14:30 Clive Betts (Labour)

Imagine a future where people can purchase clean electricity directly from a local supply company or co-operative and where every pound spent on powering our homes or cars is recycled back into the local community, supporting jobs, funding new facilities and services and contributing to renewable energy infrastructure. That is what community energy is about: ensuring that people everywhere support and benefit from the clean energy transition.

Solving the climate crisis and meeting our net zero ambitions will require huge changes that will be seen and felt directly by people everywhere. We need a radical shift in industrial systems, technology and business models, which must be underpinned by strong and decisive Government action and the right policies. However, one of the most crucial requirements is bringing people on board for the transition to net zero, because they have to pay for the transition through their energy bills and taxes, they have to host new infrastructure in their neighbourhoods and on their landscapes, and they need to alter their routines and behaviours.

Unless we bring people on board for the transition to net zero, there is a huge risk that the public will not welcome or even accept the necessary changes. The consequences of that will be that our progress to net zero will be much more lengthy, costly and contested, and it will be less inclusive, equitable and environmentally sustainable. The real strength of community energy is its connection to people and places. It is people who make community energy what it is, and it is people who will see the benefits. That is what we are trying to achieve with the Local Electricity Bill.

Community energy is one of the few tried and tested means of engaging people in energy systems. The Bill would lead to energy market reforms that would empower community-owned and run schemes to sell local renewable energy directly to households and businesses. It would make new community energy businesses viable and, by bypassing large utilities, those businesses would keep significant additional value within local economies.

The right hon. Gentleman is absolutely right. Something does not work, and I will come on to why it does not work. The whole system is outdated and does not allow for the changes that we need to make to get to net zero. We have to test what works on the ground. The number of licences that have been granted speaks for itself. We have made no progress, yet the Government accept that community energy is a good thing and we should all support it.

The hon. Lady is being very generous with her time. As I have said in previous debates, I have local constituent groups who are dead keen on community energy and really want to be able to rise to the opportunity. In addition to rising to climate change targets and reducing emissions, there is an issue about resilience to climate change. We now have people in different parts of the country who have been without power for four or five days because of climate change-related weather storms. If we had local generation, there would be additional resilience in the system that would perhaps protect or shelter people a little bit from some of the damaging consequences of changing weather.

I need to make some progress, so I will remind everybody where we were. The Bill would lead to energy market reform that would empower community-owned and run schemes to sell local renewable energy directly to households, rather than small companies buying energy from bigger companies, then selling it on. It would make new community energy businesses viable and by bypassing large utilities, they would keep significant additional value within local economies. More of the money that we use to pay our electricity bills would circulate back to our local communities to create more skilled local jobs, more viable local businesses, stronger local economies and greater resilience.

What is the biggest barrier to community energy? It is the right to local supply. Current energy market and licensing rules mean that community energy schemes to build new renewable generation infrastructure and then sell power to local customers face costs that are too high to make the schemes financially viable. A report by the Institute for Public Policy Research states that the financial, technical and operational challenges mean that initial costs exceed £1 million. As the Environmental Audit Committee has said, community energy contributes 278 MW of renewable energy as of 2020. That is less than 0.5% of total UK electricity generation.

Finally, I wrote to the Minister earlier this month, together with the hon. Members for Wantage, for Waveney, for Ceredigion, as well as the hon. Member for Glasgow North (Patrick Grady) and the right hon. Member for Leeds Central, asking him to meet us. We are keen to work constructively with the Government. Will he agree to that meeting? There is a great deal of cross-party support for the Bill, as we can all see in this room. We have an opportunity to do something significant on our path to the net zero transition, building the public consensus we need. Otherwise, we might face significant delays to deliver the necessary changes. Community energy is not just nice to have and it is not just a cherry on the top of a sustainable economy cake; it should be at the heart of what we do to get to net zero.

