Calderdale MBC Wards Affected All 27 January 2014

16

Cabinet

Formation of Calderdale Community Ener y !e"ort of t#e $irector% Economy and En&ironment 1' ())*E

1.1 The Council has committed itself to delivery of the Calderdale Energy Future Strategy. The scale of the opportunity requires a suitable delivery mechanism to progress this work. This paper sets out options for how this work can be progressed. 2' +EE$ F,! A $EC()(,+

.1 The recommended actions will affect all wards of Calderdale and will initiate pro!ects with high potential costs and benefits. Cabinet needs to identify the preferred approach to delivery. -' !EC,MME+$A.(,+ "t is recommended#

$.1 That %embers support the establishment of an "ndustrial and &rovident Society to be known as Calderdale Community Energy Company' based on the draft outline of terms at (ppendi) 1. $. That authority is delegated to the *ead of +emocratic and &artnership Services and the +irector of Economy and Environment' to develop and agree the detailed government documents for this Company' and to take such measures as are necessary to establish the Company.

$.$ That a sum of ,1-'--- is identified to support the establishment of the new Company.

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..1 The national challenge to produce enough energy for our future needs and the global challenge of climate change and related carbon emission reduction targets set a conte)t for this report. /ocally' fuel poverty' far from being eradicated is still a serious issue as energy costs rise disproportionately to incomes. The e)cess winter deaths figure rose by 01 nationally last year' a direct result of high energy prices' low incomes and a cold winter. .. Calderdale2s Energy Future Strategy was adopted by Council in (pril -1 to consider how energy needs can be responsibly met. 3enewable energy will play a key part in meeting this target. The development of community energy pro!ects can ensure that ma)imum benefit for the community comes to Calderdale residents. The agenda can specifically address concerns for residents and businesses of# Energy security &roviding an alternative to the big si) energy 3educing carbon emissions Enabling local investment in energy &roviding a local energy fund

..$ "n (pril -1- the 4overnment launched an incentive to produce electricity called 5Feed in Tariffs2 6F"Ts7 to encourage people to generate their own electricity from renewable energy sources. They have added to' and changed the levels of these incentives since then' to include heat generation. F"Ts are paid for every unit of electricity generated' with rates varying according to the type of technology used. 8ithout the incentives' there is a strong case for developing renewable energy sources9 with the incentives it becomes compelling. ... :ne of the fastest growing sectors using community shares is the renewable energy sector. :ver 1$- Societies have been registered with the power and intention of raising the capital necessary to install wind' solar' hydro and biomass generation capacity. These enterprises have been particularly successful due to the various government incentives to promote such growth' for e)ample the Feed in Tariff. ..; "n Calderdale' &ennine Community &ower /imited have installed a relatively small 1-k8 wind turbine which will generate a return to its <; community investors and is pro!ected to generate over ,1--'--- of surplus to create capacity for more renewable pro!ects and fund schemes to create environmental benefits in the locality of the turbine. ..< There are now Societies which have raised millions of pounds to install significant generation schemes. /ocal authorities have also got involved' for e)ample &lymouth City Council=s involvement in &lymouth Energy Community /imited. This is an e)citing growing movement' with significant potential to e)pand into a sector currently dominated by < large companies in a way that provides secure' sustainable and equitable energy supply.

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..> 8hilst renewable energy opportunities will continue to be e)ploited within the ?orough by commercial development' Calderdale Council and its community partners also have an opportunity to take some of this development forward ma)imising the benefits to the local area. ..@ Calderdale organisations have the opportunity to benefit from the low carbon economy through the fuel savings and income generated' and from renewable energy installations. *owever the AotBforBprofit sector of Calderdale may struggle to access the 4overnment incentives for suitable installations due to lack of awareness' ine)perience' limited capital finance' and limited access to land. ..0 /eeds City 3egion Secretariat is working with /ocal (uthorities to build a portfolio of /ow Carbon pro!ects which are finance ready. This portfolio can then be used to access Aational and European funding. Currently consultation is being carried out on local priorities that will be suitable for the European Structural "nvestment Fund.

