Sunday, 1 February 2015

Community energy schemes to lose tax relief ................... incentives which have 'propelled the transformation of the German energy market'

The West Sussex village of Balcombe is famous for opposing fracking on its doorstep, if not under its houses - and for its community energy projects:
Futures Forum: Balcombe: making a community self-sufficient in electricity

They have just finished their first stage:

Balcombe 'fracking' village in first solar panel scheme

Solar panels on cowshed

The first panels have been installed on a cowshed at Grange Farm in Crawley Down

BBC News - Balcombe 'fracking' village in first solar panel scheme

The 10:10 group have been keen backers of this project:
Futures Forum: it's happening @ 10:10 >> "Real signs of a brighter future"
Futures Forum: Climate change... and community energy... what's next from 10:10

There is an alternative
We're building it
Balcombe's first solar panels are going up!
Exciting things are afoot in leafy Balcombe. As you read this, the village famous for fracking is taking its first step towards a 100% solar powered future.
There's been a lot of work behind the scenes to get this far, but at last, their first solar panels are up and running on nearby Grange Farm.
But this is just the start. The team are busy lining up some much bigger installations (and a chance to invest in them), so watch this space for new ways to Back Balcombe!
Meet Grange Farm
Meet the family farm that's hosting the group's first solar panels.
Meet Grange Farm
The story so far
It's been a while since Balcombe hit the headlines. Here's a quick recap.
Catch up on the action

From 'fracking village' to solar pioneer
As the 'fracking revolution' loses momentum, the place where it all kicked off is taking a different path. Here's how the whole country can follow in Balcombe's footsteps.
Read more
10:10 brings people together to do positive, practical stuff that helps tackle climate change.

Balcombe is getting its first set of solar panels! | 10:10

These projects seem to be growning:
Futures Forum: Small-scale, locally-controlled power generation

However, this might be the last such project:

Balcombe balks at tax changes for community green-energy projects

Village which brought fracking to public attention fears changes to tax relief will thwart efforts to spread solar energy use

REPOWERBalcombe members Tom Parker and Jackie Emery next to the solar panels on Grange Farm cow shed

REPOWERBalcombe group members Tom Parker and Jackie Emery next to the solar panels on the roof of Grange Farm cow shed. Photograph: Martin Godwin for the Guardian

The small, picturesque village of Balcombe in west Sussex became synonymous with fracking – and the opposition to it – nearly two years ago when plans emerged to test local land for oil drilling. That summer, the Balcombe protestspropelled the issue of shale gas and oil to the forefront of public debate, sparking demonstrations elsewhere and a mass petition to Westminster.
Now the focus of protests has moved elsewhere, but the villagers are continuing their anti-fracking revolution in the form of a new, carbon-free, source of energy for the area. An array of solar panels, paid for by a fundraising drive among residents, were switched on at a nearby farm this week, giving villagers an alternative vision of clean power...
Balcombe balks at tax changes for community green-energy projects | Environment | The Guardian

Treasury to pull the plug on tax breaks for green community energy schemes

Planned changes to certain types of tax relief mean that many community projects may now struggle to get off the ground

Solar project in Balcombe

The new energy co-op REPOWERBalcombe has installed 69 solar panels on a cow-shed near Balcombe in West Sussex. Photograph: Gareth Fuller/PA