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14:50 Selaine Saxby (North Devon) (Con)

I want hon. Members to imagine a future where they can purchase clean electricity directly from a local supplier that is owned and run by local people. Storm Arwen this weekend certainly demonstrated the power of the elements back home in North Devon. As we transition to net zero, we need to harness more of our renewable energy resources as efficiently and rapidly as possible. Local energy supplies have the additional community benefits that every pound spent powering our homes or cars could support local jobs, help fund new facilities in our communities and contribute to more renewable energy infrastructure. That future is within reach and realising it is vital if we are to ensure that the British public welcome and benefit from our transition to net zero.

We have made great strides in decarbonising our economy. Our greenhouse gas output is 51% lower today than it was in 1990. Currently, renewable electricity accounts for 14% of our total energy use and that is set to rise significantly as we further decarbonise and build up our energy security. I very much hope that floating offshore wind generated in the Celtic sea will be part of that in the not-too-distant future. Achieving net zero presents the serious challenge of growing our electricity generation at least twofold, so that transport and heating can be decarbonised, and building the renewable generation infrastructure to power it.

There is remarkable potential for community energy and renewables schemes owned and run by local people in helping us reach net zero on time. As the hon. Member for Bath said, currently community energy generates around 0.5% of our electricity. As the Environmental Audit Committee showed in its recent community energy inquiry, by 2030 community energy could grow by at least 20 times, powering 2.2 million homes and saving 2.5 million tonnes of CO 2 emissions every year. Other countries such as Germany already have more than 1,000 supply companies, compared with just 50 here in the UK. One does wonder what is stopping us doing that already.

The Local Electricity Bill, which I am proud to co-sponsor, and which enjoys the support of 282 MPs—another joined this weekend—would do that. The Bill would improve the market rules to allow community energy schemes to flourish alongside larger suppliers. I look forward to working on the Bill, so that it can be another proud stride in our decarbonisation journey and quite literally deliver local power to the people.

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14:55 Caroline Lucas (Brighton, Pavilion) (Green)

It is just two weeks since the conclusion of COP26 in Glasgow and I welcome the focus that the debate places once again on how we practically deliver on the UK’s climate targets. We know that the Government’s recent pledge to decarbonise the UK power system by 2035 will require not just leaving fossil fuels in the ground where they belong, but a significant increase in renewable energy generation. Although progress has been made, with renewables generating 42.9% of electricity generation in the spring of 2020 and the Government committing to 40 GW of offshore wind by 2030, it is clear from everything we have heard this afternoon that community energy generation remains the missing part of the equation.

As we have heard many times, a failure to remove the barriers being faced by local suppliers is what is holding us back. Indeed, while large developers will soon benefit from the contracts for difference scheme, projects smaller than 5 MW continue to be excluded. Yet as the Minister will be aware, the potential for community-scale renewable energy generation is enormous. I am particularly delighted to hear the number of times that a report by the Environmental Audit Committee has been cited in this afternoon’s debate already. As a member of that Committee, I was pleased to sit in the deliberations as we came up with the figures that by 2030 the sector could grow by up to 20 times, powering more than 2 million homes and saving 2.5 million tonnes of CO 2 each year. It is a very powerful report and I commend it to those who have not yet had a chance to look at it.

Can the hon. Lady outline that the whole idea does not work because the improvements to the grid have not materialised in the way that we had hoped, or rather the way that the Government had hoped, and that we need big grid improvements to deliver net zero?

Earlier this year, the right hon. Member for Ludlow (Philip Dunne), the Chair of the Environmental Audit Committee, on which I am pleased to serve, wrote to the Secretary of State following our inquiry into community energy and specifically recommended that the Government remove the regulatory barriers to allow community energy projects to sell their energy to local communities. The Secretary of State subsequently promised to publish the Government’s future plans for community energy in the net zero strategy, yet disappointingly that strategy contains neither a plan nor the practical support measures needed and that the Committee had recommended. That is why the Local Electricity Bill, of which I am also a proud co-sponsor, is so important, and why it seeks to remedy successive policy failings, by giving people the right to local electricity generation. As others have said, it would create the right to the local supply of electricity, allowing community generators to become local suppliers, and require Ofgem to establish the local supplier licence process, ensuring that the costs and complexity of becoming a local supplier were proportionate. Other measures to support community energy schemes include expanding and extending the rural community energy fund to include urban, heat, energy-efficiency and retrofit projects.