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;.1 "n order to progress towards delivery of a systematic approach to renewable heat and energy generation a decision is needed about the model of operation. The four methods below are all used elsewhere# ;. .#e Council builds t#e resources and e5"ertise in6#ouse to deliver the schemes from initial investigation to pro!ect management of energy infrastructure pro!ects. ( new team would be required to carry out this work. This option has been pursued by a small number of Councils. For e)ample &reston Council has undertaken a feasibility study costing ,$--'--- to establish viability of renewable energy pro!ects and to assess the most appropriate delivery options.

;.$ .#e Council 7or8s 7it# a de&elo"er to e5"loit t#e rene7able ener y opportunities on its land and assets. This option would require more limited upfront costs. "t is possible for the Council to enter into partnership with a developer specialising in each of the renewable energy options. ( Coint Denture Company could be formed whereby the Council provides the land and assets and the developer provides the capital and the development e)pertise. ( profit share could be negotiated with the company. This option could mitigate risk and reduce upfront cost following feasibility studies. "t would still require e)tra resource within the Council to manage this !oint venture and to maintain the Council2s priorities within the scheme. The return to the Council would be less as this would be shared e)ternally. ;.. A #ybrid sc#eme 7#ic# assesses rene7able ener y sc#emes on a case by case basis' "n this option the Council considers asset transfers of land to the local community where a suitable community vehicle e)ists that has the skills and finances to develop the site. This could be linked with the Council developing a pilot scheme in partnership with a local developer. This option does not provide a structure to develop renewable energy schemes but it does allow incremental' higher risk' decisions to be made a later date following further e)perience and understanding of the sector. The risk of this option is that the opportunity to develop a more comprehensive approach could be missed or delayed. ;.; Establis# a Community Ener y Co6o"erati&e% forming a social enterprise that has directors represented on the ?oard from established energy community groups' and
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from Calderdale Council' :rganisations such as &ennine Community &ower and the (lternative Technology Centre are well established and are a readily available source of e)pertise and e)perience. (TC and &C& support this proposal and are interesting in building on the work they have already done in this area. Connected to these groups is a robust network of support providing legal and financial advice for pro!ect delivery. Currently these groups are in touch but are not delivering pro!ects together. *owever' the skills found within each group are complimentary. ;.;.1 For the purpose of this report the proposed social enterprise would be called 5Calderdale Community Energy2 6CCE7. The Council would have influence in the organisation and partial ownership 6See appendi) 1 for more detailed proposal to form Calderdale Community Energy7 alongside local community groups' businesses and residents as share investors. ;.;. Estimated initial costs to set up Calderdale Community Energy are ,1-'---. This would cover specialist legal and financial advice.

;.< "nitial advice has been received from the CoBoperatives Enterprise *ub regarding legal constitution. The new company would need to# *ave a social and environmental ob!ective at the heart of its business &rovide a legal mechanism to bring together diverse e)isting organisations Enable the company to increase in siEe and scale over the coming years and to incorporate sub companies as necessary. (llow local people to invest and become members with a right to vote and to elect a board %anage a revolving fund which distributed the return on investment from renewable energy schemes to fund further energy efficiency pro!ects and programmes. &rotect the interests of the Council and its potential investment ;.< The preferred option after considering each of these is to set up a community energy organisation as at ;.; above. This would ensure that further work can build on the e)isting e)pertise' e)perience and capacity within the community. ;.> There is a willingness from both &ennine Community &ower and (lternative Technology Centre to use their e)perience to ensure that more community renewable energy pro!ects progress in Calderdale. ( partnership with Calderdale Council can help to make this happen at the same time as meeting Council priorities and targets. The identified initial partners have both technical e)pertise in delivering renewable energy pro!ects and also e)perience of legal and financial implications of securing Feed in Tariffs and negotiating legal agreements with landowners. ;.@ The preferred option is then a partnership approach which capitalises on e)isting e)perience and ensure that e)isting pro!ects can be increased in scale. Calderdale Council has a long standing history of working informally in partnership with the (lternative Technology Centre to deliver !oint pro!ects which have successfully improved both the well being of local residents and made Calderdale a more sustainable place. 6' /ey 9rinci"les of Calderdale Community Ener y