Community energy schemes popular with ethical investors have been thrown into chaos, with many of the projects now engaged in a race against time to beat the withdrawal of generous tax reliefs from April.
Locally run green energy schemes have been one of the ethical investment success stories of recent years, allowing people to put money into projects and earn returns that can sometimes be as high as 10%-plus a year.
But many may now struggle to get off the ground as a result of tax changes announced by the government – and even if they do succeed in starting up, investors may find that the headline rates on offer are a lot less attractive.
Over the years Guardian Money has featured a number of “community co-operatives” that allow people to invest perhaps a few hundred or thousand pounds and hopefully earn a decent return. Many have been set up to generate clean electricity using wind turbines, solar panels or hydroelectric plants.
Some of the energy schemes now open for investment are offering returns as high as 13% a year, courtesy of the generous tax breaks currently available. But fears have been expressed that a proposed shake-up of the rules could push returns down to, at most, 4.5% or so. That is more than you would get from a traditional savings account, but may not be enough to compensate for the risks and other downsides associated with this type of investment.
More to the point, the changes could kill some schemes stone dead.
Leo Murray, head of strategy at 10:10, a climate change campaign group, told Guardian Money that energy co-ops all over the country are in a “race against time” to get their share offer documents published and open for investment as soon as possible.
So what has prompted this “crisis” (Murray’s word) that could threaten the existence of the community energy sector?
The answer: a number of things.The big blow came in the autumn statement in December, when the government announced that from April this year community energy projects will no longer be eligible for Enterprise Investment Scheme (EIS) or Seed Enterprise Investment Scheme (SEIS) tax relief. These two reliefs have played a crucial role in encouraging people to back green energy schemes because they allow investors to reclaim income tax on their investment at the rate of either 30% or 50% respectively. That’s a big benefit that comes on top of the predicted interest rate that investors will receive.
Take the example of Chase Community Solar, an energy project based in the Cannock Chase district of Staffordshire, which aims to deliver free solar electricity to council tenants by installing solar panels on their bungalows, and which is open for investment until 13 February.
Investors can pick up returns of up to 13.4% a year from the scheme, which makes use of both reliefs, but under the proposed new regime the returns would have been considerably lower.
What the government has said is that a new tax break, Social Investment Tax Relief (SITR), which is almost identical to EIS and has been set at 30%, will be expanded to include community energy. But, crucially, co-ops – which make up the majority of the sector – won’t be eligible to receive this relief. Murray says the Treasury wants to make SITR available only to a particular type of organisation, similar to a co-op, known as a community benefit society (or “bencom”). The big sticking point, he adds, is whether bencoms will be allowed to offer decent enough rates of return to attract investors. The FCA is insisting bencoms should be “charitable or philanthropic”, and appears to be threatening to restrict the returns to investors to more like those offered by traditional high street savings accounts.
Mike Kinghan, chair of Chase Community Solar, which is a bencom, says that if the FCA does go down this route, that might suggest schemes would only be able to offer returns, including the tax relief, of perhaps 4% to 4.5%. “I don’t think that’s going to be enough. I think 5% before tax relief is probably the minimum [return] that’s needed.”
The National Trust installed a hydro power turbine on the river at Hafod y Llan farm in Snowdonia in 2014.

The National Trust installed a hydro power turbine on the river at Hafod y Llan farm in Snowdonia in 2014. Photograph: Keith Jones/PA

There’s yet another issue for the sector to contend with: as the Guardian reported in August, the FCA - which registers new co-operatives - has been blocking new energy co-op applications. It is said to have taken the view that co-ops must be able to trade directly with their members - something that is difficult, if not impossible, for energy co-ops because they are usually too small to apply for licenses that would mean they could sell electricity from, say, a wind turbine directly to members. Instead, they usually sell to the national grid and then decide what to do with the profits - ie, plough them back into the the community and/or pay a return to investors. Murray is involved with an energy co-op called REPOWERBalcombe, based in the West Sussex village of Balcombe, which has just installed its first solar panels on the roof of a local cowshed. It hopes to raise £250,000 to finance the next stage of the venture and was planning to launch a share issue at Easter, but has been forced to look at bringing this forward because of the changes to tax relief taking effect from April. “From April, co-ops like REPOWERBalcombe will no longer be able to receive EIS or SEIS tax relief for investors in community shares,” says Murray. Because this will deal a major blow to the financing of such projects, REPOWERBalcombe is now “scrambling” to get the share offer out before the deadline, he adds.
Philip Wolfe, chairman of Community Energy England, a not-for-profit organisation set up last May to provide a voice for the sector, says he can understand that the government would want to clamp down on schemes that are “effectively pretending they are social enterprises when they are really not much more than a commercial investment tool”. But the vast majority of community energy projects don’t fall into that category, he adds. Wolfe says that with many of the energy co-ops, the fact they were eligible for EIS and sometimes SEIS relief “made the modest returns they were offering acceptable to enough people to make them a reality … If you don’t raise enough money, you can’t do the project.”
There are plenty of other community energy schemes currently open for investment. They include a £150,000 share offer to repay loans used to finance a wind turbine near Redruth, Cornwall, offering projected returns of 3-5% a year, plus EIS tax relief. The offer has been launched by a community benefit society called Ecodynamic and closes on 31 March. Meanwhile, in the Scottish Highlands a bencom called Sunart Community Renewables aims to raise £850,000 to fund a hydroelectric scheme in Strontian and expects to pay 4% a year, plus EIS relief. The offer closes on 28 February.

