Social finance for solar energy: approaches to financing large scale solar pv for local authorities and communities
1. BACKGROUND TO APSE ENERGY
APSE Energy - What is it?
APSE Energy House of Commons launch 11 June 2014 Over 60 people from a range of organisations including member local authorities, DECC, TCPA, LGA, Climate U.K. IPPR attended the launch. Addressed by Rt. Hon Ed Davey M.P. Secretary of State for Energy and Climate Change and Dr. Alan Whitehead M.P. the Chair of the All-party Parliamentary Renewables and Sustainable Energy Group (PRASEG).
Aims The aims of APSE energy are to support councils to deliver the local municipalisation of energy services and in doing so: address social objectives and deliver community benefits, such as a reduction in fuel poverty and increases in jobs and skills; save money and make money for local authorities to safeguard local services.
Members of APSE Energy 1. Aberdeen City Council 2. Barnsley Metropolitan Borough Council 3. Bradford City Council 4. Bridgend County Borough Council 5. Buckinghamshire County Council 6. Cardiff City Council 7. City of Edinburgh Council 8. Cumbria County Council 9. Darlington Borough Council 10. Doncaster Metropolitan Borough Council 11. Derbyshire County Council 12. Dudley Metropolitan Borough Council 13. East Dunbartonshire Council 14. East Riding Council 15. Flintshire County Council 16. Gedling Borough Council 17. Guildford Borough Council 18. Knowsley Metropolitan Borough Council 19. Lancaster City Council 20. Middlesbrough Council 21. Newcastle City Council 22. Nottingham City Council 23. Nottinghamshire County Council 24. North Ayrshire Council 25. Northumberland County Council 26.Oxford City Council 27. Peterborough City Council 28. Portsmouth City Council 29. Preston City Council 30. Reading Borough Council 31 Stevenage Borough Council 32. Southampton City Council 33. South Lanarkshire Council 34. Stockton-On-Tees Borough Council 35. Swansea City and County Council 36. Warwickshire County Council 37. Wolverhampton City Council 38. York City Council
Services offered Advocacy and brokerage Government Energy industry Partnerships Capacity Strategic advice Feasibility Time banking arrangements Knowledge Resource portal Technical and policy updates Free legal helpline Learning Practical workshops Round tables Secure networking Conferences and seminars
How do the services fit together?
APSE Energy Events and activities
Future ambition Timescales Objectives Short-term 2014/17 Build an effective membership base. Develop advocacy and brokerage capacity. Create shared resources and knowledge hub. Identify key priorities and work programme Demonstrator projects. Medium Term 2017/20 Expand membership and influence. Build capacity to deliver municipal energy. Support local authority programmes and projects. Joint working, facilitation, partnerships and collaborative working. Identifying funding opportunities, self-financing and reinvesting in collaboration. Long-term 2020 onwards Significant generation and supply of local energy. Financial sustainability. Local authorities reinvesting in local services and communities. Local community, economic and social benefits realised.
2. APPRAISING THE OPTIONS
Clarity about objectives Ambition Strategy should drive local priorities. Aims specifics e.g. generating revenue and saving money, tackling fuel poverty. Delivery mechanisms Who is best placed? Public, private, community, mixed. Pipeline of projects Scaling up, realistic and achievable. Stakeholders Government, Councils, communities, community organisations, private sector, public sector partners. Communication Effective engagement with all stakeholders
Ways of financing Renewable Energy Projects Source: Energy Savings Trust
Different sources of funding for Councils Local Authority Reserves. Slippage on capital projects. Public sector borrowing (PWLB) Revolving fund. Private Sector Commercial lending. Contribution by an equity partner. Institutional Investors (i.e. pension funds). Public offering. Crowd funding.
Options for delivery 1.The do-it-yourself model. 2. Public sector joint venture. 3. Private sector joint venture. 4. Community based model. 5. Rent a roof schemes. 6. A combination of approaches.
