Lux Nova's Sandy Abrahams successful in joining UK PACT roster of climate experts

Lux Nova Partners are proud to announce that Sandy Abrahams has been successful in her application to join the UK PACT roster of experts.

The UK PACT programme is funded by the UK Department for Business, Energy & Industrial Strategy (BEIS) and aims to improve the capacity and capability of key institutions (public, private and civil society) in partner countries so that they can deliver accelerated emission reductions and raise the ambition of their Nationally Determined Contributions (NDCs) targets.

Sandy Abrahams will provide peer-to-peer knowledge sharing through skill-shares and secondments with overseas counterparts eligible for UK PACT Country Programmes or Green Recovery Challenge Fund (which include Argentina, Bangladesh, Brazil, China, Colombia, Ethiopia, India, Indonesia, Kenya, Malaysia, Mexico, Nigeria, Peru, South Africa, Thailand, Vietnam).

The roster of leading UK organisations will be managed by PA Consulting with support from Crown Agents.

For more information on the UK PACT programme, see here.

The transition to low carbon heating networks - have your say (but be quick!)

On 30th September BEIS released a call for evidence which looks specifically at how to best design the Green Heat Networks Fund, which received £270 million in the Chancellor's Spring Budget. 

The new Green Heat Networks Fund aims to focus heat network policy on lower-carbon to low-carbon heat generation. 

The consultation covers a range of topics, including:

• the state of the heat network market and the supply chain

• the financial, technological and consumer drivers for heat network decarbonisation

• the potential project pipeline for the fund

• examples of best practice in scheme design

In addition to the consultation, there is a separate pipeline questionnaire, which asks respondents to give details of heat network projects that are in the pipeline, and would be financially possible with support through the fund. You can respond to the questionnaire here.

THE DEADLINE FOR RESPONSES IS 13th OCTOBER 2020

Once again… thank you Legal 500!

As a purpose-driven, boutique clean-energy-only law firm of 9 Partners, we’re delighted with the sustained recognition we’re receiving in the Legal 500.

Thanks to all our clients for putting their confidence in us, in doing things differently! We are particularly proud of this client quote:

“What really sets them apart is that, in a commercial world that is so often lacking, Lux Nova bring integrity and a shared commitment to dealing with climate change and a just transition away from legacy fuels and energy sources.”

We still have two of our Partners – Tom Bainbridge and Louisa Cilenti – ranked as “Leading Individuals” (shared with only 20 other lawyers in the UK).

And we now have two of our Partners – Sandy Abrahams and Nikola Zahariev – named as a “Next Generation Partner” (shared with only 3 other lawyers in the UK). 

David Short also received praise, with great client feedback.

Here are some of the things our clients had to say: 

‘Lux Nova are one of the few law firms who specialise in clean energy. The focus on niche projects allows for learning across previous projects and market to deliver better negotiations, quicker. Lux Nova’s strengths and capabilities are not limited to just legal advice. Their market experience brings a level of commercial advice that other law firms do not bring to the table.’

Lux Nova are simply exceptional. Their service is personable in its delivery, detailed in its scope and breadth and truly makes you feel that you as the client are their single biggest priority. Their knowledge of the energy and clean-tech sector is unrivalled even amongst the larger national firms.’

‘Sandy Abrahams’ specialist knowledge was a given, but her real value for us was being able to clearly explain complex and specialist elements of the agreement and use her expertise to translate our requirements into the agreement as well as providing us with commercial perspective.’

‘Lux Nova are everything you would want if asked. Dedicated, knowledgeable, capable, persistent etc. What really sets them apart is that, in a commercial world that is so often lacking, Lux Nova bring integrity and a shared commitment to dealing with climate change and a just transition away from legacy fuels and energy sources.’

‘Louisa Cilenti is deserving of special mention as a singularly talented individual who has never failed to surprise us at her dedication to the highest levels of service and delivery.’

‘Tom Bainbridge, Louisa Cilenti and Sandy Abrahams are impressive and provide a strong balance of complementary skills and expertise. Their focus on and commitment to the clean energy sector is exceptional (and genuine).’

We continue to be ranked in Tier 3 of the Power category.

We are especially proud of this, given the breadth of the Power category (which is not solely focussed on Renewables and Cleantech, while we are) and the size of the firms we are competing against. 

Here are links to the Legal 500:

https://www.legal500.com/c/london/projects-energy-and-natural-resources/power-including-electricity-nuclear-and-renewables/

https://www.legal500.com/firms/4330-lux-nova-partners-limited/7570-london-england/#section-701661

World-leading solar-to-rail innovator, Riding Sunbeams, secure first commercial investment

Riding Sunbeams, have secured their first commercial investment from Thrive Renewables and Friends Provident Foundation with support from Lux Nova

The new working capital will enable Riding Sunbeams to provide a commercial route to market for community energy groups looking for new projects to develop and connect them to regional rail network operators like Network Rail who will pay them a fair price for their power. This will enable rail network operators to source competitively priced green electricity at the same time as supporting local communities, as well as the UK’s efforts to achieve a net zero economy.

