Unlocking community energy at scale

The lack of a pricing mechanism that makes community energy projects financially viable is one of the biggest barriers to the future growth of the sector. The closure of the Feed-in Tariff significantly limited the opportunities for community energy organisations to develop renewable energy projects which generate enough revenue to attract investment. The Smart Export Guarantee has, due to low payments, variable tariffs and short guarantees which do not provide investors with long-term confidence, failed to provide the price security that is needed. (Conclusion, Paragraph 18)

For the Government to achieve its ambition for community- scale rooftop solar in the achievement of the UK’s energy targets, it is essential to develop a stable price mechanism that makes selling electricity to the grid financially viable. Reliance on Power Purchase Agreements demonstrates the barrier that financial viability currently poses to the growth of community rooftop solar. We are concerned that this has resulted in rooftop solar installations being scaled back to meet the needs of the host building, whilst other suitable buildings and prime rooftop space go unused. There needs to be a business model which is unaffected by the electricity demand of the host building: for example, which can be as effective on churches and warehouses as on schools and hospitals. (Conclusion, Paragraph 19)

Reliance on Power Purchase Agreements demonstrates the barrier that financial viability currently poses to the growth of community rooftop solar. For the Government to achieve its ambition for community-scale rooftop solar in the achievement of the UK’s energy targets, it is essential to develop a stable price mechanism that makes selling electricity to the grid financially viable. The lack of clarity about the application of procurement rules is a major barrier to establishing partnerships between local councils and community energy organisations. (Conclusion, Paragraph 20)

The Government should, as a matter of urgency, provide clearer guidance on the application of procurement rules, and if necessary, reform the rules themselves, to make it easier for local authorities and community energy 45 organisations to work together and support Power Purchase Agreements. We recommend a national policy framework to align applications of procurement rules and incentivise public bodies to procure community energy through PPAs. The framework should also attach conditions to GB Energy Funding grants to capitalise on synergies from strategic partnerships between local authorities and community organisations, reflecting a practical commitment to local and community energy. (Recommendation, Paragraph 21)

The Government should replace the Smart Export Guarantee with a Community Energy Export Guarantee, with a negotiated floor price guaranteed over 15–20 years and underwritten by the Government. (Recommendation, Paragraph 22)

The Government must ringfence a defined proportion of the £1bn Local Power Plan funding specifically for community-owned (not merely “local”) projects, with a published GW sub-target. (Recommendation, Paragraph 23) Local supply

Complex market rules are a major impediment to scaling up local supply and local energy markets. The supply regime cost and complexity of obtaining a supply license are prohibitive for small community projects and licence exemption rules are not fit for purpose. Partnerships between community energy organisations and licensed suppliers provide an avenue to supply locally-generated electricity to consumers by agreeing a bespoke commercial contract. (Conclusion, Paragraph 30)

We recommend that the Government produces, within six months, a regulatory framework to allow community energy generators to sell electricity to local consumers. Modification of P441 is a good step to clarify rules and uncertainties and should be approved by Ofgem for a swift implementation in the summer 2026. It, however, does not accommodate all types of local supply and require the participation of licensed suppliers, which is currently scarce. (Recommendation, Paragraph 31)

If P441 is not approved and implemented by the end of summer 2026, the Government should bring forward legislation equivalent to the Local Electricity Bill to establish a proportionate local supply licence. (Recommendation, Paragraph 32) 46 Grid connections

The grid connection reforms process has not benefitted community energy. The regulatory framework disproportionately disadvantages community energy projects compared to commercial developers and jeopardises their financial viability. The lack of a regulatory definition, ownership agnosticism and the absence of clear mandates for the delivery of the 8GW raises concerns as to how this target can be achieved. (Conclusion, Paragraph 47)

The lack of progress towards the delivery of the 8GW of community energy by 2030 highlights the need for the Government to reduce the disproportionately high costs and long delays community energy projects face when seeking grid connections. (Conclusion, Paragraph 48)

The 8 GW target explicitly recognises the central role of community energy in the Clean Power Mission. A commitment to delivering it requires shifting away from ownership agnosticism to grant community energy a special status and help community energy projects navigate complex grid connection processes. The Government must immediately give Ofgem, NESO, DNOs, and GB Energy clear mandates to work in the delivery of the target. (Recommendation, Paragraph 49)

