Windfarms: Is community ownership the answer?

As Rudd noted in 2015, after the election: "Our manifesto said we would remove subsidies for onshore wind, and we will act on that manifesto pledge."

On top of this, the Renewables Obligation (RO) regime closed to all new generating capacity on March 31 this year and actually closed much earlier for solar and on-shore wind generation. Given these hits to the two most cost effective and prolific forms of renewable generation, it is not surprising that there is a strong feeling across much of the renewables sector that the government’s stance on renewables is deeply contradictory.

Westminster has set ambitious carbon reduction targets for the UK but politicians appear to be caving in to the "not-in-my-backyard" lobbying movement that has its major strength in the south east of England.

However, as Johnston Carmichael’s head of Infrastructure and Renewable Energy, Mark Stewart notes, while the withdrawal of subsidy from onshore wind and solar has made it more difficult to get projects off the ground, with onshore wind being far and away the more difficult of the two, it has not quite killed off all projects.

"We are getting an increasing number of mandates now to look at the viability of subsidy-free onshore wind projects," he says.

Stewart points out that everyone in the sector knew that at some point the industry would have to be able to squeeze costs down to the point where onshore wind would be profitable without subsidies. What has hurt the sector, however, has been the suddenness of the withdrawal. A more gradual, phased approach would have been far less damaging to the sector, he argues.

"What the current circumstances mean is that only the best wind sites in Scotland can hope to go forward in anything approaching a break-even or profitable fashion," Stewart comments.

Johnston Carmichael is doing a lot of modelling work for clients, looking at what kinds of cost reductions in the supply chain and in the build-out and operating phases would be necessary to get a subsidy-free project up and running.

"What clients and funders really want to know is what kind of a shift downwards in costings would they need to achieve to make a project viable.

What can we do in the structure to optimise tax? Everything has to be very finely costed for this to work," he notes.

The stakes are huge for Scotland, since although some of the big offshore projects are now under way, generating capacity still has some way to go before offshore generation can match onshore.

According to a March 2017 report from Ofgem, the industry regulator, by 2016 low carbon energy generation accounted for some 23.5 per cent of the UK’s total generation capacity. Onshore wind and solar power, both of which have had subsidies withdrawn, accounted for the lion’s share of this contribution.

Stewart argues that while it might be unrealistic to expect the government to do a complete U-turn on its manifesto pledge – however sensible such a U-turn might be – a reasonable way around it would be for the UK and Scottish governments to find a way of assisting new community-based, common ownership schemes.

In his view, if the government could institute a scheme-by-scheme approach to sorting out a scheme-bespoke feed-in tariff or CFD approach, priced at a level that would make each individual scheme viable, that would be tremendously beneficial to local communities and to the continued build-out of wind farms.

"It would be particularly helpful in Scotland, where we enjoy some of the best wind sites in the whole of the UK. We have the major share of the wind resource available to the UK, and it seems a policy mis-step to allow the concerns of certain voters to override the push for renewables generation in Scotland," he comments. The right scheme, in the right location, at the right price for the taxpayer, must be a value for money proposition which society can buy into.

Stewart points out that from one perspective, the cuts to the subsidy regime were very understandable. "If you wind the clock back to when renewable generation first got going, what was very evident was the complete lack of a congruent, joined-up approach. The large take up on FiT scale development of solar and onshore wind generation was beyond everyone’s initial expectations. This is largely why we had all those tariff cuts, particularly on solar, because the renewables budget the government set aside for supporting subsidies (the levy control framework) was just not big enough to accommodate how things were developing," he notes.

The proliferation of small scale onshore wind with no real control framework led to the technology’s undoing. It was doomed from the start.

He points out too, that on solar, economies of scale quickly made themselves felt and even today, the price of solar panels around the world continues to fall as the industry continues to innovate. The same is true, at a slower pace, with wind turbines, where each year developers appear to be getting more power for less cost per megawatt hour.

But the government appears to have pushed the analogy with solar rather too far too quickly, and the Conservative Party’s stated dislike of the spectacle of onshore turbines blighting the countryside appears to have got somewhat in the way of the Westminster government’s climate change goals.

"We would really urge the Westminster government to focus on the community ownership of new onshore wind projects with a scheme-bespoke CFD contract. This would be vastly better than a single subsidy price across all schemes, since costs are very variable across sites and are always so site specific. We worked on the largest community deal in Lewis, which puts some £1 million a year back into the local community and funds a whole range of worthy community projects," he argues. "Replicating this across Scotland would be hugely beneficial." 