Treasury to pull the plug on tax breaks for green community energy schemes | Money | The Guardian

As George Monbiot put it last week:

With this attack on community energy the big six win out over 'big society'

By changing the rules, this government has sabotaged the promise of a UK community energy revolution and secured the dominance of the big six energy companies

Friday 23 January 2015

Solar panels on a roof in Totnes, Devon UK

 In 2013, Ed Davey announced ‘a community energy revolution’ but recent changes to the law mean that many community energy models are now unviable. Photograph: David Pearson/Alamy

You would think the government had invented community. When David Cameron became prime minister, he announced that “my great passion is building the ‘big society’ ... We need to create communities with oomph – neighbourhoods who are in charge of their own destiny, who feel if they club together and get involved they can shape the world around them.”
Since then, ministers have scarcely been able to finish a sentence without using the word community. But their commitment turns out to be as hollow as the other famous claim Cameron made in his ‘big society’ speech: “we’re all in this together”.
There are, it seems, just two levels of organisation that the government regards as valid: individual households and big corporations. Anything in between is either a threat or an irrelevance. For all the grand announcements about community rights and community action, there is still no such thing as society. Let me show you what I mean.
In 2013, the secretary of state for energy and climate change, Ed Davey, announced “a community energy revolution”. Under the unlikely slogan “Power to the people”, last year the government explained what this meant:
Local communities will be able to take control of their energy bills and help transform the energy system ... In the future, the generation of electricity by communities themselves could put pressure on energy suppliers to drive down prices, creating warmer homes, cutting carbon emissions and diversifying the UK’s energy mix.
The big six companies who currently dominate the supply of energy in this country, ripping off their customers while ensuring that we remain locked into the fossil fuel economy, would, the government promised, be replaced with “the big sixty thousand”.
An example of how this could work is the installation of a community energy supply in Balcombe in Sussex, the site of some of Britain’s most determined anti-fracking protests. The co-operative that local people have formed there, as an alternative to the smash-and-grab fossil fuel extraction pursued by the drilling companies, has attached £30,000 of solar panels to the roof of a cowshed. They will switch on the array within the next few days. The co-op, REPOWERBalcombe, hopes eventually to produce as much energy as the village uses, and to invest some of the profits in local energy efficiency and the alleviation of fuel poverty.
I have reservations about the efficacy of solar power at these latitudes, but if it’s going to be done, it is far better done by communities, at scale, with widely distributed benefits, rather than just by individual householders, which means extra costs and resources per unit, and financial benefits flowing only to people rich enough to carry the costs of installation.
There is a real possibility, as Ed Davey’s department suggested, that community energy of all kinds (not just solar) could present a serious threat to the existing system: the stitch-up that followed privatisation, which allows six companies to milk us under a dispensation no fairer than the granting of royal monopolies in the 17th century.
This is more or less what has happened in Germany, whose ‘big four’ are now in serious trouble as a result of the government’s encouragement of community schemes. I believe that Germany’s priorities are wrong: that getting rid of fossil fuels is a more important task than getting rid of nuclear power, which is orders of magnitude less dangerous. But despite proceeding with a ball and chain around its leg (the irrational pledge to abolish the nation’s primary source of low carbon energy, which impedes the transition away from oil, gas and coal) the government there has at least succeeded in challenging the big energy companies’ licence to print money.
One result is that at the end of November the German company E.ON (which is also one of our big six), whose prior commitment to cooking the planet prompted protesters to devise the immortal slogan “E.ON: F.OFF”, announced that it would spin off its fossil fuel business and “focus on renewables, distribution networks, and customer solutions”. There are, however, grounds for suspicion about the motivation of such companies.
This was the future promised to the UK by Ed Davey’s department. In this oligarchs’ island paradise, whose government often seems to be little more than a channel for corporate power, it sounded too good to be true. And it was. His coalition partners have now sabotaged Davey’s community energy revolution. The big six can relax: their inordinate profits remain safe on these shores.