Lux Nova partner Louisa Cilenti commented: We are delighted to have continued our support to Riding Sunbeams to see this investment made, creating the platform for scaling an entirely new route to market for decentralised energy generation where community groups and community-owned and commuter-owned renewable energy are at the centre of creating a decarbonised railway fit for the 21st century.

See here for further details.

Riding Sunbeams was founded by climate charity Possible and Community Energy South with a mission to decarbonise rail traction networks through the development and connection of unsubsidised, direct-wire renewable generation with significant social impact for line-side communities.

What's next for UK's distributed generation: contractual routes to market in uncertain times

Sushma Maharaj, Partner at Lux Nova Partners, explores what’s next for UK distributed generation

Ofgem’s recent decision to enable the Electricity System Operator (ESO) to give Distribution Network Operators (DNOs) blanket instructions to disconnect an aggregate quantity of distributed generation capacity within their areas (without compensation to those generators affected albeit subject to the ESO creating a long term enduring solution) comes hot on the heels of its Targeted Charging Review decision which virtually removed embedded benefits for distributed generators.   See article by Robert Tudway at Lux Nova “Emergency disconnection of distributed generators”.   The removal, also, of renewable subsidies (specifically Feed In Tariffs and revenues from the sale of Renewable Obligation Certificates) received by distributed generators, begs the question – “What’s next for UK distributed generators?”.  This question is particularly timely as we await the Government’s Energy White Paper which is set to detail the UK’s path to net zero greenhouse gas emissions by 2050.  

The cutting of subsidies and the erosion of embedded benefits point towards a proliferation of corporate power purchase agreements (PPAs) in the UK power sector.  This means companies whose businesses are not related to energy will increasingly procure the electricity they use directly from generators (instead of via PPAs with licensed electricity suppliers) - and especially as this would also allow them to meet their corporate sustainability goals.  Distributed generators too, will want to enter into corporate PPAS and other route to market agreements, as this would increase their options to take their projects to financial close and optimise project revenues.

Distributed Generators’ Revenue Stream 

The revenue stack of distributed generators usually comes from:-

• the distributed generator’s sale of power either directly under a PPA with a licensed electricity supplier or into the wholesale power market;

• subsidies (e.g. Feed-in Tariffs (“FITs”) under the Feed-in Tariff Scheme (“FIT Scheme”); Renewable Obligation Certificates (“ROCS”) under the UK Renewables Obligation scheme); difference payments under the Contract for Difference (“CFD”) Scheme; and capacity market payments under the UK Capacity Market Scheme); 

• embedded benefits, i.e. the distributed generator’s share of the costs saved by the licensed electricity supplier (as purchaser of power from the generator) as a result of the generator being directly connected to the electricity distribution network – including TNUoS charges on suppliers (known as the triad benefit) and balancing services use of system (BSUoS) charges.  Embedded generators under 100 MW in size also avoid paying TNUoS charges which is a charge incurred by transmission connected generators; and

• ancillary services to National Grid/System Operator  – i.e. services which are provided by the generator to support the safe functioning of the electricity network – e.g. Short-Term Operating Reserve (STOR) or “standby power”, Firm Frequency Response (FFR) i.e. the provision of generation or demand reduction in response to drops in system frequency, or Fast Reserve i.e. so as to control frequency changes arising from sudden changes in generation or demand.  Generators will receive availability payments regardless of whether they are called upon to provide the relevant ancillary service and utilisation payments when the relevant ancillary service is called upon.

Some alternative routes to market for Distributed Generators

Optimisation services agreement with licensed electricity supplier:  

Usually a PPA between a distributed generator and licensed electricity supplier would provide for the sale of power by the generator to the licensed supplier for a percentage of the day-ahead or spot electricity price.   However, under this type of arrangement, the generator gives the supplier control of its assets to be traded at the discretion of the supplier in the electricity forward market or the spot market and also to enter the generator’s asset into the Balancing Mechanism, the Capacity Market or to provide FFR services to NGESO.  In other words, the generator appoints the licensed supplier to trade electricity from its plant in the electricity forward market so as to optimise revenues for the generator in return for which the generator pays (usually monthly) an “optimisation fee” to the supplier (i.e. a flat fee per trade or a percentage of the profit made on the trade). The generator provides availability forecasts in respect of the plant on e.g. a seasonal, monthly etc. basis taking into account a range of factors including operational parameters for the plant – e.g. environmental obligations, O&M manual requirements etc.  The generator can decide that the supplier will always be able to despatch electricity from the plant or will only be able to despatch electricity from the plant at a specified floor price – this way the generator can ensure that revenues will cover plant operating costs, fuel costs, debt repayment and also be able to meet the investment rate of return for the project.  The commercial deal struck between the parties will vary according to the supplier’s share of the market and risk appetite.  

