Financial incentives to promote citizen investment in renewables


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A workshop was held in the IFSC on December 8th 2016, looking at financial incentives to promote citizen investment in renewable energy. The workshop was organised by Dr. Celine McInerney, Cork University Business School, and Joseph Curtin, UCC. It was funded by the EPA Research programme.

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Financial incentives to promote citizen investment in renewables

  1. 1. Financial Incentives to Promote Citizen Investment in Renewables Joseph Curtin, UCC Thursday 8th December Funded by:
  2. 2. 1. (Very) short history of Irish renewable energy development 2. The case for (and against) citizen investment 3. The use of financial incentives and “typical models” in four jurisdictions: Germany; the UK; Denmark & Ontario 4. Future work 5. Conclusions and policy implications Overview
  3. 3. A short history of Ireland’s Energy transition (wind) SEAI, 2003
  4. 4. 208 Farms 2532 MW IWEA (2016) A short history of Ireland’s Energy transition (wind)
  5. 5. A short history of Ireland’s Energy transition
  6. 6. Two views on promoting citizen investment 1. Will unlock the next phase of Irish decarbonisation by building social “buy-in” • Generates local income and regional development • More locally appropriate developments, more likely to receive planning • Contribute to understanding of climate issues • Dispose citizens to making future low-carbon investments 2. It’s not possible in the Irish context • Increases costs of developing projects • Burden on project developers (slows down projects, fiduciary and regulator responsibility) • Irish citizens are too risk averse • Wind projects in pipeline to 2020 have grid connections/approvals
  7. 7. Proportion of total electricity generation (%, 2014) Local Ownership Renewabl es Wind Solar PV Germany 25.8 9 5.0 Over half of total investment in wind and solar has come from citizen investors Denmark 53 40.5 .2 Over half of total wind investment from local citizen investors UK 19.1 9.5 .6 Low levels of community and citizen ownership, though increasingly since 2000 and especially since 2009 Ontario 28.7 4.4 Less than .1 Low levels of community and citizen ownership, though increasingly rapidly since 2009 Four Case Studies * *Ontario How? financial incentives How? Focused on Models of Participation
  8. 8. Timeline 1980s 1990s 2000s 2010s FiT for wind & income eligible for tax rebate (1992) Very high energy and carbon taxes FIP (2003) Grants: 30% of wind turbine (1979) Mandated equity offer to local citizens (2009) Guarantee scheme for loans for feasibility studies (up to €70,000) (2009) DevelopmentFeasibility OperationConstruction Increased FIP (2009)
  9. 9. DevelopmentFeasibility OperationConstruction Timeline 1990s 2000s 2010s Undifferentiated FiT & significant tax advantages from resultant income Pilot soft loans & grants programme for Solar PV Expanded soft loans (2%) programme for PV Technology and size- specific FIT Tender scheme for large projects All soft loan programmes consolidated: up to 100% of Investment costs State/Regional-level programmes Local organizations & citizen associations encouraging energy communities
  10. 10. Timeline 1990s 2000s 2010s FiT for smaller projects under 5/10MW Contract for Difference Non Fossil Fuel Obligation Grant for feasibility studies (up to €26,000) Renewables ObligationGrant support (CRI) Grant support: low carbon community challenge Grant for pre-planning development work (up to €26,000) 30-50% tax relief to investors in new companies, early stage startups and social enterprises (ended 2015) Voluntary equity offer DevelopmentFeasibility OperationConstruction
  11. 11. OntarioTimeline 2000s 2010s FiT: Technology and size differentiated + ADDER Energy Partnership Program: grant funding and finance to cover planning applications and other studies (covering legal, technical, financial and due diligence and soft costs) Tax exemption for Aboriginal communities DevelopmentFeasibility OperationConstruction Energy Partnership Program: Grant funding and access to finance to cover feasibility assessments 2011: 25/25MW set aside 2014: competitive tendering process with local ownership as important criteria * *
  12. 12. Typical models Smaller Projects (often solar) Larger Projects (often wind) Co-ops for solar PV and some smaller wind Limited partnerships (GmbH and Co. KG structure) for many wind* Denmark For-profit guild structure with co-op-like decision-making for majority of fully community- owned and shared ownership (wind) projects The UK No typical model evident: Community benefit societies, charities, co-ops all used No typical model evident: a variety of co- ownership models emerging Ontario For profit energy co-ops for solar PV (one wind) JV between aboriginal community groups and professional developers (wind) Impact of financial incentive on typical model is evident. e.g: • Germany tax treatment of profit • Ontario FiT legislation *Not necessarily “local” investors
  13. 13. Future Work Cast Study paper: under review at Journal of Cleaner Production
  14. 14. Conclusions: Specific • Incentives required at all stages of project development to overcome discrete barriers for citizen and communities • Grants and access to (soft) finance at Feasibility and Development (+ access to trusted intermediary) • Operation stage: While FITs have been correlated to high levels of community investment in many cases, not instrument choice but designed characteristics which are most important • Tender/quota-based schemes can be designed with communities in mind (Ontario, Quebec, not UK) • Tax efficient treatment of profits is an important consideration
  15. 15. Conclusions: General • Promoting citizen/community involvement in renewable projects is possible in Ireland • But very challenging as these investors are different: requires long-term and persistent policy focus • Useful to promote typical models/vehicles through design of financial incentives • Cost: we can’t afford to do this V we can’t afford not to do this? • Speed of deployment: faster or slower decarbonisation? • Alienated citizenry, populism: get rural and marginal communities “invested”