NEW ENGLAND CO-OPERATIVE WIND FARM PRE-FEASIBLITY STUDY: COMMUNITY RENEWABLE ENERGY POLICY BRIEF

Prepared by: J. Hicks & N. Ison For: New England Wind Pre-feasibility Study

Community Power Agency June 2011

1. CURRENT AUSTRALIAN RENEWABLE ENERGY POLICY

There are currently two main renewable energy policies that will benefit New England Wind the Federal Renewable Energy Target and the NSW Renewable Energy Precincts Program. Renewable Energy Target The Federal Renewable Energy Target, legislates that approximately 20% of Australias electricity comes from renewable energy sources by 2020. The target has been split into two bands the Small-scale Renewable Energy Scheme (SRES) and the Large-scale Renewable Energy Target (LRET). The project proposed by New England Wind will fall under the LRET band. The LRET policy works by requiring an increasing number of MWh of renewable electricity to be generated each year. For every MWh generated, the generator registers for a Large-scale Generation Certificate (LGC), to be sold to an energy supply organization generally through a pre-negotiated power purchase agreement. The creation of LGCs mean that renewable energy projects such as the one proposed by New England Wind, will receive a higher price for the electricity it generates than the average NSW wholesale electricity price. However, the actual LGC price fluctuates based on supply and demand. For example, energy companies may already be close to their annual required quota of LGCs, particularly if large renewable energy projects have recently come online. In this case, the price of LGCs will drop. In the past the LGC price has varied between $10 and $60 (ORER, 2011). The fluctuations in LGC price presents a risk for New England Wind, negotiating a good power purchasing agreement based on a high LGC price is likely to be important to ensuring the financial viability of the project. For more information see: www.orer.gov.au/publications/lret-sres-basics.html Renewable Energy Precincts NSW Renewable Energy Precincts is a program whereby six areas around the state of NSW with significant renewable energy potential have been designated renewable energy precincts. The NSW have employed a designated Coordinator for each precinct. Their role is to provide information, support, undertake stakeholder engagement and awareness raising (OEH, 2011), network between the renewable energy industry, community and government in those areas. Already, the New England Renewable Energy Precinct Coordinator has provided invaluable support to the New England Wind project, including helping to secure funding for this prefeasibility study. Such a program, helps identify synergies and opportunities within and across precincts for both commercial and community renewable energy projects such as New England Wind. Additionally, the Renewable Energy Precincts program provides greater access to government, including decision makers who will affect the viability of the New

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England Wind Project, both in the Office of Environment and Heritage and in other departments. For more information see: www.environment.nsw.gov.au/climatechange/renewableprecincts.htm Additional legislation relevant to the development of New England Wind are listed in Appendix 1.

2. BEST PRACTICE COMMUNITY RENEWABLE ENERGY POLICY

While the above policies are helpful, there are still significant barriers and challenges that community renewable energy projects like New England Wind face in the Australian policy context. Although challenging, it is possible that the New England Wind project will be able to proceed without further policy intervention, however it will be difficult to develop a vibrant community renewable energy sector in NSW without additional policy support. Internationally, key barriers to community renewable energy projects have been identified and policy responses implemented. Based on international examples, the Community Power Agency proposes the following suite of community renewable energy policy measures. A policy environment that actively supports and enables the development of community renewable energy (CRE) projects has four key features: 1. Funding available for the development phase of community renewable energy projects, including feasibility and pre-feasibility work. 2. Support organisations and coordination 3. An appropriately scaled Feed-in Tariff that covers all renewable energy technologies. 4. Guaranteed grid connection These policies are key interventions to overcome common barriers that community renewable energy projects face. They have been proven internationally to foster the rapid uptake of CRE, as will be seen in the examples that follow. However, it should be noted that the implementation of community renewable energy support policies such as these, should, like any good policy initiative, be seen as medium term support to transform a fledgling sector with significant promise, into a vibrant and self sustaining sector that will deliver a multitude of public good. 2.1.1. DEVELOPMENT FUNDING Rationale for Policy intervention: Perhaps the biggest barrier CRE projects face is finding the financing to take a project from an idea to a tangible plan: taking it through the pre-feasibility, feasibility and planning approval stages. These stages are the most risky for any renewable energy venture, Community Renewable Energy Policy Brief