However, when negotiating these types of arrangements/agreements, the following key issues will need to be considered: 

• suitability of the generation technology to control by the supplier;

• provisions to ensure that the generator has transparency in respect of the trades executed by the licensed supplier;

• responsibility for installation and operation of the remote dispatch platform via which the supplier is able to dispatch the generator’s plant and parties’ liabilities in respect of connectivity failures;

• failure by the licensed supplier to trade the generator’s plant in accordance with agreed parameters including price, operational restrictions, permissions, warranties etc. and compensation payable by licensed supplier to generator and/or termination rights for persistent breach.  Such compensation regime would also need to be carved out of the parties’ “no liability for consequential losses” provision;

• change in law risk – the parties will, following a change in law, want to amend the agreement so as to achieve the same overall balance of benefits, rights, liabilities, obligations, risks, costs and rewards which existed between the parties prior to the change in law.  However, the generator might want the right to terminate if there is a change in law.  For example, when the Capacity Market Scheme was suspended, the market price paid by electricity suppliers for power from reciprocating gas engines increased and many of those generators wanted the ability to terminate their contractual arrangements to take advantage of higher market prices. Again, much will depend on the supplier’s market share and risk appetite; and

• termination and termination payments – termination payments and caps and whether payments by a generator to unwind forward trades would be enforced if the supplier is in breach of its provisions under the agreement.

The distributed generator can further optimise its revenues by joining a cluster of distributed generation installations (e.g. wind turbines, photovoltaic power plants, small hydro etc.) and any other power sources in its local area to form a Virtual Power Plant  (which is controlled by a central control entity or Virtual Lead Party via an information communication technology (ICT) structure).  The distributed generator would be entitled to service fees e.g. availability payments and payments for delivery of flexibility services to the Virtual Lead Party. The distributed generator will also need to consider: the services which it will offer and for what service periods based on the operational parameters of its asset (e.g. via transaction confirmations); its obligations regarding proving tests for its assets; its performance obligations including reporting obligations and how performance failures (e.g. unavailability of assets) will be dealt with (e.g. for planned and unplanned maintenance); communication and metering requirements; changes in law; and termination and termination liabilities where assets are removed from the Virtual Power Plant (e.g. for persistent breaches by the distributed generator).   

On Site/ Private Wire PPAs: 

 This is where electricity is generated on the same site where it is used by the corporate offtaker and the generator has a physical connection both to the corporate offtaker through private wires and also to the grid. The generator may also have a PPA with a licensed supplier in respect of surplus volumes not required by the corporate offtaker and the licensed supplier can act as a back stop buyer if the corporate offtaker is unable to fulfil its PPA obligations. The electricity price achieved by the generator is typically higher than for a wholesale or sleeved PPA and lower for the corporate offtaker than a traditional grid import price because the corporate offtaker avoids non-commodity energy and network charges.  Pricing options include (i) fixed price, with some form of indexation; (ii) floating price where supply is priced by reference to an index agreed by the parties; (iii) a cap and floor mechanism; (iv) a discount to market model where the Buyer pays a price based on what it would have paid had it purchased electricity from a licensed supplier (including non-commodity costs) less a discount based on an agreed formula.  

When negotiating these types of agreements, the parties must consider and cater for the following issues:

• suitability of corporate offtaker’s location for direct connection – upfront capex costs, parties’ responsibilities for costs of connection, access and land rights, delays in construction of private wire and compensation regime;  parties’ responsibilities for electrical losses on private wire;

• consents and/or licences required – e.g. will the arrangement fall within the Electricity Class Exemption regulations;

• creditworthiness of the corporate off-taker;

• co-operation of the local DNO so as to ensure sufficient capacity on the local grid to take full offtake if needed;

• generation technology and operating costs (particularly, input fuel costs, where relevant);

• generator’s projected energy total output volumes andvariability in output volumes plus target energy volumes and metering of volumes sold and bought;

• generator’s failure to provide target energy volumes e.g. due to unplanned maintenance and compensation by generator to corporate offtaker in respect of such “availability shortfall”;

• buyer’s failure to consume minimum guaranteed offtake and compensation by Buyer to generator for such “consumption shortfall”;

• transfer of and payment for green benefits (and how this is affected if generator fails to provide target energy volumes to the corporate offtaker);

• termination and termination payments (and caps);

• change in control and changes in land ownership; and

• change in law - currently charging for public wire networks is based on metered consumption from the grid so electricity which is generated and consumed “behind the meter” is not taken into account even if private network users rely on the electricity distribution network to ensure continuity of supply.  However,  Ofgem decided in the Targeted Charging Review that, from April 2021, final demand users e.g. industrial consumers, will be charged a fixed charge for use of the electricity networks.

Synthetic or Virtual PPAs:  

This is a form of hedge where the corporate buyer and the generator agree to hedge the price at which they buy electricity from, and sell electricity to, a licensed supplier.  Both the corporate buyer and the generator each, separately, enter into an agreement with the licensed supplier – the generator enters into a power purchase agreement with the supplier and the corporate buyer enters into a supply contract with the supplier.  There is no physical delivery of electricity between the generator and the corporate buyer.   The corporate buyer and the generator agree a strike price.  If the open market electricity price is higher than the strike price, the generator will pay to the corporate buyer, the excess amount for power generated in that period (a “difference payment”).  If the open market electricity price is lower than the strike price, the corporate buyer will pay, to the generator, the shortfall amount for power generated in that period (a “difference payment”).  This gives both parties long-term certainty  over their power prices.  The corporate buyer will also be given green certificates associated with the project in order to demonstrate it is meeting its renewable and/or corporate sustainability commitments.  This structure allows for flexibility in the number and location of electricity volumes supplied. The generator and corporate buyer will need to consider, amongst other things, the following issues when negotiating this type of agreement:

