Residential Co-operative Power Production
(1 year, 2 months ago)
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Dr Jamie Wallis (Bridgend) (Con)
I am grateful to have secured this debate to champion reform that is not only innovative but pragmatic: an idea that encapsulates the essence of empowerment, economic prudence and the responsible stewardship of our environment. At the heart of this vision is the unequivocal call to reconsider our approach to funding residential co-operative power production, in particular by not imposing green levies on individuals who choose to invest in their own renewables, no matter where in the country they may be. It is not just about fiscal prudence, but about putting the power to shape our green energy future back into the hands of the people.
We live in a time where large-scale wind and solar energy have emerged as the United Kingdom’s most viable sources of renewable electricity. Yet what truly sets this era apart is the exciting realisation that ordinary people, like you, Mr Deputy Speaker, and me, can now own a share of a wind farm or a solar park. This is not merely a financial transaction; it is an opportunity for each of us to become an active participant in shaping the trajectory of the UK’s energy landscape—a vision reminiscent of the transformative privatisations of the 1980s by the revolutionary Thatcher Government.
Consumer ownership of green energy assets goes beyond mere financial gains; it empowers individuals to play a pivotal role in the transition to net zero emissions. It makes tangible and accessible our personal contributions to, and the benefits from, that shift. So, how does it work? The process is simple: as individuals, we can purchase shares in a renewable power production initiative, alongside thousands of others. We receive our share of the electricity generated, delivered directly to our homes via the national grid. We experience tangible savings on our electricity bills each month for the entire lifespan of the asset.
A growing number of consumers, both households and businesses, have taken the bold step to invest in their own off-site green energy generation. They are not just securing energy independence for themselves; they are contributing significantly to the UK’s environmental targets. These consumers invest by purchasing shares in residential co-operative power production initiatives, bearing their portion of upfront construction costs. Owners of these shares receive their share of the electricity generated, delivered to them via the grid. Importantly, their energy suppliers purchase this electricity at the low operating cost of the co-operative, rather than at the fluctuating wholesale market prices. The resulting savings are then applied directly to the owners’ bills each month, stabilising costs over the long term.
However, a glaring issue demands our immediate attention. Consumers who invest in their own renewable power production have energy levies integrated directly into their electricity bills by virtue of the fact that they are purchasing from the grid. Contracts for difference, feed-in tariffs, green levies and so on all come off their bills. Paradoxically, the levies mean that consumers who own their own green energy assets effectively subsidise the green power consumption of others. The energy levies serve as a significant deterrent to investment in consumer-owned residential co-operative power. They hinder people from directly reaping the rewards of the UK’s transition to net zero—a counterintuitive outcome, to say the least.
My proposal is simple yet powerful: consumers who own shares in off-site renewable power production should be granted an exemption from the levies. Such a step could potentially reduce their bills by a remarkable 44%. That would create a compelling incentive for consumers to invest in their own source of green power, unlocking a new wave of personal private ownership of UK infrastructure. Moreover, there is another aspect that warrants attention. A portion of the savings that consumers accumulate on their electricity bills is currently liable to taxation. The savings are treated as interest, and if they surpass their owner’s annual interest allowance they become subject to taxation. The taxation of these savings serves as a significant deterrent to investing in energy ownership, as it adds complexity and uncertainty to the financial picture. In developing a sustainable future, taxing consumers’ bill savings from off-site renewable energy ownership is also counterproductive. I propose that we rectify it by exempting all bill savings from off-site green energy production from taxation. That would bring this into line with the treatment of home solar, creating a level playing field for all renewable energy investments.
Members may be wondering about the potential cost impact, so let me be clear: if these energy levy and tax exemptions did not induce people to invest in their own energy assets, there would be no cost at all to the Treasury or to other consumers. The scale of the cost impact hinges directly on the scale of the adoption of green energy ownership within the residential co-operatives. If people do not invest, there will be no costs. To put that into perspective, if just 10% of consumers decided to invest in such a manner, the levies imposed on other consumers would increase by approximately 11%—approximately £15 a year. These costs would be deferred and the Treasury’s revenue would be neutral for, probably, the next five or six quarters.
To underscore the real-world impact of this proposal, let me share with the House a compelling case study. It concerns a wind farm launched by Ripple Energy, not far from Cardiff and near my constituency of Bridgend, in Porthcawl. It was one of the first consumer-owned wind farms, owned collectively by 900 individuals from across the country who invested an average of £2,200 each. It has been generating clean electricity since March 2022, and has saved its owners an average of £320 on their electricity bills, with projected savings of about £970 in its second year. These substantial savings are attributable to the recent surge in electricity prices. Importantly, ownership of the wind farm has shielded those individuals from the price spikes that have burdened other consumers in recent times.