however unlike private enterprise or even government bodies, community actors do not typically have large reserves of capital to draw on. A relatively small amount of money in the form of a government grant or loan has been shown to make a significant difference to the development of vibrant community renewable energy projects and the broader sector as the Scottish and Welsh have found. The state of Ontario, Canada, also has a development funding scheme that was introduced in late 2009 (MEI 2009). This scheme provides a one-off grant of up to $200,000 to CRE feasibility studies. They also offer loans guarantees to CRE projects owned by Indigenous peoples. Description of policy mechanism: CRE development grants (or loans) are typically government funding schemes that community groups can access to pay a project coordinator, hold events, pay expert contractors and/or any of the many other tasks that it requires to develop a CRE project. Many such funding programs have stipulations as to what projects are eligible in order to ensure multiple benefits such as carbon reduction, job creation, community development etc. Such funding programs are often most successful if delivered at arms length from the government. Best practice examples: Community Renewable Energy Scheme (CARES), Scotland The Scottish Parliament has provided funding support for CRE since 2002. In 2009, the CARES program was introduced as an update to previous grant programs. The aim of CARES is to: Reduce carbon emissions; Reduce community reliance on imported energy increasing self-sufficiency; Increasing renewable energy capacity in Scotland; Reduce energy bills; and Provide added value for communities including jobs, economic benefit, awareness raising and more.

Two types of grants are available through the scheme: 1. Technical grants of up to 15,000 for feasibility and scoping studies, capacity buildings, community consultation and wages. 2. Capital grants of up to 150,000 for capital costs of installing a renewable energy project. Grant eligibility is based on organisation type, technologies and a short list of essential project criteria. Eligible organisations must be not-for profit and include non-profit and charitable organisations, cooperatives, local authorities, housing associations and non-profit education institutions. Technologies covered include hydroelectric, wave and tidal, green hydrogen, fuel cells, geothermal, solar PV and solar hot water, heat pumps and automated

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wood fuel heating systems. Essential criteria include an energy efficiency assessment, demonstrated community benefit, involvement and support, technical viability and access to those seeking to replicate the project (CES 2010). The delivery of CARES was put out to tender and won by Community Energy Scotland, a charitable association with the aim of building confidence, resilience and wealth at the community level in Scotland through sustainable energy development (CES 2011). In 2011, due to European Union competition laws and the introduction of a UK wide feed-in tariff for community scale projects, the CARES grant program was changed to a government loan program. Ynnir Fro, Wales In 2010, the Welsh Assembly established the Ynnir Fro Program to support the development of community renewable energy projects. Similar to Scotland, two types of grant funding are available preparatory stage grants and capital grants. Preparatory grants of up to 30,000 fund feasibility studies and other preparatory costs; capital grants fund capital costs of up to 300,000 (Energy Savings Trust 2010). Welsh social enterprise organisations including community interest companies, cooperatives, charities and more are eligible, if they are deemed to have a primarily social purpose and seek to reinvest surplus into the community or the organisation. However, schools and social landlords are not eligible. Other eligibility criteria include a minimum annual income and energy generation per project; these are different for each of the three eligible technologies hydro, wind and biomass. Additionally, projects are required to employ a least one part-time employee within the first two years of completion. Grant funding is mediated by a network of locally based technical development officers who also provide project development support (ibid). 2.1.2. COMMUNITY ENERGY SUPPORT ORGANISATIONS AND COORDINATION The existence of more than 1000 community renewable energy projects across Europe and North America, as well as the soon to be operational Hepburn Wind in Australia, shows that communities have the capacity and drive to develop complex renewable energy projects. Nevertheless, the research of Ison (2010) demonstrates that like any infrastructure project, outside expertise and support are also needed. This support and expertise varies from employing technical consultants to do wind mapping, environmental impact statements and system design, to working in partnership with a commercial renewable energy developer or dedicated community renewable energy support organization. The best government policies recognize the need for such support and not dissimilar to the NSW Renewable Energy Precinct Program provide coordination through a network of local development officers. Both Community Energy Scotland that delivers CARES and Yrrin Fro include this feature. Development officers on the ground can provide tailored support to