• financial regulation issues – the parties will need to consider whether the contractual structure will be a derivative financial transaction falling within the Markets in Financial Instruments Derivative (MIFID) and triggering derivative accounting obligations;

• appointment of contract administrator – to monitor and record power volumes, calculate difference payments, recommend alternative trading strategies where forecasted generator volumes exceed corporate buyer’s requirements and where corporate buyer’s demand requirements exceed generator’s maximum agreed volume; monitoring, recording and validation of green certificates;

• agreed power volumes and volume limitations;

• price – i.e. price at which agreed power volumes  are sold by generator to licensed supplier and price at which corporate buyer purchases agreed power volumes from licensed supplier;

• forecasting obligations;

• metering– e.g. daily metering and relevant reporting platforms;

• payment schedule for difference payments; and

• termination provisions if generator fails to sell required volumes and also if corporate buyer does not purchase minimum agreed volumes and compensation payments in respect of early termination. Parties to also consider compensation payments payable as between them if the power purchase agreement and/or supply contract between the relevant party and the licensed supplier falls away due to such party’s breach.

Sleeved/Physical PPAs: 

The corporate buyer enters into a tripartite corporate PPA with the distributed generator and the licensed electricity supplier who will “sleeve” the power from the generator to the corporate buyer in accordance with a PPA (between  the licensed electricity supplier and generator under which the supplier takes delivery of the energy from the generator’s site) and a supply contract (between the supplier and the corporate buyer under which the supplier sleeves such power to the corporate buyer at its point of consumption), for a fee.  The supplier will also top up electricity delivered to the corporate buyer to meet its electricity demands.  The corporate buyer has certainty over how much power it will use and how much it will pay – whilst the generator and the supplier manage the off-take of power from the generating plant.  However, this arrangement involves complex contracting arrangements – and the corporate buyer’s reliance on the supplier to provide the sleeving service in addition to electricity supply may reduce its flexibility to change suppliers, unless contract chain breaks are thoroughly worked through. 

When negotiating these types of agreements, the following issues will need to be considered:

• contractual chain: the terms of the PPA between supplier and generator will need to be “backed to backed” with the terms of the supply contract between the supplier and the corporate buyer;

• financial regulation issues – to minimise the risk of the contractual structure being considered a derivative financial transaction, the parties need to ensure the transaction remains physically balanced at all times;

• matching electricity volumes to be sold by generator and purchased by corporate buyer and keeping them matched even where one party’s generation or demand is below the expected volume;

• management fee/sleeving fee and revisions to such fee if there are market movements or the parties agree to volume changes;

• termination provisions and termination payments if there is a break in the contractual chain due to the fault of either of the generator, corporate buyer and/or suppler;

• generator’s failure to deliver agreed electricity volumes to the corporate buyer and compensation payable by generator to corporate buyer as a result of such failure;

• corporate buyer’s failure to consume agreed electricity volume and compensation payable by corporate buyer to generator as a result of such failure;

• credit support to be given by the parties;

• change of control of generator;  

• assignment of contracts by corporate buyer; and

• arrangements in place for appointment of replacement supplier in the event of supplier’s default.

Conclusion

The ESO’s power to disconnect distributed generation capacity may affect distributed generators’ sale of power to licensed suppliers who need such power in a different location and therefore need such power to travel over the transmission systems.  Furthermore, the Targeted Charging Review decided that, from April 2021, all distributed generators will have to pay for the costs of balancing the grid and will no longer be supported by embedded benefits.

In general, embedded generators bear higher unit costs for each MWh they generate.  However, since their electricity is designed to be consumed locally, they have historically saved on transmission costs which larger scale power stations pay (as these use the transmission network to transport their power to its point of consumption by the electricity supplier).  However, the removal of embedded benefits and the imposition of a charge on distributed generators for transmission system costs is inconsistent with ‘local’ consumption. Furthermore, these changes will affect wind, solar and battery storage projects more acutely than thermal generation (such as gas peaking plants and CCGTs) as renewable generation will not be able to obtain higher capacity market payments due to their low contribution to security of supply.   This all means that the cost of building renewable distributed generation will become more expensive which may impact investor confidence in the renewable generation sector, and, in turn, undermine GB decarbonisation targets.  

Emergency disconnection of distributed generators – business interruption without compensation?

Robert Tudway of Lux Nova Partners explores the recent emergency powers granted to DNOs for last resort disconnection of distributed generation and the wider implications for grid management of low and zero carbon electricity generation.

On 7th May Ofgem approved with immediate effect a change to the Grid Code, enabling the Electricity System Operator (ESO) to give Distribution Network Operators blanket instructions to disconnect an aggregate quantity of distributed generation capacity within their areas, without compensation to the generators affected. 

This is an emergency measure, but is to be followed up by the ESO constructing a permanent mechanism for Ofgem’s approval.

It is fundamental that any long term solution adopted to address the actual underlying problem is a product of extensive participation by distributed generators and does not discriminate against the low and zero electricity generating capacity that it contributes.  