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15:02 Peter Aldous (Waveney) (Con)

The rationale for empowering community energy schemes is compelling. To decarbonise our energy supply, our transport system and our heating networks we need a shedload of electricity. We need to be firing on all cylinders. Communities around the UK want to do their bit, to play their role in getting to net zero. Imposing a wind farm, solar farm or hydro scheme on a community might well run into resistance, but a community working up its own plans is more likely to get somewhere. Community energy schemes can also play a key role in revitalising local economies, creating sustainable, long-term jobs and promoting a truly circular economy.

Although having such consensual debates provides pleasant respite, we need to get on with making meaningful and significant progress on the road to net zero. Local communities have a significant role to play and, to ensure that they can do so, we need to remove those regulatory barriers. I acknowledge that in many respects that is complicated, and there is perhaps a tendency to put it in the “too difficult to do” column. However, there is very limited, if any, political resistance and, in fact, as we are hearing, a groundswell of grassroots support from all around the four nations. I thus request that the Minister ask his team to work with Ofgem to produce a strategy for removing those hurdles, so that, when we next debate community energy, perhaps in six months’ time, it will be when he is making a statement in the main Chamber setting out the steps that he is taking to unleash a wave of community energy projects.

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15:07 Jim Shannon (DUP)

I want to emphasise the importance of allowing local communities the opportunity to advance their own electricity strategies. Perhaps those come at a cost, but a community approach should be at the forefront of any decarbonisation effort. That is where the initiative and inventiveness comes from, and a community approach has the potential to drastically increase renewable energy provision. It may be of interest that currently there is no strategy to target the enabling of community energy. Brief overviews have been discussed, but if we want to focus our efforts on empowering community energy, surely we must have a sustainable plan to do so. I look forward to the Minister’s response, because he always gives us something to hang on to—we look forward to that contribution.

In my office, and I am sure those of all Members, there is massive interest in clean energy, net-zero carbon targets and the need for a better future for our children and grandchildren. Those are the things that motivate us. My mailbag and email accounts are full of such requests and suggestions. We need to have a sustainable plan in place, so that we can move forward. It is safe to say that cost is a huge factor in putting energy companies off investing in localised schemes. Green Alliance has stated that the number of new community energy projects in England, Wales and Northern Ireland has fallen dramatically since 2015, with only one in 2017. I think the right hon. Member for Leeds Central (Hilary Benn) said that there were none at all in 2019.

On regulation, the Local Electricity Bill establishes a right to local supply, ensuring that local energy is financially viable and creates local economic resilience across the United Kingdom of Great Britain and Northern Ireland. However, the Bill, as I mentioned in July, does not extend to Northern Ireland. I know that the Minister is always keen to encourage us in Northern Ireland, so perhaps he could give us some idea of what we can do to make that happen. I encourage him to engage with his counterparts in Northern Ireland—the Economy Minister, Gordon Lyons, and in more rural instances the Minister in the Department of Agriculture, Environment and Rural Affairs, Edwin Poots, both of whom represented Northern Ireland in the recent COP26 talks, where they made a significant contribution. It is important that we are part of that.

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15:13 Hilary Benn (Labour)

When he replies, I hope that the Minister will not only give encouragement but set out the practical steps that the Government are willing to take to make it easier for that to happen. The hon. Member for Bath says that she has requested a meeting, and I join her in that request. It would help all of us who are campaigning—I freely acknowledge that I have come late to this—to understand what the problems are. In the fight against dangerous climate change, the fight to change the way we produce, distribute and use our energy, nobody is afraid of trying to get to grips with the practical changes that are required. We want to support the Government to make the necessary changes.

The problem in Northern Ireland is that if everybody were to convert to electric vehicles, as we are trying to do in relation to net zero, our grid would collapse. With everyone coming home at 6 o’clock at night and plugging in, the grid would collapse. The only way to deal with that is local generation for charging networks, as has happened in some communities in Israel and America. That approach has worked and is working.