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meet individual group needs, while networking across groups to help identify and address common challenges. Such co-ordination support can be provided by either government or a dedicated community renewable energy support organisation, both approaches have their advantages. However, if the delivery of grant funding is also contracted to the community renewables support organisation, it is likely that more flexibility in and speed of support is possible as the case of Community Energy Scotland shows (Hicks and Ison, in press). 2.1.3. FEED-IN TARIFF Rationale for Policy intervention: Negotiating power purchase agreements and cost are a significant barrier to the take up of more socially and environmentally sustainable energy options such as community renewable energy projects. Currently, the wholesale cost of electricity in NSW is approximately 4c/kWh (AEMO 2011); electricity generated from community scaled renewable energy projects find it difficult to compete with this wholesale price generated by centralized fossil fuel power stations. Policy support is needed to level the playing field, particularly while newer technologies and approaches to energy are maturing and subsidies to existing fossil-fuel power continues. Policy support such as a Feed-in Tariff (FiT) enables projects to be financially viable, encourages investment and development of projects by a wide range of actors from communities to commercial companies. Appropriately scaled and designed FiTs ensure that renewable projects yield some financial return to communities and/or investors for a given period of time (usually 20 years) and provide the stable investment environment needed to foster a new industry. Description of policy mechanism: A FiT is a guaranteed price or premium rate for electricity generated from renewable energy sources, usually guaranteed for a given number of years. A well designed Feed-in Tariff (FiT) that covers community scale projects, which are typically (although not always) in the 50kW-10MW range, enables CRE projects to access investor and debt financing as it minimises the risk to those who invest. A good FiT can help develop the renewable energy sector more broadly as well as make the fledgling CRE sector financially attractive. A well-designed FiT would include the following features: Coverage of all renewable energy technologies, including solar PV, solar thermal power, wind, sustainable biomass and small-scale sustainable hydropower. Coverage of at least medium scale projects 50kW-10MW, although a FiT that also covers small-scale and large-scale projects are good for the renewables industry more generally and good for households. FiT prices that guarantee approximately a 6% return on investment for typical projects of each technology type and at each scale range. A long-term guaranteed price, at minimum 15 years.

Community Renewable Energy Policy Brief

A tariff that declines gradually for new projects each year, to prevent the creation of a price bubble and to keep up with the decline in the cost of renewable energy technologies over time. Guaranteed grid connection rights and responsibilities (see below).

Best practice examples: Internationally, FiTs are the most favored policy to support the take up of renewable energy, having been implemented in some form in 19 European countries (BMU), at least six US states and at least nine other countries across the world. The best examples of FiT policies that support community projects are found in Germany, Ontario and UK. Germany Germanys EEG was the first national Feed-in tariff and has perhaps been the most successful to date. The tariffs legislated are optimized for different technologies at different scales, with premiums available to incentivise additional benefits. For example, different tariffs are available for bioenergy projects below 150kW, 150-500kW, 500kW-5MW and 520MW (BMU, 2007). Additionally bonus premiums are available for the type of feedstock and the use of innovative technologies. Other technologies covered include PV, wind, geothermal, hydro and landfill and sewage gas. Because the EEG covers community scale installations, in addition to increasing the uptake of commercial and household scale renewables, the policy has supported the development of a wide range of different CRE projects. Examples include: Over 200 bioenergy villages, such as Juhnde in central Germany which is a cooperatively owned community anaerobic digester system, which produces heat and electricity for the village; Community owned wind farms such as the Burgerwindpark in north-west Germany and the Freiburg city wind-farm; and Developer/community wind partnerships such as Dardesheim. Ontario Inspired by the German experience, the Canadian State of Ontario implemented a FiT policy in 2009 under the Green Energy Act. This Act is designed to support a cross section of CRE projects through offering differentiated FiT rates based on technology type, size, location and ownership. The FiT supports wind, hydro, solar, biomass & biogas developments, size of projects is generally up to 10MW except for wind, which is uncapped, and hydro which is capped at 50MW (MEL, 2010). It also offers premiums based on project ownership, with CRE projects receiving a $0.01/kWh bonus and Indigenous-owned projects receiving a $0.015/kWh bonus. In this way, the FiT enables farmers, community groups, Native Americans, and Native Canadians to participate directly in the development of their own renewable resources, on an equal footing with commercial power producers (Gipe 2010).

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As of November 2010, a little over a year after the policy was implemented, 384 MW of CRE projects had been approved for the FiT, representing 16 % of the states 2,500 MW of renewables approved under policy (Gipe 2010). Collectively, these CRE projects will supply over 600,000 Ontario households! Further, the government claims the Green Energy Act will create over 50,000 jobs in its first three years (MEI 2011). In Ontario, the FiT was coupled with policy to streamline the renewable energy development process, guarantee grid connection, guarantee project loans to low-income and Indigenous people, promote energy efficiency, build state renewables manufacturing and implementing a smart grid in order to ensure maximum effectiveness and benefit from the FiT (MEI 2011). UK The UK FiT is designed to support household, small business and community scale renewable energy projects. Different tariffs are available for electricity generation from solar PV, wind, hydro and anaerobic digestion projects up to 5MW (DECC n.d.). An additional tariff is available for every kWh of electricity exported on top of the generation tariff. The FiT policy works in combination with the UKs Renewable Energy Obligation for large-scale renewables. The Renewable Energy Obligation is a certificate scheme similar to Australias Renewable Energy Target. The FiT is one of many factors that are contributing to the wave of CRE projects particularly wind and small hydro that are running or under development across the UK. 2.1.4. GUARANTEED GRID CONNECTION A challenge that many community renewable energy projects face is negotiating a grid connection agreement. Connecting to the electricity grid is essential to the success of a community energy project such as New England Wind. One mechanism for overcoming this barrier is to legislate a grid connection guarantee, whereby grid operators are required to connect all projects at a reasonable distance from the grid at a reasonable cost and utilities are required to purchase all electricity supplied. Guaranteed grid connection is a typical feature of a good FiT policy, such as Germanys EEG and Ontarios Green Energy Act. Indeed the EEG additionally gives grid and generation priority to renewable energy sources. That is when the grid is operating at full capacity, conventional power stations must reduce their electricity production to favor renewable energy generation (BMU, 2007). A grid connection guarantee reduces the institutional barrier of negotiating a grid connection agreement, however the large cost of grid connection remains. However, in some countries, such as Germany and Denmark, the cost of grid connection is shared by turbine owners (who pay to connect to the nearest technically suitable point of the grid) and utilities (who pay if the grid needs to be reinforced to take the extra load) (BMU, 2007; DWTOA 2009).