Why the emergency?

The ESO already has a power to ask DNOs to disconnect an individual item of generating capacity embedded in its system if departing from the normal balancing system processes is justified; but it has rarely if ever been used and does not apply to the aggregated distributed generating capacity or percentage capacity connected to DNOs’ systems, but only to specific individual plants. However, the reduction in electricity demand resulting from the combination of ‘stay at home’ restrictions to combat Covid 19 and the progressive increase in the amount of distributed generating capacity triggered  the ESO to want the ability to include embedded generation collectively in its balancing armoury - so much so that, from a standing start, the ESO felt that the modification needed had to be done before the May Bank Holiday week-end to avoid the risk of the transmission network crashing. 

The quantity of distributed generating capacity has been increasing steadily.Around a third of the electricity consumed in the UK is now from renewable sources, a substantial proportion of which is in smaller generating plant directly connected to electricity distribution systems. The result has been that, when Covid 19 arrived and caused reduced electricity demand as we stayed at home, it brought to the surface the question of Grid control over this new and expanding source of electricity generation within the distribution networks. Unfortunately, the hurried measures now taken could unfairly and unreasonably disadvantage distributed generators in competing in the market place with sources of generation directly connected to the Transmission Grid. A long term, fairer and more transparent arrangement is needed.

Working for an enduring solution.

In the ESO’s modification proposal [GC143], to give it the control it wants over the disconnection of distributed generation, the ESO sets out its solution – 

‘The changes proposed will give the ESO the clear ability to instruct DNOs to disconnect embedded generation in an emergency situation. This would only be pursued as a last resort if no further actions were available to the ESO either commercially or in the BM [Balancing Mechanism]. As part of the solution a sunset clause has been included which will time out the additions to the Grid Code in October 2020 if not further amended by this point.’

‘It is the intention that a more considered solution to the issues identified here will be developed in the meantime…’

In allowing the modification to the Grid Code, Ofgem made it clear that the ESO must bring forward a further modification to  develop an enduring solution in consultation with industry stakeholders ‘on a non – urgent timeline to allow all relevant points of view to be taken into account’.

Ofgem also state that the solution should be based on the development of a ‘market based enduring solution’

Ofgem’s decision also refers to the EU’s ‘Clean Energy Package’ [Regulation on the internal market for electricity 2019/943] and quoted from it the requirement that ‘where non-market based re-dispatching is used, it shall be subject to financial compensation by the system operator requesting the re-dispatching to the operator of the re-dispatched generation, energy storage or demand response facility except in the case of producers that have accepted a connection agreement under which there is no guarantee of firm delivery of energy’

This might sound re-assuring, but the distributed energy sector should not be lulled into thinking that events can be allowed to take their course – 

• in their assessment of the impact of the temporary measures contained in their modification proposals, the ESO assesses there to be no impact on the facilitation of effective competition in the generation and supply of electricity, despite the fact that directly connected generators are compensated either though the BM system or under commercial arrangements, whilst the distributed generators are not;

• Ofgem finds, in its determination on the modification, that the change will have a neutral impact on the facilitation of effective competition under the Grid Code;

• in its recent review of embedded benefits, Ofgem virtually removed embedded benefits. This was in spite of cogent arguments being made on behalf of distributed generators that the business model of many them depends upon embedded benefits to correct for a market structure that favours large scale, directly connected generators. The removal of embedded benefits has a clear negative impact on their businesses and a further distortive impact on competition;

• although Ofgem (through the Authority) has environmental obligations, they do not interpret that obligation as requiring them ensure the market structure supports low and zero carbon energy production.

What next?

The underlying message is that, although the ESO is committed to a proper review of the long term position and Ofgem has included some re-assuring words regarding a possible market based solution and the possibility of compensation, nothing is settled and much is in doubt – 

• since both participation in the BM and commercial arrangements with the ESO involve payments in return for directly connected generators not generating, there needs to be a basis of compensation for distributed generators which is equivalent and does not leave put them at a further competitive disadvantage;

• how would a market-based system (as Ofgem would appear to prefer) work and how will it be made transparent and practical for smaller scale generators to participate in?

• what would be the role of the DNO and the specifics of their obligations in operating a scheme beneath grid supply points?

• will the DNO operate a bidding system or other pricing mechanism to establish on each occasion whose generating plant will be disconnected or will there be a series of commercial agreements with each connected generator?

These questions are merely a broad outline. The distributed generation sector will do well in the coming months to identify the issues which are important to them and to the outcome of the forthcoming debate.  They will need to play a leading role in constructing a fair and transparent scheme, rather than risk leaving too much to others. Left to their own devices, the ESO and DNOs will naturally choose solutions that fit their own systems and a market structure designed for transmission connected generation, more than ones that meet the legitimate expectations of distributed generators.

Lux Nova are proud to have supported the Leapfrog Finance team to complete a £5.5million community solar park refinance amidst COVID-19 lockdown

West Sussex local energy enterprise completes £5.5million transaction amidst lockdown and launches Corona Crisis Fund.

Leapfrog Finance and Communities for Renewables C.I.C. are delighted to share the news of a successful community re-finance of a 5MW solar farm by Ferry Farm Community Solar Ltd.