<.1 Calderdale Community Energy would be a catalyst for community owned renewable energy generation across Calderdale. CCE brings together the Council and
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communities with their local energy sources and provides the information' e)pertise and facilitation to ensure that local people benefit directly from locally generated energy. Calderdale Community Energy would improve the environmental performance of Calderdale Borough whilst protecting and preserving its landscape and heritage. The new body would have relevant e)pertise in energy and environmental issues' including legal' financial' technical and community development. 6'1 .#e (ndustrial and 9ro&ident )ociety model and Community Members "n recent years there has been an upsurge in the use of the "ndustrial and &rovident Society legal model to create enterprises owned and run by communities. Societies are a tried and trusted legal form used by coBoperatives and community owned businesses for over 1-- years. Societies have specific e)emptions from some of the legislation around the offer of investment to the public9 and so communities across the FG have been able to finance' own and control their own energy generation' pubs' breweries' shops' leisure facilities' community buildings' woodland' and farms. (s well as allowing this particularly fle)ible source of finance' Societies have the additional advantage that the democracy is hardBwired into them. They are owned and controlled by their community shareholders and the people who trade with them or live in the communities where they are situated. This control is also on a democratic one member one vote basis rather than the one share one vote basis of the Company model of share ownership. This is definitely not charity' rather it is dynamic mutual selfBhelp at a community level. /ey features of Community )#are initiati&es: +emocratic control H one member one vote. 4ives communities meaningful control of parts of their local economy. &rofits can be shared with the community membership. AonBtransferable shares H investment tends to be philanthropic and strategic rather than speculative. &rovides longBterm risk capital to enterprises which benefit the community. 3eturn to shareholder members is linked to the performance of the Society. <.$ Ways t#at t#e community can be in&ol&ed There are three main ways which the community can be part of Calderdale Community Energy. (s a community investor as e)plained above 3eceive help in order for a local group to set up as a fully constituted energy organisation independently. This organisation can then become a ?oard member and be part of the wider Calderdale Community Energy if appropriate. 3eceive help advice and support about energy generation and energy efficiency either as e)pertise' grants or energy offers. <.. .#e Community Fund (ny surplus income generated from the renewable energy pro!ects could be directed into a community fund. This fund would be used to support further renewable energy pro!ects or to provide energy efficiency services improving the well being of Calderdale residents.
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6'2 CMBC (n&ol&ement "n essence the new Company would simply be a legal vehicle for progressing key pro!ects to the mutual benefit of the Council and the wider community. Specific investment pro!ects would be considered on their merits and safeguards' built in to protect and provide return on the Council2s investment and assets as preferred. <.< 2and Assets. There are potential renewable energy development sites on Council owned land. ( full feasibility study has been delivered for hydro electric plant at Cromwell ?ottom and a first stage feasibility study has identified potential for wind energy on Council land. Calderdale Council can support Calderdale Community Energy by providing agreements for these opportunities to be developed as community owned pro!ects. (longside considering the appropriate return on any Council2s investment' the surplus income generated could be used to further the aims of Calderdale Community Energy. <.> Ca"ital in&estment. Calderdale Council has the potential to access capital investment money at preferential rates. Two potential routes of financial support for Calderdale Community Energy have been identified# Funding in the form of a loan sub!ect to contract law H this could be identified as a priority loan "nvestment as part of any community share offer sub!ect to the terms of the offer.

<.@ $e&elo"ment su""ort. ( constraint to developing renewable energy pro!ects is the initial development funding before income is generated. Currently significant e)pertise is available within the community. Calderdale Council could support the partnership through providing a small fle)ible deployment fund which would help establish the "ndustrial and &rovident Society and enable community partners to use e)perience and e)pertise to develop a robust business case. This would include specialist legal advice' financial modelling and advice on legal structures. "t is estimated that a fle)ible deployment fund of ,1-'---. would enable this work to commence in partnership with the e)isting resource within the Council. The Environmental %anagement Team would also prioritise support within their work programme. <.0 Further feasibility work is also required to develop specific renewable energy pro!ects and to progress them to a more advanced design stage. &romising initial progress has been made on feasibility for wind turbines' hydro power schemes' photovoltaic installation and fuel e)traction from Calderdale woodlands. Taking this work to the ne)t stage would cost appro)imately ,;-'---. E)ternal grants of up to , -'--- have been identified and it is suggested that the Economic Taskforce consider the case for further investment in feasibility work. <.1- The level of C%?C support can be reflected in the initial set up of Calderdale Community Energy for instance by writing into the constitution that C%?C would hold two seats on the ?oard. This would ensure that C%?C has involvement in the decision making at ?oard level of CCE.