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3. REFERNECES
AEMO (2011) Average Price Tables. Australian Energy Market Operator. Available at www.aemo.com.au/data/avg_price/averageprice_main.shtml, accessed June 2011. BMU (2007) EEG The Renewable Energy Sources Act, the story of sustainable policies for Germany. German Federal Ministry for the Environment, Nature Conservation and Nuclear Safety (BMU). Available at www.gtai.com/uploads/media/EEG_Brochure_01.pdf, accessed June 2011. CES (2010) The Scottish Governments Community and Renewable Energy Scheme (CARES). Community Energy Scotland. Available at www.communityenergyscotland.org.uk/cares.asp, accessed December 2010 CES (2011) Our Aims. Community Energy Scotland. Available at www.communityenergyscotland.org.uk/cares.asp, accessed June 2011 DECC (n.d.) Feed-in Tariffs (FITS). Department of Energy and Climate Change, UK. Available at www.decc.gov.uk/en/content/cms/meeting_energy/renewable_ener/feedin_tariff/feedin_t ariff.aspx, accessed June 2011. DWTOA (2009) Past and Present: successful developments followed by stalemate. Danish Wind Turbine Owners Association. Available at www.dkvind.dk/eng/index.htm, accessed May 2010. Energy Savings Trust (2010) Yrrin Fro. Available at www.energysavingtrust.org.uk/Wales/Ynni-r-Fro, accessed December 2010. Gipe, P. (2010) Get f.i.t! Provincial Feed-in-Tariffs spurring community power. Grist Magazine, 4 November 2010. Accessed 10 June 2011: http://www.grist.org/article/2010-1104-provincial-feed-in-tariffs-spurring-community-power Hicks, J. and Ison, N. (in press) Community Owned Renewable Energy: Opportunities for Rural Australia, Rural Society Journal. Ison, N. (2010) From command and control to local democracy: the governance of community energy projects, Conference Paper, Berlin Conference: Human Dimensions of Environmental Change, October 2010. MEI, Ministry of Energy (2009) Community Energy Partnerships Program. Tonronto, Ontario State Government. Accessed 10 June 2011: http://www.mei.gov.on.ca/en/energy/gea/ MEI, Ministry of Energy (2010) Feed-in Tariff Program. Tonronto, Ontario State Government. Accessed 10 June 2011: http://www.mei.gov.on.ca/en/energy/index.php?page=fit

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MEI, Ministry of Energy (2011) Ontarios Green Energy Act: our path to a green economy and a cleaner environment. Tonronto, Ontario State Government. Accessed 10 June 2011: http://www.mei.gov.on.ca/en/energy/gea/ ORER (2011) Increasing Australias Renewable Energy Generation. Office of the Renewable Energy Regulator, Australian Government. Available at www.orer.gov.au/publications/lretsres-basics.html, accessed June 2011.

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APPENDIX 1: RELEVANT LEGISLATION

Table 1 provides a non-exhaustive list of the legislation that New England Wind will likely need to comply with or take into consideration in the development of a community wind farm.
Table 1: Legislation relevant to the development of New England Wind

Category Organisational Legislation Tax Legislation

Level State Federal

State Local State/Federal State State Local Property Legislation

Electricity Legislation

Planning Legislation

Legislation The Corporations Act The Co-operatives Act. GST Income Tax Capital Gains Land Tax Fringe Benefits Council Rates National Electricity Law National Electricity Rules IPART Environmental Planning and Assessment Act Local planning policy Real Property Act Conveyance Act

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