Ferry Farm Community Solar, a local energy enterprise which serves the West Sussex communities of Selsey and Sidlesham has completed a £5.5 million transaction to bring a 5MW solar array into full community ownership. The solar array has been up and running since 2016 and generates enough clean energy to power approximately 1,300 homes per year. Ferry Farm Community Solar is supported by Communities for Renewables CIC.

The transaction was funded by a loan from Leapfrog Bridge Finance. A further opportunity for the community to invest in the enterprise will come later this year.

Surplus income generated by Ferry Farm Community Solar (around £50,000 per year since inception) has been used to support:

-      An energy and fuel poverty advice service, helping individuals and families living in fuel poverty reduce their energy spend, maintain a healthy living environment in their homes, deal with energy debts and access energy-related benefit payments. 

-      A community grant fund, supporting local organisations and projects in Selsey and Sidlesham. 

Immediately following completion of the transaction Ferry Farm Community Solar launched a £40,000 Corona Crisis fund to support local people facing hardship due the outbreak, shut down and likely recession. 

Louisa Cilenti, Partner at Lux Nova - legal advisors for the transaction, said: 

“We are delighted to have supported Leapfrog to finance the acquisition of Ferry Farm Community Solar Project, to enable this FiT-backed 5MW solar park to remain in long-term community ownership and under community management. It is testament to the expertise and commitment of the Leapfrog finance team and the strength of their relationship with community developer and asset manager CfR that acquisition terms could be structured to meet the commercial requirements of Triple Point whilst preserving significant cash surpluses over the life of the project to directly benefit local community initiatives. We continue to be filled with optimism that we will emerge from the COVID-19 pandemic with a stronger focus on the value of communities and the enabling role of social finance to advance a bigger societal mission and positive social impact.”

Matt Andrews, Director of Project Finance at Leapfrog Group said: 

“Leapfrog Bridge Finance is delighted to support another community with its’ transition to a carbon neutral future whilst at the same time generating significant social impact. Working closely with our professional advisors Lux Nova Partners, Johnston Carmichael Chartered Accountants & Green Cat Renewables we were able to complete the funding during a period of intense uncertainty for the country and its communities. The funds already being distributed locally to help combat the impact of the coronavirus demonstrate how local energy enterprises can support their community’s resilience.” 

Tom Cosgrove, of Communities for Renewables CIC, who managed the transaction for Ferry Farm Community Solar said:

“behind the scenes a huge amount of work goes into a transaction like this from the borrower, funder and the advisory team. It has taken us 6 months to get through the finance process and several months of negotiations prior to that. To complete the transaction in the midst of the lock down is a credit to all parties and shows how important it was to everyone to get it done and enable the enterprise to mobilise the Corona Crisis Fund.”

About Ferry Farm Community Solar Ltd

Ferry Farm Community Solar Ltd is a not for profit community energy enterprise which serves the communities of Selsey and Sidlesham in West Sussex. It was set up with the support of Communities for Renewables CIC to manage the community involvement in a 5MW solar array at Ferry Farm on the outskirts of Selsey. The society is governed by a board of volunteer directors and owned by its members (of which there are currently around 100) who invested in a community share offer when the society was first set up. These members have a 1 member 1 vote say in AGM decisions and have been paid 6% per year share interest. However, as a community benefit society, Ferry Farm Community Solar operates primarily for the benefit of the local community rather than its members. The enterprise expected to generate around £2million to support local community projects over its lifetime.

About Leapfrog 

The Leapfrog Group is dedicated to enabling positive social, environmental and financial impact for UK communities by facilitating their participation in a low-carbon energy system. 

Our not-for-profit organisation comprises:
1.         Pure Leapfrog (UK Charity 1112249), providing access for communities wishing to benefit from low-carbon systems (including legal templates, pro bono technical advice, social impact tools etc.) and serves as an ‘incubator’ working with communities on innovative models for their engagement in and benefit from the energy system. 

2.         Leapfrog Finance, which is our social and environmental impact investment arm. Leapfrog Finance operates a revolving short-term (6-12 months) bridge finance facility, enabling community organisations to install and/or acquire low-carbon energy systems. Projects benefiting from this facility are overlooked by traditional finance. Importantly, Leapfrog Finance only lends to projects combining renewable energy assets with strict social impact criteria. This is how we ensure that, while we are involved for a short time at the early-stage of a project, our contribution generates positive environmental and social impact for the community through the lifetime of the project (20 years+).

www.pureleapfrog.org

About Communities for Renewables

Communities for Renewables CIC (CfR) is a community interest company which helps communities across the UK to set up local energy enterprises and works with them to develop, finance and manage their own renewable energy generation. 

Since setting up in 2012, CfR has worked with local energy enterprises in over 30 localities from villages to cities to help deliver over 35MW of community solar from school roofs to one of the largest community solar farms in the UK. CfR has supported the financing of community solar projects with a capital value of £56million and our company and asset management team looks after 50MWp of community solar across 7 localities. Over their operational lives, these projects are projected to generate around £20million of surplus income to support community projects in their localities. 