Lack of awareness/support (political) Lack of awareness/support (corporate) Lack of awareness/support (community) Shortage of necessary skills/capacity The council does not understand risk and reward fully Nimbyism (not in my back yard syndrome) Local planning framework/understanding APSE Energy survey on barriers to local authority involvement in municipal energy schemes What in your view are the main political/organisational barriers to local authorities engaging more effectively in local energy projects? (Tick all that apply) 70.0% 60.0% 50.0% 40.0% 30.0% 20.0% 10.0% 0.0%
Factors which determine the right option Risk. Reward. Accountability. Ease and cost of implementation. Knowledge and capacity.
3. BUSINESS CASE EXAMPLES
DIY Headline business case for large social housing project Project Install solar PV on 3000 Council Houses Number of systems 2800 Capacity on average 1.8 kwp Total capacity 5MW Costs Tendered costs including client side, overheads and add-ons 16,000,000 Income Feed in Tariff rates (2011/12) 43p per kwh and 22p per kwh Total income = 40,000,000 over lifetime of project (20-25 yrs) Surplus income over costs = 20m to 25m
Turn key solution Peterborough City Council Mears Framework Portfolio Portfolio Portfolio Portfolio Feasibility Development Construction Transfer Key Activity Assess the opportunity Confirm availability / capacity Host commitment: Go / No Go Detailed assessment of complexity Mobilisation for delivery Design, supply and installation Commission & Completion Payment & Transfer Key Document Host Access Protocol + Portfolio Schedule Letter of Intent (Host pay 5,000 Access Fee) Roof Access Agreement / Host Contract Asset Purchase Agreement + Novation Host Contract Opportunity Assessment + Desktop Review Establish Commercial Model Collateral Warranties Final Account & Invoicing
Roof PV Residential roof Tenant Energy Free Solar PV NB: year 1 below is first full year of operation PV Assessment PV Assessment ITEM UNIT VALUE No. of Houses No. 1 Solar Irradiation Hours 1020 Total Plant Size (4kW each) Total Yr 1 Energy Yield kw 4 kwh 3,468 Total CapEx 5,400 O&M Cost p.a. 65 ITEM UNIT VALUE Yr 1 Resident Free Energy @ 10.00 / MWh: 70% consumed 242 Yr 1 FIT @ 12.94 / MWh 448 Yr 1 Export @ 4.77/ MWh: 30% export Yr 1 Total Income (FIT + Export) Yr 1 Income Nett (minus O&M) 49 497 432
Roof PV Business case example - Housing PV Assessment ITEM UNIT VALUE No. of Houses No. 100 Solar Irradiation Hours 1020 Total Plant Size (4kW each) Total Yr 1 Energy Yield kw 400 kwh 346,800 Total CapEx 540,000 O&M Cost p.a. 5,787 Lifetime CO2 avoided ton / yr 3,752 PV Assessment ITEM UNIT VALUE Lifetime Total Income (FIT + Export) Finance Costs (20yr term, 4.4%) Lifetime Operating Costs NET POSITION (+/-) Assumes all income due to HA 1,035,986 788,394 115,743 131,849 NB: the Net position shown here, does NOT include the energy generated and given / sold to the tenant (assumed to be free, hence not include)
4. EXAMPLES OF WORKING WITH THE PRIVATE SECTOR
Joint Venture with Solar developers Large scale ground mount solar pv 5MW and above. Changes to ROCs and CfD regime uncertainty. Land transaction (Economic Development Powers). Income through rental, profit share or buy back options. Community benefits. Prices from 800k to 900k per MW installed. Typical cost for 5MW solar park circa 4m. PPA on energy generated but procurement kicks in for supplies.
BELECTRIC Big 60 Million
Crowd funding
Conclusion Many approaches to delivering solar pv schemes. Sources of funding need to be evaluated properly. Not just RRI but Social Return on Investment. Public bodies have an important role to play in promoting and supporting community energy initiatives. Tackling fuel poverty, investing in local labour and training, wider community benefits. Scaling up generation capacity at a local level. BE CLEAR ABOUT WHAT YOU WANT TO ACHIEVE?