy’. The initiative will address the barriers
of access to information and knowledge, and direct groups towards potential
financing and grant funding of projects. Local support groups will be set-up
in specific geographical areas on a pilot basis early next year. They will
provide support, training and advice, and will encourage people to devise
and deliver renewable energy developments in their locality.
Ecodyfi
The Dyfi Eco
Valley Partnership has assisted several farmers, businesses, schools, community
groups and householders with feasibility studies, capital grants and advice
concerning installation of small-scale renewable energy schemes, using the
EC, ERDF 5b programme.
SEED
West Wales Eco
Centre offers site visits and independent advice on renewable energy options
for householders, businesses and community buildings in Pembrokeshire.
SEALL
North Energy
Associates have run two EC-funded projects providing feasibility studies and
capital grants for community renewable energy schemes in Northumberland.
A community-owned,
community led wind turbine in the dulas valley
In September
1999 the initial idea for a small community-owned, community-led wind turbine
in the Dulas Valley was mooted. After two years of struggling with complicated
financial spreadsheets, ironing out technical details, selecting an appropriate
small-scale turbine and the detailed requirements of the planning process,
it’s now possible to see the project taking shape. The project is currently
under construction and the 75kW second-hand Vestas wind turbine, located on
the hill above the Centre for Alternative Technology , will be commissioned
by the end of this year.
Project history
The
idea for a community-owned wind turbine was initially conceived by a few people
living in Pantperthog village and CAT in Oct 1999. In December 1999, founding
members formed the Dulas Valley Community Wind Partnership and applied for
and successfully obtained an ERDF grant for 30% of capital costs through the
Dyfi Eco Valley Partnership.
Initial Lease
and Power Purchase Agreement negotiations were held with the local landowner
and CAT during the first half of 2000.
The
first public meeting was held in May 2000. During Autumn 2000 the Dulas Valley
Community Wind Partnership (DVCWP) was established as a formal society so
that a bank account could be opened and members’ subscriptions raised in order
to fund initial tasks such as the planning application and publicity to widen
the group. The committee met once or twice a month as necessary in meetings
which were open to members of the local community. Delegated subgroups met
more frequently when there were specific things to be done: such as the environmental
impact assessment, legal groundwork, technical and financial research etc.
As word
about the project spread more members of the local community joined the group.
Membership currently stands at 74. Local networks, like the veggie box scheme,
were also approached to help raise awareness of the project. Publicity is,
however, a sensitive issue and a legal minefield for projects that are considering
the option of opening themselves to investment by the public, because the
laws around advertising the issue of shares are very complex and very strict.
In March 2001,
the Dulas Valley Community Wind Partnership was successful in a bid for a
grant from Scottish Green Energy Trust. The DVCWP submitted a planning proposal
for a 50kW turbine to Powys County Council in April and permission was granted
in early July. In August 2001 the turbine changed to a 75kW Vestas wind turbine
due to planning conditions and the dollar exchange rate. In September 2001
the DVCWP was additionally successful in a bid for a grant from the Energy
Saving Trust.
Methodology for
developing the project
The methodology for the project
development of the DVCWP turbine is outlined below.
·
Form a core group of enthusiastic local individuals and formalise the group
into an association.
·
Identify a suitable site and willing landowner.
·
Undertake a wind resource assessment if required.
·
Negotiate the power purchase agreement.
·
Apply for grant funding to cover development stages (if expertise not available)
and to cover capital costs if required.
·
Hold open public meetings and distribute information to the local community
to keep them informed about the proposal.
·
Develop a project proposal outline and determine project costs.
·
Apply for planning permission, which may involve producing an Environmental
Statement for the proposal.
·
Form vehicle to take legal ownership and responsibility for developing and
operating the project. In this case, DVCWP formed an Industrial and Provident
Society called Bro Dyfi Community Renewables Ltd (BDCR).
·
Sign lease and power purchase agreement.
·
Launch share offer through local investment club to enable local community
to purchase shares in the project.
·
Place construction contracts and order turbine.
·
Construct project.
·
Commission turbine and place operation and maintenance contract.
·
Establish community energy fund.
·
Distribute profits of project as annual dividends to shareholders of BDCR.
This process
took the Dulas Valley Community Wind Partnership the best part of two years
to complete.
