Establishing a Thriving Sector for Community Energy Projects in Australia

Kelsey attended the UNFCCC forum. She is in her first year of study and is completing a combined degree of Law and Science at the University of Newcastle. 

Abstract

This paper proposes that the Australian Renewable Energy Agency (ARENA) establish a specific section or office which focuses on renewable energy uptake in communities. It proposes legislative reform to the Renewable Energy (Electricity) Act 2000, which would provide a clear political framework for the uptake of community energy programs. These recommendations would provide support to communities wishing to establish a project, particularly during the pre-planning stage of development. They will address the underlying causes of community energy stagnancy in Australia, including the difficulty of navigating the pre-planning stage (Parliament of Victoria, 2017). The reforms would provide a political framework which indicates governmental support, and will provide skills, funding, transparent monitoring, and support for the pre-planning stage.

The United Nations Framework Convention on Climate Change (UNFCCC) established the Global Climate Action Agenda in 2015. The Agenda aims to boost cooperative actions between governments, cities, businesses, investors, and citizens to reduce greenhouse gas emissions (UNFCCC, 2015). COP23 President Frank Bainimarama is focusing on private sector mobilisation as an objective of the Climate Action Agenda. An agency for community energy in Australia would effectively support the Agenda by facilitating collaboration between governments, investors, and communities.

Context and Background

Community energy programs (CEPs) are renewable energy projects where community groups are significantly involved in the development, application, and ownership of the program (Walker and Devine-Wright, 2008). CEPs first developed in Northern Europe in the 1960s and 1970s, and have since proven to have significant social, economic, and environmental benefits (Hicks and Ison, 2011). As a result, community ownership of energy is accelerating across the Northern Hemisphere. In contrast, the Australian community energy sector has been slow to proceed (Community Power Agency, 2014). The first operational project was established in Hepburn, Victoria in 2011. With the sector still being new, there are several key challenges preventing community mobilisation. The key problems have been identified in a series of reviews into the sector. In 2015, the Coalition for Community Energy (C4CE) published the National Community Energy Strategy, as an appendix to the Community Energy Collective Impact Baseline Assessment. The report identified the following as key obstacles: a lack of political and regulatory environment, lack of time, availability of host sites, and lack of access to funding or finance. To date, there are 59 projects either being considered or in operation in Australia (Parliament of Victoria, 2017). This is substantially less than nations in the Northern Hemisphere. For example, Scotland has over three hundred programs, and German communities own 47% of installed renewable energy projects (Parliament of Victoria, 2017).

Clear political frameworks and support have contributed to the success in Scotland and Germany, along with a peak governing body which serves the community energy sector. In Scotland, the Community and Renewable Energy Scheme (CARES) is a government affiliated body which administers the community energy sector. Likewise, in Germany, the Federal Republic of Germany’s Renewable Energy Sources Act (EEG) allows for community development via its network with agencies, banking institutions, and state and local governments (Li wen Li et al, 2013). Australia lacks these initiatives. In 2011, the Federal Parliament passed the Australian Renewable Energy Agency Act, which established ARENA. ARENA oversees Australia’s shift to a renewable energy future (ARENA, 2017). It’s Investment Plan, released in 2017, has four key priorities, none of which have community energy as a strong focus.

First Recommendation: Establish a peak body


International Examples

Scotland is a leading international example for the community energy sector via CARES, established by the Scottish Government in 2011. The scheme provides technical support and grants to communities to establish projects (Hicks and Ison, 2011). It has key features, including loans up to 150 000 pounds, a fixed interest rate of 10%, and advisory services (CARES, 2017). It is administered by Local Energy Scotland on behalf of Scottish Ministers. It has developed a Toolkit to provide communities with an informative, step by step guide to implementing a project.  

Another example is Germany. Although it does not have a comparable body to CARES, it has an effective framework for facilitating intersectoral collaboration and networks. The Federal Government is a key body providing over 900 programs to assist community energy development (Li Wen Li et al, 2013).  For example, ‘100% Renewable Regions’ is administered by the ‘Competence Network Local Energy Technology’ and advised by the Federal Ministry for the Environment, Nature Protection, and Nuclear Safety, as well as the Federal Environmental Agency (Li Wen Li et al, 2013). The Okostromgruppe Greiburg GmbH is one example of an agency that has public and private connections with the Government and banking institutions, which has assisted the development of CEPs throughout Germany (Li Wen Li et al, 2013).