CfR’s contribution to leading innovation in the community energy sector has been recognised through CfR winning the 2018 Community Energy England (CEE) Community Energy Champion and Young Community Energy Champion awards and being short-listed for CEE community energy finance award, 2018 and 2019 Renewable Energy Association awards and 2020 Natwest SE100 social enterprise awards.

www.cfrcic.co.uk

About Selsey and Sidlesham 

Selsey and Sidlesham lie on the Manhood Peninsula to the east of the Solent. The peninsula is much loved by its residents and visitors. With a population of around 11,000, Selsey is a local centre providing a range of day-to-day services such as healthcare, shopping and education to the adjoining parishes and villages. Sidlesham is a rural parish with a population of 1,000 across 5 hamlets. Selsey and Sidlesham parishes are under Chichester District Council and West Sussex County Council.

The low-lying Manhood Peninsular is particularly vulnerable to climate change. The parishes of Selsey and Sidlesham are home to the UK’s largest open coast realignment scheme which is designated as a nature reserve and managed by the RSPB, who are also custodians of the neighbouring Pagham Harbour Local Nature Reserve.

The local economy is highly reliant on seasonal trade and low pay, low skilled work in agriculture and tourism jobs, as well as residents working in the commutable commercial centres which include Chichester, Portsmouth, Southampton and the Sussex Coast towns.

Like most UK coastal towns Selsey has its challenges with unemployment, access to post 16 training, cost of public transport and links to employment areas. Whilst Chichester District as a whole is one of the least deprived areas in the UK, this hides significant wealth disparity.  The North Ward of Selsey contains a pocket of multiple deprivation. This is reflected in the roll at the local Secondary school where a quarter of the school population qualify for Pupil Premium and just below 20% identify as having Special Educational Needs (SEN) compared to the national average of 12%. The percentage of students receiving Free School Meals (FSM) is slightly above national average (14.9% at TAS compared to 14.1% national) but much higher than the rest of West Sussex (8.8%). 

The Corona outbreak presents particular challenges for the community:

• 40% of the population are over 65 and there are 3,500 over 70's supposed to be self- isolating

• Many of the retired population have moved to the area and live away from family, with loneliness and isolation being an issue for those who have subsequently lost partners

• There are 189 people with a diagnosis of dementia

• There are 550 voluntary carers

The area, and Selsey town, has a strong sense of identity and its residents form close communities. There are over 150 active community groups, providing everything from leisure and creative pastimes to support for health, emotional and social needs. Selsey Community Forum holds 46 Forums a year bringing together statutory, charity and commercial partners. Selsey Care Shop offers support to voluntary Carers, people living with dementia, the lonely, bereaved, those in debt and low level mental health needs. This support is given through 400 monthly visitors to the Shop, 21 monthly activities and regular proactive telephone calls. 

Selsey Community Forum is coordinating the community’s Covid response, working in partnership with all other agencies. Action so far includes:

• Organised 120 buddies covering every road in town. This is covering Shopping, prescriptions and dog walking amongst other things. 

• Set up a communications network via Facebook, phone, email and text.

• Distributed an informative magazine, Senior Selsey News, to 1000 most isolated elderly residents. 

• Set up a welfare fund in coordination with Foodbank.

• Helped to coordinate the use of surplus food from Costa and other closing outlets. 

• Organised daily phone calls to reassure 150 isolated and vulnerable people.

• Sending weekly reports to Community Warden, Town Council, Medical Practice, District and County Council.

Lux Nova supports Energy Pro to commercialise new energy efficiency model for SME sector

EnergyPro, the leading energy consultancy and investment firm, is delighted to announce that it has been awarded a new contract by the Department for Business, Energy and Industrial Strategy (BEIS) through the ‘Boosting Access for SMEs To Energy Efficiency (BASEE)’* competition. EnergyPro will develop and launch ESCO-in-a box®, a new business model aimed at unlocking the wide range of financial, environmental and social benefits provided by energy efficiency upgrades for SMEs that traditionally lack the time and resources to implement projects. 

ESCO-in-a-box is an ‘operating system’ for energy services, incorporating all the systems, processes and contract templates needed to deliver energy efficiency projects to SMEs, based on internationally established good practice. The system will be targeted at organisations operating on a regional or market-segmented basis that enjoy trusted reputations and relationships with SMEs, meaning they can work with them to systematically address barriers to increase the uptake of energy efficiency solutions. These organisations will then deliver projects for SMEs in a standardised manner using ESCO-in-a-box. The projects will be investment grade and accessible to financiers, making the customer proposition high quality, low risk and available at no up-front cost to the SME. ESCO-in-a-box system will be available as a ‘franchise’, over time creating a national network of energy services companies (ESCOs) serving SMEs.

The Low Carbon Hub based in Oxford will be the first regional energy services organisation to trial the new business model and will help develop a market-ready version of ESCO-in-a-box in collaboration with a consortium of organisations including: EnergyPro as the business lead; Oxford Brookes Univeristy’s Environmental Information; Basel Agency for Sustainable Energy (BASE); the Energy Systems Catapult; Lux Nova and Huber Dixon Insurance.