Raising the finance
The total turnkey
project cost for the 75kW Vestas machine was £78,565. A breakdown of the capital
costs are shown in Table 1 and a breakdown of the annual operating costs are
shown in Table 2. It should be noted that some of these were commercially
costed. The tasks were undertaken by members of the community with the relevant
ability in kind for nominal shares in the project.
|
Capital costs
|
|
|
Due diligence
|
1650
|
|
display + instrumentation
|
1,500
|
|
turbine
|
14,810
|
|
construction
|
32,715
|
|
finance/legals
|
2,000
|
|
eia
|
1,500
|
|
connection
|
12,000
|
|
contingency
|
5,000
|
|
spares
|
7,390
|
|
total
|
78,565
|
Table 1: Capital costs of project
|
Annual operating costs
|
|
|
o&m
|
1,100
|
|
admin
|
300
|
|
accountant
|
100
|
|
Filing of accounts
|
25
|
|
business rates
|
43
|
|
landowner
|
250
|
|
insurance
|
500
|
|
total
|
2,318
|
Table 2: Annual operating
costs
The
Dulas Valley Community Wind Partnership was fortunate in obtaining capital
grant funding. The initial grant was for £23,569 (30% of eligible costs) of
ERDF funding from the Dyfi Eco Valley Partnership’s Renewable Energy Project.
This was complemented by a further £10,000 grant from Scottish Power’s Green
Energy Trust and a further £10,000 grant from The Energy Saving
Trust. At £43,569, this presently represents about 55% of the essential
start up costs. The rest of the capital is expected to come as equity from
community members, the Energy Saving Trust (for a community energy conservation
fund) and the Baywind Co-operative who have generously agreed to support this
initiative. The Dulas Valley Community Wind Partnership currently has 74 members
who are indicating they wish to invest over £23,000 in the project. Without
the mechanism of the Renewable Energy Investment Club (REIC) the cost and
time delays of producing a formal share offer would have significantly reduced
the economic viability of the project and most likely the project would not
have proceeded. The involvement of REIC in the proposal is detailed later
on in this paper.
This
project is proposed with the primary goal of achieving reductions in the emissions
of carbon dioxide (CO2) within the local community of the Dulas
and Dyfi valleys. It aims to divert a proportion of the income generated from
the wind turbine into a community energy fund for investment in local energy
savings measures.
The
Energy Saving Trust (EST) will invest up to £20,000 in the project and the
returns generated from the dividends on this investment will be placed into
the community energy fund. It is estimated that the wind turbine will generate
about 160MWh annually. Promotion of energy efficiency measures through the
community energy fund could offset a further 784MWh annually (through the
provision of low energy lightbulbs). Table 3 below summarises the savings
proposed by the scheme.
|
Annual savings
|
Activity
|
Energy
(MWh)
|
CO2
(Tonnes)
|
Wind
turbine
|
160
|
70
|
Community
Energy
Fund (CFLs)
|
784
|
345
|
Sub
Totals
|
994
|
415
|
Table
3: Summary of energy and carbon dioxide savings
The project is
highly innovative in that it combines renewable technologies and energy efficiency
measures, as part of an integrated and replicable local sustainable energy
strategy, to reduce carbon dioxide emissions.
Local benefits
The project provides
significant opportunities for direct economic benefits to the Dyfi Valley.
·
The work undertaken in developing the project has been carried out by members
of the local community.
·
The partnership has placed the construction contract with a local consortium.
·
Many of the people involved in the project construction, planning, finance
and legal matters and the landowner have agreed for some or all of their work
to be paid in shares in the project.
·
The project will bring about £55,000 into the local economy (70% of the total
project cost).
·
The administration and O & M contracts have been placed locally.
·
All revenue from the project will be retained within the local economy
·
The wind turbine provides renewable electricity to the Centre for Alternative
Technology
·
An additional demonstration turbine and educational resource for the Centre
for Alternative Technology
·
Provision of an information board
·
The project is a community-owned scheme where each shareholder has one voting
share irrespective of the amount of investment
·
Approximately 50% of the annual project profit will go into a community energy
fund for energy efficiency measures
The Dulas Valley
Community Wind model
The Dulas Valley
Community Wind Partnership model is based on inviting members of a community
group to take shares in an Industrial and Provident Society. They will benefit
from dividends in the sale of clean electricity to a local electricity consumer
- CAT. Net income will be returned to the community and shared out in dividend
payments over a 15 year period, the expected lifespan of the turbine. Working
on the Dulas Valley initiative, perhaps as many as half of the project initiators
actually work in the RE field, so in some ways this project is more of a pioneering
experiment than something which could be easily replicated anywhere in any
community. Though small in scale, the Dulas scheme is additionally favoured
in that CAT is able to purchase the electricity generated, thereby creating
a premium local market for selling the clean electricity at prices better
than those presently offered by selling direct to the grid, even after anticipating
the value of “green benefits” which will accrue to renewable energy generators
from the Renewables Obligation and the Climate Change Levy.
Generalised conclusions
In summary,
there are a number of points which should be considered by any community group
which is planning a wind scheme.