The Benefits of having a Peak Body

The Scottish CARES program has many financial and collaborative benefits. The loans given can provide up to 95% of pre-development costs (Meacham, 2012). In 2012, the Scottish Parliament conducted research into the effectiveness of the scheme. In the Report on the achievability of the Scottish Government’s renewable energy targets (Scottish Parliament, 2012), surveyed groups described the initiative as “hugely effective”, and “the only way to get into the game” (Scottish Parliament 2012). This second comment is particularly relevant. It has been found in numerous Australian studies that the development stage is the most difficult for communities to navigate, due to the difficulty of attracting funds or investors without a business case yet established (Ison et al, 2012)(Kirsch et al, 2015)(Hicks et al, 2014). A key challenge is funding the project development to planning approval (Hicks et al, 2014). This is so because communities do not have large reserves of capital, whereas large companies do. The lack of established business cases in Australia makes investors hesitant to participate in ‘pioneering costs’ associated with a new commercial activity (Hicks et al, 2014).

A further benefit of a peak facilitative body is intersectoral collaboration. Collaboration between the government, financial institutions, and communities has proven effective overseas. For example, the Scottish Investment Bank (SIB) is regulated by the Scottish Government. It has a division titled the Renewable Energy Investment Fund (REIF) which has community energy as a key focus. In 2015-2016, the Bank invested 9.85 million pounds into ten renewable energy projects, five of which were CEPs (Scottish Investment Bank Annual Review Highlights, 2015-2016). For example, the Hoprighiels Community Wind Farm in Berwickshire Scotland could proceed when SIB provided 15% of the necessary funds for development. It is estimated that over the next 25 years, the scheme will raise 34.6 million pounds (Scottish Investment Bank Annual Review Highlights, 2015-2016). The investment had wide ranging benefits. Having the primary investment from the SIB enabled the project to achieve credibility and secure support from more private investors. A similar system in Australia could be equally beneficial by allowing community projects the opportunity to attract investors and a legitimate business case.

The German KfW Development bank and Landensbanke provides loans for CEPs in the initial project stages. For example, the Landesbank in Baden-Wurttemberg (LLBW) has a corporate financing branch dedicated to renewable energy and investment in sustainability. The LLBW set clear sustainability targets in 2006, and sustainability is now one of its key focus areas (Sustainability Report of Landesbank Baden-Württemberg with 2016 Consolidated Environmental Statement, 2016). The KfW bank buys half of the ‘risk’ element in community energy schemes, lending them money at 1% interest (Simpson, 2013). The ‘BW ZukunftsSparbrief’ (savings bond) promotes loans for sustainable projects and innovations in communities (Sustainability Report, 2016). In 2016, EUR 3.6 million were invested in the BW ZukunftsSparbrief, with the proceeds going towards loans for community innovation. The German examples highlight how the integration of financial tools into policy making is a major contributing factor to the successful implementation of renewable energy (Li Wen Li et al, 2013).

What can be done to incorporate a peak body into Australia?

Currently, ARENA is investing in reliable electricity networks, solar PV, the transport, building, and industry sectors, and exporting renewable energies. ARENA should incorporate a new division focusing on renewable energy in communities. The new division within ARENA would provide advisory roles and technical support. For example, the CARES scheme has Framework Contractors in the legal, financial, and project management spheres. Australia’s agency must be able to provide support which is readily available and relevant to each project. It should partner with companies or individuals who have those skills, either in employment or pro bono. It should network with relevant advisors to provide support and skills in the following areas: legal, financial, technical, engineering, accounting, fundraising, communications, administration, and project management. Providing skills such as these enables time to be saved and the best outcomes to be achieved (Ison et al, 2012). Having a central body with all these services allows all community groups to access the technical skills needed.

Due to the present difficulties in proceeding beyond the development stage, the agency must give due attention to projects which are not yet under construction. Advice and support needs to be given from the very initial stages of development. A Pre-Development fund or loan would be useful to help the communities establish credibility and a legitimate business case to attract more investors.