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,9.(,+) C,+)($E!E$ :ptions are set out at part ; of this report C,+)*2.A.(,+

@.1 The Environmental %anagement Team have worked alongside the (lternative Technology Centre and &ennine Community &ower to ensure that the there is support for the options that have been recommended in this report. @. E)perts have also been consulted to build on e)isting e)perience within the FG. The CoBoperative Enterprise *ub has provided advice on setting up an energy company. Two other local Councils9 3ochdale and Girklees' have considerable e)perience of setting up renewable energy schemes and working with energy partners. Their e)pertise has been included in the options considered. ( local community group has recently set up a wind coBoperative in Girklees which has similar aims to the proposed CCE. There is a possibility of this organisation working with CCE. F(+A+C(A2 (M92(CA.(,+)

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0.1 There is a considerable opportunity to provide additional income from developing renewable energy within the ?orough. 8orking with the local community will ensure that e)isting e)pertise is utilised and that income can be directed towards improving the well being of local residents. 0. The initial recommended spend of ,1-'--- will assist in establishing the new company and progressing initial business propositions. "t is e)pected that additional specialist pro!ect management e)perience will be required at the ne)t stage to progress renewable energy pro!ects on site and to issue community share offers.

0.$ E)ternal funding is available for some e)pert legal advice through the CoBoperative Enterprise *ub for two days consultancy. 0.. Funding of further feasibility work can be considered by the Economic Taskforce 10' E=*A2(.4 A+$ $(3E!)(.4 1-.1 The work towards renewable energy and heating envisages a resilient low carbon economy to support our communities and landscapes. 8ithout appropriate actions to secure the future of energy locally it is possible that our communities will be adversely affected by rising energy prices and uncertain supply in the future.

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11.1 The success of Calderdale Community Energy relies on national policy to uphold its commitment to the Feed in Tariffs or similar scheme. 8hile relying on government funding there will always be a risk of change. 11. The proposal would involve working alongside community organisations such as (lternative Technology Centre and &ennine Community &ower to agree a working contract to set up Calderdale Community Energy. "t is proposed that Calderdale Council are represented on the board of this company. These discussions would clarify# 11. .1 The level of responsibility and liability held by the Council as a member of CCE 11. . &roposed contracts for development of renewable energy on council owned land. 11. .$ (ny loan agreement which would fund initial capital investment in the revolving 3enewable Energy Fund' and clarify the basis of return on capital deployed.

12' C,!9,!A.E (M92(CA.(,+)>9,9*2A.(,+ ,*.C,ME) 1 .1 Fse of resources B Ensuring that resources are allocated and used efficiently and effectively to meet the Council=s priorities through reducing costs and improving the quality of council buildings. 1 . Environment B "mprove the quality of our environment through mitigating the impacts of Climate Change. 1 .$ Economy and Enterprise B Safeguarding Calderdale=s future and foster economic prosperity for all through realiEing the opportunities presented by a low carbon economy. 1 .. Aarrowing the 4ap B 8ork to ensure that the differences in health' quality of life and economic prosperity between different communities within Calderdale be reduced through reducing fuel poverty and improving the quality of housing for all. 1 .; There will be implications for Corporate (sset and Facilities %anagement through potential renewable energy and heat pro!ects involving Council assets. 1 .< There will be positive implications for &ublic *ealth and 8ellbeing through reducing fuel poverty and improving quality of housing in the private housing sector.