If we look beyond the immediate financial and logistical benefits, we see that this proposal carries even more profound significance in the context of our nation’s future. It positions us on a path to energy independence and resilience against global energy price shocks—vulnerabilities exposed by international conflicts and wars such as what we are currently witnessing in Ukraine. In post-Brexit Britain, this initiative is emblematic of the British public taking back control—taking control of their energy future; taking control of their financial wellbeing; and taking control of our contribution to a greener, more sustainable world. It encapsulates the very essence of British self-reliance and national pride, aligning perfectly with the spirit of autonomy that Brexit has come to symbolise.
Beyond the immediate fiscal and environmental benefits, this proposal has the power to shape our society. It can foster a sense of collective purpose and unity as people from all walks of life come together to invest in our common future. Imagine communities rallying around the prospect of owning a share of a local wind farm or solar park. Imagine schools and universities engaging students in the process of renewable energy ownership, educating them about the importance of sustainability and self-reliance. Picture a future when our energy landscape is dominated not solely by faceless corporations, but by the collective will of the people—a tapestry of interconnected, community-owned energy assets that serve as symbols of resilience and sustainability.
Furthermore, in line with the Government’s commitment to grow the economy, this initiative can act as a catalyst for innovation and job creation. As more and more consumers invest in green energy ownership, the demand for renewable energy technologies will soar. This will spur research and development in the UK renewables sector, creating new opportunities for scientists, engineers and entrepreneurs. Simultaneously, the growth of the consumer-owned green energy sector will lead to the establishment of local energy co-operatives and businesses, generating employment and economic growth in regions across the UK.
In a world where the challenges of climate change loom large, where global energy prices are subject to geopolitical disruption and where the public’s desire for self-determination has never been more pronounced, this proposal is a testament to our ability to take control of our lives. It is a resounding declaration that we, the people of the United Kingdom, are not mere spectators in the unfolding drama of our energy future; we are its authors and its protagonists.
In conclusion, what we have before us is not merely a fiscal proposal, but a transformative vision; one that empowers individuals, safeguards our energy future, and solidifies our commitment to a sustainable tomorrow. By not taxing green levies on those individuals who choose to invest in their own renewables, we would be giving power back to the people, and ensuring that everyone could partake in our collective journey toward a more sustainable, fairer and more resilient tomorrow.
The Minister for Energy Security and Net Zero (Graham Stuart)
I congratulate my hon. Friend the Member for Bridgend (Dr Wallis) on securing this important debate, and thank him for sharing his thoughts during the conversation that we were able to have ahead of it. As we heard in his moving and well-thought-out speech, he has continued to be a champion in this regard. I want to begin by assuring him that the Government recognise the importance of empowering local communities to come together to deliver renewable energy projects for their areas, be that putting solar panels on school roofs, setting up electric vehicle chargers in local communities or developing residential power production using hydro, say, to power a village.
My hon. Friend has raised a concern that people who invest in their own renewable energy are still required to pay the green levies that are part of their energy bills and he made an appeal that they should cease to do so. Levies more than pay for themselves by driving investment in renewables. He mentioned the fact that large-scale renewables have driven down costs enormously over the last decade or so, not least through our contracts for difference scheme, which this Government are very proud of. These levies provide vital support to low-income and vulnerable households and, because of the way they have been used in the system, they have saved consumers money on their energy bills overall over the past 10 years.
Having a fair system relies on everyone being part of it. If consumers anywhere are reliant on the infrastructure that is developed by the whole, there is a strong case that they should contribute to that whole; otherwise, there is a danger of creating a system that is the opposite of what my hon. Friend seeks—namely, a system that is less fair, in which people can buy their way out of a system that is designed to cater for all.
The Government are committed to ensuring that the cost of the UK’s transition to net zero is fair and affordable for all energy consumers and, over the past decade, environmental and social schemes have been instrumental in driving the decarbonisation of the system. It is fair that all consumers should contribute towards the cost of these schemes, as the UK’s transition to abundant low-carbon energy over the coming decades will bring benefits to households and businesses everywhere. Our recent exposure to volatile global gas prices underscores the importance of our plan to build a strong home-grown renewable energy sector in order further to reduce our reliance on fossil fuels, but one that, importantly, ensures that everyone everywhere, whether or not they can invest in their own local renewable energy, is protected and looked after.