Alex Rathmell, MD EnergyPro Consultancy says: “We aim to prove that a local, trusted organisation can successfully deliver energy efficiency services to SMEs provided they are equipped with the right toolkit: standardised project development process, vetted technology partners and contractors, guaranteed savings and suitable finance.” 

Barbara Hammond MBE, CEO of Low Carbon Hub says: “To drastically reduce our carbon emissions, we must quickly address the high energy usage of our buildings – increasing energy efficiency and reducing energy demand. We are thrilled to be a partner on this innovative project, supporting Oxfordshire SMEs to implement energy efficiency measures, reducing their costs and carbon emissions.”

Louisa Cilenti, Partner, Lux Nova says: “We are delighted to have supported EnergyPro to develop a breakthrough services to improve energy efficiency take-up by SME’s and advance a community of best practice to achieve efficient implementation and sustainable transformation for the SME sector.”

Editors Notes: 

EnergyPro Communications and Marketing Manager contact: Lucy Churchill 

Email: lucy.churchill@energyproltd.com 

Mob: 07711 643 112 

Low Carbon Hub Communications and Marketing Manager contact: Tabitha Whiting 

Email: tabitha.whiting@lowcarbonhub.org 

Tel: 01865 246099

EnergyPro Ltd is a leading energy consultancy and investment firm working with corporate and public sector clients and investors helping make business sense of the energy transition. Our areas of expertise include energy, energy efficiency and energy efficiency finance. www.energyproltd.com

Low Carbon Hub is a social enterprise out to prove they can meet our energy needs in a way that’s good for people and good for the planet. They develop community-owned renewable energy projects in Oxfordshire and re-invest 100% of the surplus into supporting local communities in carbon-cutting projects. https://www.lowcarbonhub.org/

Oxford Brookes University’s Environmental Information Exchange (EiE) is a not-for-profit organisation based at Oxford Brookes University providing UK organisations with support to reduce their energy, water, and waste. www.brookes.ac.uk/eie/

Basel Agency for Sustainable Energy (BASE) uses expertise in technology, markets, economics, finance and business development to unlock investment in sustainable energy and meet the challenge of climate change for public and private organisations. http://energy-base.org

Lux Nova is a team of specialist lawyers focusing exclusively on clean energy and market transformational projects. www.luxnovapartners.com

Energy Systems Catapult (ESC) was set up to accelerate the transformation of the UK’s energy system and ensure businesses and consumers capture the opportunities of clean growth. ESC is an independent, not-for-profit centre of excellence that bridges the gap between industry, government, academia and research – _with around 200 staff covering a variety of technical, commercial and policy expertise. https://es.catapult.org.uk/

Huber Dixon Insurance (Energy Group) is an independent insurance broker specialising in providing bespoke solutions for the Energy Efficiency and Renewable Technology sectors.

The Department for Business, Energy and Industrial Strategy (BEIS) 

The Department for Business, Energy, and Industrial Strategy (BEIS) is a ministerial department bringing together responsibilities for business, industrial strategy, science, innovation, energy, growth and climate change.

The Boosting Access for SMEs to Energy Efficiency (BASEE) competition is funded by the BEIS Energy Innovation Programme and further details can be found at: https://www.gov.uk/government/collections/innovations-in-the-built-environment

Latest news from Gov.uk regarding the BASEE competition can be found at: https://www.gov.uk/government/publications/boosting-access-for-smes-to-energy-efficiency-basee-competition-winning-projects

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* https://www.gov.uk/government/publications/boosting-access-for-smes-to-energy-efficiency-basee-competition

Coronavirus (COVID-19)

Dear clients and friends

We hope you and your families are as well as could be and navigating through this challenging period. 

We are taking all precautions at this time to protect our staff, including remote working and suspending face-to-face meetings. Those who work with us closely will know that our business was founded on an ability to be responsive to change and to put our people and your business first, so our systems are already well-tested and it’s very much business as usual. The climate emergency won’t stand still, and neither will we.

We are very proud to belong to such a committed community of people who have long recognised the interconnectedness of everything we do and made fighting climate change a priority. Let’s stay strong together.

Louisa, Tom and Sandy

Lux Nova advises Renewable Energy Assurance Limited on its partnership with MCS and Which? to enhance consumer protection

Lux Nova has advised the small scale renewables consumer protection organisation Renewable Energy Consumer Code (RECC) (part of Renewable Energy Assurance Limited (REAL)), on its  partnership with the Microgeneration Certification Scheme (MCS) and Which? Trusted Traders to improve consumer choice and protections in relation to installation of small scale renewable assets and enhance the offering for MCS registered installers.  

RECC and MCS have welcomed the new arrangements which permit qualifying installers’ RECC membership fees to be included in the MCS “per installation” fee payable when they register on the MCS Installation Database on a “pay as you go” basis. Both MCS and RECC have commented that the new arrangement shows that consumer protection remains at the core of their operations.

Meanwhile the new Which? Trusted Trader arrangements provide qualifying RECC members with both reductions in fees and the benefits of being listed as a Which? Trusted Trader (part of the consumer champion Which?).

Lux Nova’s Stephen Lister said “We are proud of our association with REAL and were delighted to work with Virginia Graham OBE and her team on these arrangements which mark a great start to the new decade for both consumers and RECC”.