First, the Financial Conduct Authority (FCA) changed the rules under which energy co-operatives could be established. As a result of the Co-operative and Community Benefit Societies Act passed into law last year, the model that has proved so successful in Germany has been deemed ineligible here. The FCA has been rejecting attempts to establish new energy co-ops on the grounds that they sell the electricity they produce on to the grid, rather than to their members.
Then the treasurer, George Osborne, quietly slipped a change to the tax rules into last year’s autumn statement. Uniquely among small new businesses, community energy schemes will, from April, no longer be eligible for two major incentives to investors: Enterprise Investment Scheme and Seed Enterprise Investment Scheme tax relief.
A different relief scheme will be available to community groups, but only if they are set up as “community benefit societies”, which are “charitable or philanthropic in character”. The profits of these societies cannot be distributed to their members or shareholders. In other words there’s a tax incentive to invest in a business that cannot make you any money, but no incentive to invest in a business that can turn a profit. A perfect formula for ensuring that nothing changes.
As almost all energy co-ops rely on the usual business model – people invest and expect a return on their money – and as margins are fairly tight, this means, in effect, the likely death of community energy in Britain. In all other circumstances the government celebrates the profit motive as being the primary, or even sole, means by which social benefits are delivered. But when the profit motive threatens the position of the big six, the high priests of Mammon suddenly become an order of Franciscan monks.
This is not the government of enterprise; it is the government of monopolies. Its mission is to protect its major donors and lobbyists against effective competition. Through privatisation, successive UK governments have created a tollbooth economy, whose gatekeepers enrich themselves at public expense. The profits of the big six (and utility companies operating in other sectors) arise from the same treasure house as the wealth of the Russian and Mexican oligarchs: a state licence to rob the public.
I mentioned that there are two units of organisation regarded as valid by this government: corporations and households. While community energy has been torpedoed, the absurd incentives for rich families remain protected.
As the Guardian revealed earlier this month, the Renewable Heat Incentive was rolled out by the government without any basic tests, safeguards or quality standards. The rich have been encouraged through amazingly generous incentives to install biomass boilers so inefficient that they don’t meet the official definition of renewable energy, under a scheme which encourages as much waste as possible. The bigger the boiler and the more fuel you burn, the more money you are given. So rich people now run their oversized boilers at full steam, and leave the windows open to cool the house. The returns are astonishing: 20, 30, sometimes 40%.
I’m told that there are farmers who have used this incentive to install biomass-fired grain dryers, which would normally operate for just a few weeks a year. But because the scheme pays them to burn wood pellets, they keep the empty dryers running year-round. 
This scheme is expected to cost us around £10bn, while doing little to reduce our greenhouse gas emissions. As hundreds of thousands languish in fuel poverty, forests are being felled so that rich people can burn wood with the windows open to profit from a government-approved scam. Does that sound like good policy to you?
All this has the incidental effect of ensuring that there is no serious threat to fossil fuel production and consumption: in other words no threat to the interests of the corporations with which the Conservative party has a symbiotic relationship. You can see the effects of this relationship in the infrastructure bill now passing through parliament, which, outrageously, places a legal duty on future governments to maximise the economic production of oil in the UK, and in the government’s refusal of planning permission for most wind farms. Never mind the living world; never mind the future of humanity. What counts is the financial interests of the fossil fuel producers.
I asked the FCA why the rules have been changed. It told me it has to work within the new act. It repeatedly stressed that energy co-operatives could set themselves up as community benefit societies if they choose, apparently unaware that this would destroy the incentive under which around 90% of them have formed, and which has propelled the transformation of the German energy market. “There is no need for community energy projects to be constrained or undermined” by this model, it told me, which suggests that it has no knowledge of the impact of its policy.
I bet Ed Davey is fulminating. I think he was sincere in seeking a community energy revolution, but the Treasury and other departments have made this impossible. It’s a classic example of the triumph of what Thomas Piketty calls patrimonial capital: a rentier economy of robber barons crushing the breath out of new entrants and alternative models. Overseen, of course, by a government that claims to be the champion of free enterprise.
With this attack on community energy the 'big six' win out over big society | George Monbiot | Environment | The Guardian

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