Some billpayer-funded schemes are important for tackling fuel poverty by providing financial support or home upgrades to low income and vulnerable households. We do not wish to see a system in which people can withdraw from supporting that. Ofgem, the energy regulator in Great Britain, administers renewable energy and social schemes on behalf of the Government and ensures that policy targets are met in as economical and consumer-friendly a way as possible. A list of the current environmental and social schemes that are funded through those bills can be found on Ofgem’s website.
In response to my hon. Friend’s point about changing the tax rules specifically on bill savings from off-site renewable ownership—he will know what is coming—I have no choice but to comment that taxation is a matter not for me but for the Chancellor. However, I would like to reassure him that we see value in, and support, community energy, including co-operatives that come together to create community energy projects such as Graig Fatha, which he mentioned. They play a role in our efforts to eliminate our contribution to climate change.
The Government offer a range of support to that type of project, perhaps just slightly different in nature to the ones that he has so passionately espoused today. They include the brilliant new £10 million community energy fund. This enables both rural and urban communities across England to access grant funding to develop local renewable energy projects for investment. The community energy fund follows on from the success of the rural community energy fund, which was delivered through our local net zero hubs and has funded several innovative projects. An example is Swaffham Prior in east Cambridgeshire, a pioneering project in a village of around 300 homes. It is one of the first villages in the UK to install a heating network into the existing infrastructure. In order to get more brilliant projects such as Swaffham Prior set up, we are aiming to launch applications to the community energy fund as soon as possible.
I recognise that the community energy fund is open only to communities in England. This is because the devolved nations have their own support schemes for community energy. For instance, the Welsh Government have the Energy Service, which works with both the public sector and community enterprises to reduce energy use, to generate locally owned renewable energy and to reduce carbon emissions. Similarly, the Scottish Government’s community and renewable energy scheme supports communities across Scotland to engage with, participate in and benefit from the energy transition to net zero.
Community energy funding is available alongside UK-wide growth funding, and we encourage community energy groups and residential co-operatives to work closely with their local authority to support the development of community energy projects within these schemes. The UK shared prosperity fund supports interventions that reinforce our commitment to reach net zero, and that includes £2.6 billion of funding for investment in places, including for community infrastructure projects. An example of that is West Devon District Council, which has been among the local areas to benefit from this type of UK growth funding. It received £1.1 million under the shared prosperity fund, which includes provisions to support community energy groups, helping them to bring projects forward and to access funds to support their goals. I entirely share the vision and the aspiration set out by my hon. Friend, and we have measures in place to ensure that can be brought to reality.
Beyond this, Ofgem also supports community energy projects and is now welcoming applications from community interest groups, co-operative societies and community benefit societies to the industry voluntary redress scheme, which is much more helpful than its name suggests. This allows groups to apply for funds to deliver energy-related projects that support energy consumers in vulnerable situations, that support decarbonisation and that benefit people in England, Scotland and Wales.
We also regularly engage with the community energy sector through the community energy contact group. This is our central engagement method to stay in touch with community energy, to hear from the voices of that community and to allow the people involved to feed into Government policy.
I know many Members, including my hon. Friend, will have supported the Local Electricity Bill and the amendments on community energy that were tabled on the Energy Bill. During the passage of the Energy Bill, which I am delighted to say has now completed its Commons stages, the Government carefully considered the amendments that sought to ensure a right to local supply. We set out the reasons why we were unable to accept those amendments and why it was not right to do so, which included ensuring the best outcomes for consumers and the sector overall, but the Government recognise that community energy projects have real benefits for the communities in which they are based and for the nation as a whole, and we are keen to ensure that they deliver value for money for consumers nationally and locally alike.
We have worked closely with many parliamentarians and the community energy sector to develop commitments that will better support the development of this type of energy. These commitments include the launch of the £10 million community energy fund, which I have already mentioned, alongside which we have committed to publishing an annual report and to consulting on the barriers that the sector faces when developing projects, precisely to ensure that we can have more of them. We are working with the sector through the community energy contact group so that we have the most effective routes available and so that we make it as easy for communities to understand the help that is available in the system.
I close by thanking my hon. Friend for securing this important debate and for the manner in which he opened it. I am proud of the wide range of support that the Government offer to community energy groups across the country. This support enables local community groups to come together to deliver renewable energy projects for their area, including in residential co-operatives. I share the vision that my hon. Friend set out, and I look forward to working closely with him, in Wales, Scotland, England and right across the United Kingdom, to see that vision made even more of a reality than it is today.
Question put and agreed to.