The Government and Ofgem must agree a regulatory definition and clear criteria for community energy projects to allow them to be differentiated from commercial developers. (Recommendation, Paragraph 50) Planning

The National Planning Policy Framework needs to be reviewed to enable local authorities and planners to differentiate community energy projects from commercial developers in planning application processes. There is a need for more clarity on what projects should be prioritised and supported and whether local planners might consider local benefits from community energy projects. (Conclusion, Paragraph 64)

The Government must, this year, alter the National Planning Policy Framework to allow for community benefits from community energy to be material considerations in planning application processes. The current NPPF’s definition of community-led development would be a good starting point for determining how community energy could be prioritised within the Framework. We recommend that community energy policy uses this until a better, more comprehensive definition is put forward by the Government. (Recommendation, Paragraph 65) 47

Energy planning is too important to hope that local planners have the capacity and knowledge to deliver to national targets. The Department for Energy Security and Net Zero must ensure stronger coordination between NESO high-level spatial planning strategies and local energy planning to ensure alignment between objectives. The government should allocate greater funding for dedicated roles within local authorities. (Recommendation, Paragraph 66)

The Government should legislate to make community ownership (as opposed to community benefit payments) as an express material consideration, distinguishing equity stakes from donations. (Recommendation, Paragraph 67)

GB Energy’s new advisory service does not contain a dedicated planning function, despite the planning system being one of the most significant barriers our evidence identified. Our view is that it should. Planning constitutes both legal and technical expertise as referenced in the Secretary of State’s letter of instruction to GB Energy. (Recommendation, Paragraph 68) Shared Ownership

There is much appetite for shared ownership, but careful consideration is needed to ensure contracts are mutually-beneficial and prevent free-riders. Scotland and Denmark provide examples of where the voluntary approach to shared ownership has failed and where mandating shared ownership has had positive impacts for community energy, respectively. However, mandating alone is not enough and mechanisms need to be in place to incentivise commercial developers and build community energy groups’ capacities. (Conclusion, Paragraph 79)

The Secretary of State should use the power granted by the 2015 Infrastructure Act to give individuals and/or communities the right to purchase a 20% stake in a renewable generation facility in their local area at a fair market price. We recommend additional incentives to encourage commercial developers to constructively engage with community energy organisations and available support to community energy organisations to ensure shared-ownership arrangements are mutually beneficial. (Recommendation, Paragraph 80) 48 Governance and Coordination

The governance of the sector is rapidly evolving with the influx of new actors such as NESO and GB Energy but their roles and interactions with diverse community energy organisations remain unclear. Too much focus on high- level planning and large-scale infrastructure risks neglecting the need for place-based approaches that delivering on community and local energy requires. More coordination and clarity on responsibilities and mandates in delivering change to achieve the 8GW target for stakeholders to understand are needed. (Conclusion, Paragraph 85)

Community energy projects are very popular and can be used to demonstrate the value of a new project in a different community. They have the potential to demonstrate the value of renewables and can deliver cheaper electricity. A stronger alignment between the 8 GW target and the Department’s various objectives would also enable a more holistic approach to energy system transformation and governance. Since community energy is not just about generation, community-led smart and local energy systems, low carbon heat, retrofit, and initiatives seeking to address fuel poverty can all contribute to the Department’s wider objectives to cut energy bills and strengthen energy security. Stronger articulations of interlinkages between the Local Power Plan, the Warm Homes Plan and the Clean Flexibility Roadmap could help clarify trade-offs and synergies in these multi-actor interventions and outline potentials for cross-sectorial approaches. (Conclusion, Paragraph 86)

The Government must incentivise collaborations between community energy organisations and local authorities to strengthen local and place- based governance. This energy transition “from the ground up “ will also strengthen engagement with local communities hosting large renewable energy infrastructure, which DESNZ, NESO and GB Energy all emphasise. The Government should use successful community energy projects examples of the benefits of renewable energy to other communities and more widely as part of its communication of the benefits of the energy transition. (Recommendation, Paragraph 87)

Capacity building initiatives must be targeted and co-designed with community energy organisations to build on existing knowledge and expertise in the sector. Such an approach will ensure that interventions and support are guided by practices and context-specific knowledge and skills, rather than being informed solely by Whitehall or GB energy HQ. A dedicated national community energy unit must be set up immediately. It should include clear governance and accountability mechanisms to avoid power asymmetries when co-designing community energy interventions. (Recommendation, Paragraph 88) 49