This agency should also incorporate collaborative opportunities. Respondents to a research paper prepared by a consortium of Backroad Connections, Community Power Agency, and the Institute for Sustainable Affairs at the University of Technology Sydney, highlighted the importance of being able to collaborate with industry, agencies, local businesses, and energy retailers (Ison et al, 2012). It would promote peer-to-peer learning by allowing for information sharing. Lack of information sharing was another issue identified in the 2012 research consortium. For example, Scotland has a Community Energy Annual Conference, which operates as a think-tank, allowing successful and developing projects to exchange skills, advice, and ideas. Australia would benefit from having a similar conference which allows for collaborative learning with other communities and key stakeholders (Ison et al, 2012). Information sharing would be best achieved through a transparent system to monitor projects, recording features such as characteristics of investors, business and legal models adopted, and characteristics of planning stage finance.

Second Recommendation: legislative reform to provide a clear vision in Australian policy


Germany

Germany has a long-term strategy regarding renewable energy which has been committed to legislation. The strategy is named ‘Energiewende’ (Nolden, 2013). Energiewende, or ‘energy turn’ involves communities actively planning and implementing CEPs (Nolden, 2013).

The Renewable Energy Sources Act (EEG) 2017 governs Germany’s approach to developing renewable energy schemes. This Act enables community scale development of renewable energy by creating a healthy network between agencies, banking institutions, local governments, and residents (Li Wen Li et al, 2013).  It contains an explicit target in s1(2):

(2) The aim of this Act is to increase the proportion of electricity generated from renewable energy sources as a percentage of gross electricity consumption to

1. 40 to 45 percent by 2025,

2. 55 to 60 percent by 2035 and

3. at least 80 percent by 2050.

These aims are supplemented even further by s4, which gives a specified outline of how these goals are to be achieved. The success of Germany’s Act has been attributed to its facilitation of mixed sector participation, collaboration, coordination, and partnerships (Li Wen Li et al, 2013).

Scotland

In Scotland, the relevant legislation is the Climate Change (Scotland) Act 2009. As with Germany, this legislation sets clear interim targets. The opening section of the Act provides:

 The 2050 target

(1)    The Scottish Ministers must ensure that the net Scottish emissions account for the year 2050 is at least 80% lower than the baseline.

Notably, the Act has a clear provision under s91 which promotes public engagement, and provides for a strategy which would allow people to contribute to the achievement of the targets laid out in the legislation. The section mandated that a ‘Public Engagement Strategy’ be published. This strategy, published in 2010, identified community groups as a key sector for climate change mitigation (Low Carbon Scotland: Public Engagement Strategy). 

Australia

 Australia should commit to statutory form a target which explicitly identifies the goals to be achieved. This would be contained in s3 of the Renewable Energies (Electricity) Act 2000 which currently outlines vague objectives regarding renewable energy. The targets must be specific, measurable, and outline interim steps to meet on the path to reaching the overall target. A similar document to the Scottish ‘Public Engagement Strategy’ would support the transition to reaching these targets.

Possible barriers to implementation

Having new reform in the community energy sector is only useful if communities are willing to participate. A key challenge currently in Australia is a lack of understanding in political, financial, and community circles (Ison et al, 2012). Ordinary community groups may not understand the concept of community owned renewable energy, or at least may not understand its benefits. To overcome this challenge, education is needed. This could be achieved through local development officers working with the ARENA CEP division to advocate and instruct communities about the options and benefits available to them.

Another key challenge is lack of access to host sites. People living in cities or apartment blocks often cannot access the natural resources needed for renewable energy as easily as rural communities can. The Victorian Government’s Parliamentary Inquiry into Renewable Energy (2017) identified this as an issue. The Inquiry considered utilising public buildings such as schools, and creating partnerships with regional groups to overcome this problem.

Conclusion

CEPs have a vast range of benefits to local economies, social cohesion, and the environment. Australia has the potential to establish a thriving CEP sector, though for this to occur some key policy changes must be implemented. Creating a specific division in ARENA which focuses on community energy, and providing legislative targets could assist in creating this thriving sector. Community mobilisation in this way would further President Bainimarama’s vision for COP23.

References

Australian Renewable Energy Agency Act 2011 (Cth)

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