·
FIXED COSTS are a much bigger proportion of overall projects costs for small
schemes
·
PREMIUM PRICES should be sought for the sale of electricity for the scheme
(particularly true for small schemes)
·
PREMIUM PRICES are most likely found by offsetting an existing electrical
load which the turbine should be selected to match
·
CAPITAL GRANTS are often required for small scale wind turbines to enable
them to compete with standard investment options
·
VOLUNTARY LABOUR is frequently essential to facilitate community wind projects
(much of which needs high skill levels and specialist knowledge)
·
COMMUNITY CONTROL - community wind projects are a way for ordinary individuals
to take control of a basic resource and requirement of modern living
·
WORKING TOGETHER - community wind is a way of getting local people working
together
·
SUSTAINABILITY - community wind projects get people working towards a more
sustainable lifestyle (sometimes by directing profits into energy conservation
or appropriate local rural renovation initiatives)
·
Facilitate community ownership of renewables
·
Raise awareness of and promote renewable energy initiatives
·
Raise awareness of and promote social and ethical investment opportunities
·
Help to diversify the economy by encouraging investment in renewable energy
projects within Wales.
Through
the establishment of this investment tool it is hoped that more community
groups or larger developers of RE projects will offer local people a stake
in their local RE scheme as well increasing the number of projects successfully
obtaining planning permission.
What is the role
of REIC?
·
The Renewable Energy Investment Club provides a mechanism for linking people
who wish to invest in sustainable energy initiatives with renewable energy
developers, including community groups, within Wales.
·
REIC provides impartial information on new investment opportunities to members.
·
REIC encourages and promotes RE technologies, particularly schemes with community
developed schemes
·
REIC encourages and promotes social and ethical investment
·
REIC provides support and advice to community renewables initiatives, including
access to a web-site containing a downloadable community renewable investment
club handbook and links to potential sources of help, including Baywind, the
Countryside Agency Community Initiative project and local support groups,
Awel Aman Tawe and the Wind Works package.
It is important
to note that members of REIC make an independent decision on the investment
opportunity. Members can either invest as an individual or pool resources
and make a joint investment.
Bro Dyfi Community
Renewables Ltd share offer
Bro
Dyfi Community Renewables (BDCR) initially approached REIC earlier this year
to be a pilot project for REIC. A business plan was presented to REIC and
a format for the share offer was provided following a simplified version of
the share offer document used by Baywind for Haverigg II. REIC has invited
its members to a presentation of BDCR’s share offer in October. Members will
have the opportunity to invest in the project and the share offer will be
open for four weeks. REIC will also distribute the share offer document to
all of its members.
Figure 2 above
illustrates the mechanism by which shares are offered to REIC members.
Conclusions
In the
past 2 years, significant advances have been made in overcoming the barriers
that have formerly hindered community involvement in RE projects.
The
Dulas Valley Community Wind Partnership has developed a novel, though touch
‘over-enthusiastic,’ approach to the development of community renewables.
The Project has succeeded through:
·
Securing a 15 year power purchase agreement with a local electricity user,
the Centre for Alternative Technology.
·
Securing significant grant funding and essential support and advice from the
Dyfi Eco Valley Partnership and Powys Energy Agency.
·
Work carried out to develop the project and to take the project proposal through
planning was undertaken by members of the community group in return for nominal
shares in the project.
·
Open and extensive public consultation and involvement of the local community
from the inception of this project ensured all issues were addressed prior
to the scheme going into planning. The proposal received planning first time.
In addition
dividends accumulated through money invested in the project by EST will be
used for a community energy fund for energy conservation measures in the Dulas
Valley. One of the main problems encountered was in the mechanism for raising
finance through a share offer to the local community, without incurring large
legal bills and significant bureaucratic time delays. The Renewable Energy
Investment Club provided a solution to this through the provision of a simple
and easy mechanism for offering shares in the project to the local community
once a strong business plan had been established.
Developing
a community-led wind project certainly has its challenges and should not be
entered into lightly. However, with an enthusiastic core community group and
support from new initiatives including REIC, the Community Renewables Initiative
and Wind Works, as well as the ongoing work of Baywind, the Dyfi Eco Valley
Partnership and AAT, at last we can envisage the vast potential to ‘Empower
our communities’.
Acknowledgements
The authors wish
to thank the management committee of the Dulas Valley Community Wind Partnership,
Baywind Energy Co-operative, The Centre for Alternative Technology and Powys
Energy Agency.
FOR MORE INFORMATION
Baywind Energy Co-operative – www.baywind.co.uk
The Renewable Energy Investment
Club – www.reic.co.uk
Dyfi Eco Valley Partnership www.ecodyfi.org.uk
The Centre for Alternative Technologywww.cat.org.uk
REFERENCES
R.Edwards, VC
Leaney, R Stevenson Overcoming Barriers to greater active community and local
involvement in wind farms in the UK, British Wind Energy Conference proceedings,
Cambridge, September 1999
Dilwyn Jenkins
Developing community wind schemes, Clean Slate No. 41, Summer 2001
Dulas Ltd, Alterner
Project proposal AL/2000/95 – Community Renewable Energy Investment Club,
Progress report 1, September 2001
Articles and
Memorandum, The Renewable Energy Investment Club
Awel Aman Tawe,
Consulting Communities: a renewable energy tollkit ETSU K/BD/00236/REP/S 2001