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15:20 Alan Brown (Kilmarnock and Loudoun) (SNP)

It is a pleasure to serve under your chairmanship, Mr Betts. Like other hon. Members, I commend the hon. Member for Bath (Wera Hobhouse) for bringing forward the debate. She set out clearly the benefits of community energy and how it would help on the path to net zero and to empower local communities. She also, importantly, set out the current barriers to setting up community energy companies. That was further illustrated by examples in the contributions of the hon. Members for North Devon (Selaine Saxby), for Brighton, Pavilion (Caroline Lucas), for Waveney (Peter Aldous) and for Strangford (Jim Shannon), and the right hon. Member for Leeds Central (Hilary Benn).

One barrier seems to be that it could cost upwards of £1 million to get set up for a generation licence. We have heard that the Licence Lite option under Ofgem simply is not working, so we need alternatives, and the Government must update rules that date back to the electricity network privatisation back at the end of the ’80s and the early ’90s. The hon. Member for Bath made important comments about bringing people on board. We need everybody to buy into the actions that we need to take to tackle climate change. If people get additional community benefits along the way, that is clearly a bonus.

If we look at the energy retail market, we see how badly it is struggling. We just saw Bulb—the seventh largest company, with 1.7 million customers—go bust, so it is clear that we need alternative solutions for the provision of electricity. Clearly, local powering will not replace an organisation such as Bulb overnight, but, as I say, it is logical to try to facilitate local community-based renewable energy where possible.

Changing the regulations to make new community renewable energy businesses viable allows communities to bypass the large utility companies. It means significant additional value for local economies and, as we have heard already from other hon. Members, more money will then circulate in the local economy, leading to more skilled jobs, more viable local businesses and stronger local economies. As I touched on earlier, it empowers local people and companies to be part of the green revolution and part of the pathway to net zero. That can only help to focus minds and create the general buy-in for the need for collective action to tackle climate change.

The Scottish Government published an updated local energy policy statement in January. Of course, community energy projects in Scotland are further hampered at the moment by Scotland having the highest grid charges in Europe. Lucy Whitford, managing director of Renewable Energy Systems UK and Ireland, has said that

“it doesn’t feel as if charging is fit for purpose anymore for us to deliver net zero. We have worked up some examples of network costs. The additional cost per annum of a 22 MW wind farm in Argyll versus one in Essex could be £500,000. Continuing in the current direction of travel on charging reforms could add another £120,000 per year to a project, so it is very significant.”

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15:29 Dr Alan Whitehead (Southampton, Test) (Lab)

My particular involvement in the issue goes back to a 2013 Energy and Climate Change Committee inquiry on local energy, which I chaired, that looked at the barriers to how local energy can go forward, remarked that there was not a great deal of local energy going on and talked about the potential for local energy. We have heard this afternoon about the potential from now on, but at the time we were saying we could have perhaps 3 GW of local energy overall in this country by 2020. What have we got today? About 270 MW, something like that.

Yet again we are meeting with the idea that the future for local energy could be really bright, but I fear that we will be here in a few months’ time talking about the bright future that has not quite emerged, but may in the future. We have not got time any more to keep going round the houses before we get to a decent settlement that will allow local energy to proceed. Local energy is so important, as we have heard this afternoon, for the future of low-carbon renewable energy.

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15:42 The Minister of State, Department for Business, Energy and Industrial Strategy (Greg Hands)

I will start by reassuring the House that the Government recognise the role community and locally owned renewable energy schemes can and do play in supporting the UK’s national net zero targets. Since the last debate we published, on 19 October the net zero strategy, which has already been referred to and sets out our road map of how we will get to net zero by 2050 and the staging posts in between. We understand that the value of community energy is not just in delivering energy projects that stimulate clean growth. Projects such as the community energy cafés run in south-east London support the most vulnerable in society by providing impartial domestic energy advice. Community groups can also act as the catalyst for raising awareness of both the energy system and wider environmental issues. They can be a catalyst in the promotion of behaviour change, which we all know is vital to reaching net zero.

