current affairs energy politics

One week to invest in community energy

If you’ve thought about investing in community energy in the past and never quite got round to it, this is the week to bite the bullet. There’s just one week left for many community energy projects to get funding, and after this latest round, there may well be far fewer and less attractive opportunities for investment.

Why? Because as if blocking onshore wind and cutting the feed-in tariff weren’t enough, the government has recently announced that community energy will no longer be eligible for two key tax breaks. Building on the Enterprise Investment Scheme, George Osborne brought in the Seed Enterprise Investment Scheme in 2o11, designed to encourage investment in small start-ups. Investors get tax relief on any funds spent investing in a qualifying small business. Many community energy projects were designed to be eligible, and used the scheme to attract bigger investors.

For no apparent reason, the government has now announced that as of the end of November, community energy projects will no longer be able to take part. No reason has been given, and very little warning. Those projects planning the use the scheme have been scrabbling to get their funding together before the deadline. Others, including my favourite energy project in Balcombe, have had to be scrapped at the last minute.

Everybody wins with community energy. Renewable energy capacity is built and carbon emissions fall. Consumers get cheaper bills, jobs are created, and profits return to the local economy rather than shareholder corporations. I find it bizarre that as a nation we are desperately courting China to fund our nuclear power stations, while ordinary people are trying to take responsibility for their own energy and being denied the opportunity. I can’t think of any good reason to undermine community energy. But since the move comes from the Treasury rather than the Department of Energy and Climate Change, I think we know who’s behind it.

Anyway, the good folks at 10:10 have put together a community energy funding hub, Energy Dash, to help groups get their funding before the time runs out. There are 29 projects to choose from at the moment, and just a few days left to get involved.

6 comments

  1. If community energy projects are becoming less risky investments the it is right to reduce government subsidies. Otherwise we are just borrowing money our children will have to repay to give to investors.

    I have no figures for how many community energy firms have benefited from this or how much capital is now shielded in these schemes, but if it is greater than expected ( for example because it is less risky than thought) then again the government may need to reduce support to avoid busting the scheme’s planned budget.

    Ultimately as renewable energy reaches grid parity subsidies have to be withdrawn.

    1. This isn’t a subsidy for renewable energy – you could have applied for SEIS if your community energy project was a gas power station. It’s tax relief for investors, to encourage people to back smaller start-ups. I agree that renewable subsidies need to be withdrawn over time, but this isn’t what these schemes are about.

      It’s possible that community energy was unbalancing a relatively small government scheme, but then why not say so? Why the secrecy? And giving people one month’s notice is a slap in the face. Even two months would have saved people having to pull the plug on years of work. Even if there’s a good reason for the change – and there might be – there’s no excuse for the way it’s been done.

      1. I think you would find if this was given to a gas plant it would be included in the OECD fossil fuel subsidies oy have previously written supportively about so when applied to renewable energy it is a subsidy.

        That changes were coming has been signalled for a while so it shouldn’t surprise anyone. Here is a Guardian article from January
        http://www.theguardian.com/money/2015/jan/31/treasury-tax-breaks-green-energy-schemes

        Note they talk of returns up to 13% which with near zero inflation is very good indeed. Removing the tax break brings that back to 4% which is still good in current conditions. Given that energy generation is a fairly capital intensive but low risk business they should have no problem raising funds from sensible investors.

        Budgets are meant to be kept secret until they are announced and often act rapidly to prevent too many people using loopholes before they are closed. As the HMT say here, these schemes were being used for tax planning purposes which wasn’t the intention. So you have to move fast in closing to cut tax avoidance.

        http://www.theguardian.com/environment/2015/nov/05/treasury-tax-plans-will-decimate-community-energy-projects

        Do you want special treatment?

        1. I’ll think you’ll find I’m asking for the opposite of special treatment. I’d like community energy projects to be treated the same as other start-ups.

          And yes, some of these changes were mooted last Autumn, but many community energy projects were wrong-footed by additional changes in the Finance Bill that were not expected.

          The expected cost to the treasury of running SEIS is not secret. It was projected to be £20 million in 2015-2016.

          Great to see you jumping in to bat for fair taxation though.

          1. These aren’t like ordinary start ups since they are lower risk. Hence they need less subsidy.

            I support people following the tax rules as they are written, not as some people think they should be like TJN. It is up to the government to set the rules which is what they are doing here the same way they make changes for other businesses.

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