1-' C,+C2*)(,+ 1$.1 (n opportunity has been identified which has the potential to generate considerable income into the ?orough that would directly enhance the well being of local residents and increase energy resilience. "n order to take advantage of this opportunity a legal framework is required to develop these pro!ects. Currently there is considerable
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e)pertise within the ?orough in developing community renewable energy pro!ects. This report seeks to harness this to deliver renewable pro!ects across the ?orough. 1$. /ocal (uthority involvement in renewable energy schemes is not a new concept and is being considered throughout the FG. The option recommended in this report however is unique to Calderdale in that it ma)imises the skills and e)pertise within the ?orough and ensures that the benefits are directly received by local people. 1$.$ "n addition to local funding through community shares there are Aational and European funds channelled through /eeds City 3egion. ( framework of delivery is required locally to ensure that we can access these funds and that there is a local pipeline of financially viable low carbon pro!ects.

For furt#er information on t#is re"ort% contact: Emma (ppleton Carbon &artnerships :fficer' Telephone# -1. $0 ->. EBmail# emma.appletonIcalderdale.gov.uk .#e documents used in t#e "re"aration of t#is re"ort are: 1. Calderdale Energy Future Strategy

.#e documents are a&ailable for ins"ection at: +ort# ate ?ouse

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A""endi5 1 9!,9,)E$ ,*.2(+E ,F .E!M) 6 Calderdale Community Ener y Calderdale Community Energy would be a community benefit society incorporated under the "ndustrial and &rovident societies (ct 10<;. "t would be an independent legal entity' separate from Calderdale Council. :ne option for the registered office is the (lternative Technology Centre. 3ision The vision is to create a financially sustainable community owned energy enterprise which uses local knowledge of our landscape and people to make the most of the renewable energy opportunities for the benefit of the community. This will be done via a community business model that will ma)imise local ownership of energy services' strengthen our local economy' recognise the unique qualities of our local landscape and build community resilience. This business model would enable funds to be recycled into additional renewable energy pro!ects and energy services including contributing to eradicating fuel poverty. This can be achieved by# Ensuring that the community has a stake in commercial renewable energy schemes in the borough. (dvising on all aspects of energy B from production of clean energy to energy conservation 6the energy hierarchy7. %anaging a community fund which reBinvests in energy schemes within the ?orough of Calderdale +eveloping and managing community renewable energy sites across Calderdale &roviding energy services to local communities and businesses.

How Calderdale Community Energy is organised ( designated personJgroup is responsible for the day to day management of Calderdale Community Energy2s affairs' and is accountable to a ?oard of +irectors' which appoints' removes and determines the employee2s terms and conditions of employment. The ?oard of +irectors ensures that Calderdale Community Energy conducts its affairs in accordance with its stated purpose. "t sets the policies' strategies and ob!ectives' and then supervises the staff who are responsible for delivering them. The ?oard is accountable to the members through elections and the power of removal. Indicative Composition of the board one representative of &ennine Community &ower' one representative of (lternative Technology Centre' two representatives of Calderdale Council' one member of each community renewable energy pro!ect as they are developed 6up to si) pro!ects7' one representative of the business sector' two coBopted members'

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Community Members CCE has members who have invested in the company through a share offer attached to individual renewable energy schemes. Each shareholder would be a member of Calderdale Energy
Company and would be entitled to one vote.

Members would have the opportunity to vote on key decisions affecting the operation of CCE at each AGM and would be kept informed of development and progress throughout the year. he geographical coverage of CEC!s membership would be monitored to ensure that the ma"ority of members are from the local area. Each pro!ect that CEC invest in would allocate any surplus profit to reinvest in further renewable energy schemes and to direct into a community fund.

Financial ,"tions /oans and 4rants H ( number of national loan companies specialise in renewable energy pro!ects or have e)perience of them and know the specific risks and opportunities posed. &otential funding sources include#

Gey Fund 8est Korkshire Triodos C?%C 3egional 4rowth Fund European Funding 3ural Community Energy Fund CoBoperative ?ank

#hare issues $ A share issue would be offered for each renewable energy scheme undertaken. %nce dividends and investors have been paid any surplus income would be reinvested into Calderdale Community Energy Hub. Calderdale Community Energy Hub aims to improve the environmental performance of Calderdale &orough whilst protecting and preserving its landscape and heritage.

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