I know Members will agree with me that there is already some excellent work under way in the community energy sector. We have heard many examples today, but I will add one: Swaffham Prior is an off-grid gas village of around 300 homes in east Cambridgeshire that is being supported by its community land trust to bring renewable energy to the village through installing a heat network. This will make it one of the first villages in the UK to do so.

I mentioned the net zero strategy, but we have also heard about a lot of different fantastic schemes from across the United Kingdom. As a Government, we fund the rural community energy fund. Delivered through local net zero hubs, this £10 million scheme supports rural communities in England to develop renewable energy projects that provide economic and social benefits to the community. Since its launch in 2019, the fund has received 1,668 enquiries, 203 applications and awarded millions of pounds worth of grants to projects focusing on a variety of technologies, including solar, wind, low-carbon heating and electric vehicle charging. It includes funding for the constituency of the hon. Member for Bath. She referred earlier to Bath and West Community Energy, which has received more than £92,000 from the rural community energy fund for feasibility grants to develop three community solar projects.

Ofgem also supports community energy projects and, following a consultation process, has announced that from February 2022 it plans to welcome applications from community-interest groups, co-operative societies and community-benefit societies to the industry voluntary redress scheme. That will allow groups to apply for funds to deliver energy-related projects that support energy consumers in vulnerable situations, support decarbonisation and will benefit people in England, Scotland and Wales.

More widely, through the introduction of UK-wide growth funding schemes, such as the community renewal fund, levelling-up fund and the towns fund—all very important new funds—the Government are enabling local areas to tackle net zero goals in ways that best suit their needs. I am aware that those schemes may be used to support the development of community energy schemes, which I highlight for all right hon. and hon. Members. For example, the towns fund has awarded more than £23.6 million to Glastonbury town, including to the Glastonbury clean energy project, which aims to generate renewable energy for use by many of the other projects in the plan, as well as other local businesses and residents.

To take forward the vital work on community energy, we committed in the net zero strategy to reintroduce the community energy contact group. That group will provide a single, dedicated forum for community energy groups to engage and co-operate with Government on key policy issues. That could obviously include discussion of the recommendations already referred to, made by the Environmental Audit Committee’s inquiry into community energy. I hope that group will strengthen outcomes for both the sector and the Government.

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16:17 Clive Betts (Labour)

Germany was mentioned many times. Without going off and setting up my own separate Adjournment debate, there are reasons why Germany works well, and less well, in this space. Germany’s grid, for example, makes it very difficult to get renewable energy from the North sea down to Bavaria. Its grid is not set up in the same way that ours is, on a national basis. That can have advantages and disadvantages. I also point out Germany’s reliance on imported gas from abroad. That again stresses some of the difficulties in scaling up; even in Germany, which has been praised for community energy, it does not necessarily offer a scalable solution in that same way.

The Government continue to support the development of new business models to supply energy consumers and help achieve our net-zero ambitions. In response to the unprecedented rise in energy prices this year, we are working closely with Ofgem to consider broader reforms to the overall energy retail market regulatory framework. We want a market that will support the longer-term transition to net zero, recognising the need for continued competition and innovation while also ensuring that suppliers have sustainable and resilient business models. That includes Ofgem exploring a move towards a more prudential regulatory regime, recognising that energy suppliers are managing complex financial risks and ensuring that the energy sector is resilient against a wide range of future scenarios, including prices rising further or falling sharply.

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16:27 Wera Hobhouse (Liberal Democrat)

I thank the Minister for offering to meet us and have that engagement. I am a little disappointed that he has still not quite understood what we all think: that the current system does not work because it is too centralised, and that the Government must face the brave new world of decentralisation to set free the power of local electricity. As we have heard, community energy schemes currently account for 0.5% of the UK’s electricity supply; 20 times that would bring 10% of the energy market to the table —clean, renewable energy. We have heard today that the most important thing is that we fire on all cylinders, and it is surprising that the Government do not take up that opportunity for that extra 10% of local electricity supply—setting free people and power. I hope that we will receive a more positive reply when we come back to debate this topic, yet again, in this Chamber or the main Chamber.

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