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August 31, 2010

The rush to renewables

Good news and bad news this week for communities wanting to invest in renewable energy projects.  The bad news is the Government has closed the door to its CARES grant scheme.   Demand has exceeded all expectations – around 600 communities will have benefited by next April. The good news is that the Government has bowed to pressure – in no small part applied by Community Energy Scotland –  and has agreed that communities in receipt of grants can now be paid for any surplus energy they produce

…the bad news

The Scottish Government has announced that the Community and Renewable Energy Fund (CARES) will close to new applications due to unprecedented demand. The scheme has already helped over 300 community groups to invest in renewable technology such as biomass, solar panels and wind turbines. A further 300 groups are expected to benefit by April next year.

The CARES scheme, which opened in May 2009, is delivered by Community Energy Scotland. The two elements of CARES are a network of development officers offering free advice, and grant support of up to £150,000 for technical studies and installation of renewable equipment.

Energy Minister Jim Mather said, “The Community and Renewable Energy grant scheme has been extremely successful in helping communities generate their own green energy, cut carbon and stimulate the market for renewable technologies.

“Since CARES was launched last year the demand from community groups wishing to invest in renewables funding has been unprecedented with over 600 groups set to benefit from £13.5 million of funding. The scheme, part of this Government’s move to treble the budget for community renewables and microgeneration has boosted our growing low carbon industries. As a result, the scheme is now facing financial pressures.

“We remain committed to driving local ownership of energy and in doing so, securing wider community benefits. Building on this success of CARES, we have commissioned a feasibility study to look into early stage financing for renewables projects which will be carried out by the Scottish Agricultural College in conjunction with Community Energy Scotland. That will report back in September and we will look at future options for funding as part of the budget process this autumn.”

This announcement only impacts on new applications. Subject to normal checks on eligibility, all projects currently going through the system and supported by development officers will be funded.

You can get more information on the Scottish Government website.

…and the good news

There has been a positive step forward this week as Department for Energy and Climate Change (DECC) updated their guidance in line with EU State Aid Law, making it clear that it is possible for grant aided projects generating renewable electricity to receive Feed In Tariff payments. Previously there had been a blanket prohibition on this, based on what Community Energy Scotland felt was a misunderstanding of EU State Aid law.  

Since  CES’s  response to the consultation on the FiT in September 2009, there has been concern it would adversely affect organisations in receipt of grant funding for renewable installations, especially small community groups taking forward wind and hydro projects. This was because such groups would find it difficult to take out loan to cover capital costs. In April this year when the FiT Order was launched Community Energy Scotland argued strongly that community groups should be able to receive grant funding and be eligible for FiT payments. This culminated in a   letter to Gregory Barker MP, Minister of State for Energy and Climate Change in July.

DECC has now confirmed that this is indeed possible. The news is particularly relevant for projects up to 50kW in size.

The new addition to the FiT Order 2010 will mean that many organisations who receive/have received grant will be eligible for FiT payments for their installation as long as the total amount over 3 years is within the European Commission State Aid De Minimis Level. This is currently at 200,000 Euros which is equivalent to around £160,000.

For example if a grant towards the  capital cost was £40,000 and the amount of FiT received for the first 3 years was £15,000 then the total amount would be £55,000 which would be well within the De Minimis level.

This is a positive step for community groups who are installing renewable technology for their community facilities. We are currently assessing the detail of this update and how it will work in practice for the many groups that we are currently supporting to install community renewable projects across Scotland.

Please see this link for the DECC update which was released yesterday.