How to treat requests to share grid connections

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1 How to treat requests to share grid connections There may be a number of reasons why commercial generators might request to convert an existing grid offer into a shared arrangement. Some would be looked upon favourably by Government, as this would indicate developers responding to Government policy. Others would be looked upon negatively as they are triggered by developers reacting defensively to changes in Government policy or seeking to sell connection capacity which they are no longer in a position to use. Consequently DNOs may be wary of the motivation behind grid connection sharing requests. They will also be wary of being put in a position where they are expected to judge which requests are desirable with respect to Government Policy. This paper addresses the situation where commercial developers are seeking to share their connection with a bona-fide community organisation. It is Government policy that commercial developers offer interested communities the chance to invest in projects alongside them. The Community Energy Strategy, published in January 2014 set up the Shared Ownership Taskforce in order to recommend how this might be done. The Taskforce reported in November. The report set out which types of projects would be expected to make ownership offers, and described three typical approaches of shared community ownership. One of these is the split asset model. This is a project where some of the wind turbines or solar panels in a project are physically owned by the community organisation. This model, though new to the renewables industry in the UK, is proving particularly attractive to developers of ground mounted solar PV projects. This is because A legislative change to the Feed in Tariff will allow split asset model projects to share a grid connection, and for each part of the project to be regarded as a separate site, qualifying for the Feed in Tariff in its own right. This would allow two projects, both up to 5MW to share a connection and each to qualify for the FIT. (The legislative change is set out at the end of this paper for reference). The Renewables Obligation is closing to projects over 5MW at the end of this month. Therefore, if developers have projects which they cannot commission in time to qualify for ROCs, there may be scope to continue to develop them as split asset projects under the FIT. Solar is a very popular technology, and there is a healthy appetite amongst the general public for investing in solar projects. The REA has prepared this paper, in the hope that DNOs can agree how to treat sharing requests, against this rather complex policy background. It looks specifically at requests to share grid connections made in order to develop split asset projects qualifying under the FIT.

2 Another point to note is that community organisations often experience difficulty in getting project finance for installations that do not have their own grid agreement. Lenders are wary of lending to projects which will be reliant on a third party for their ability to export. This rules out a community organisation project with a shared connection, operated under an agreement solely between the commercial partner and the DNO. In order to overcome this problem, some developers have sought to move the connection agreement so that it is held in an insolvency-remote SPV, in the hope that this will reassure lenders that the community organisation s route to market cannot be lost. However this is complex and costly in legal fees (perhaps 30k 100k), and experience has shown that even with this arrangement lenders can be wary. Therefore, what is really needed to facilitate the development of split asset projects, as Government desires, is the ability for commercial developers to share their grid connection offers with a community organisation, without relinquishing any capacity so that it goes interactive with other connection applications separate grid Connection Agreements for the developer and community organisation. (Of course this will only be possible where the configuration of the connection allows the DNOs to distinguish between the two parties), and finally to be able to reverse these changes if necessary (for example if the community project falls away for some reason) The table below sets out the position the REA would like DNOs to take in respect to the above scenarios.

3 Summary of how projects offering shared community ownership (split asset model) should expect to be treated, WRT to interactivity. Requested change A commercial developer with a grid offer (whether they have accepted it yet or not) requests to share its grid connection with a community organisation. The resulting connection would have 1 MPAN, with separate FIT meters beyond that. As above, but The resulting connection would have 2 MPANs, each with own FIT meters and own Connection Agreement. How should this be treated This should be permitted as a non-material change provided that the developer demonstrates that both parties would be eligible for the FIT. (In order that they are eligible, Ofgem has to be satisfied that one party is a bona-fide community organisation). This should be permitted in a manner which does not trigger any interactivity considerations. This may require the Community Energy Scheme to complete a new application form initially. The commercial developer would then release the required export capacity to the Community Energy Scheme. As above. Comment although more expensive this is likely to be a preferable solution as it would be easier for fundraising as both parties would have their own Metering Breaker, Protection Systems and Connection Agreement. NB It is understood that the impact of the legislation is slightly different in this case. Before the change, projects could not share a connection this was only possible provided they were totally separate and segregated sites (under the original definition of a site.) Following the legislation the total capacity could be up to 5MW for (both) two parties, but only in situations where one of the party is a bona fide community organisation. Therefore in situations where there are to be two MPANs (and Connection Agreements) DNOs would need to be able to distinguish between a bona-fide split asset project sharing request and an attempt to trade capacity. The DNO have to satisfy itself that one of the parties comprised a community organisation. The definition of community organisation is given below (pink shading). REA understands that this entails an additional task for DNOs. If helpful, the REA could produce a declaration which the community organisation could sign to testify that it meets the legal definition of a community organisation. Where there is to be one MPAN they need not worry as the Ofgem accreditation process would provide the necessary safeguards.

4 Now considering the above in reverse e.g. in a situation where the community organisation cannot actually raise the money, or drops out of the picture for some other reason. In order to encourage commercial developers to make community shared ownership offer, it will help if the developer knows they can continue to progress their project independently of the community element, should things not work out. They should be able to revert back to developing the entire capacity themselves (which would only work if it were no greater than 5MW) or developing their split portion of it, allowing the remainder of the connection capacity not taken up by the community project to be released to the queue. Requested change Is this permitted right now? Will there be any change after the FITs legislation amendment is enacted on 1 st April To remove the community organisation from a proposed shared grid connection, in a situation where there was to be 1 MPAN, with separate FIT meters beyond that. As it stands now some DNOs may take the view that this would only be regarded as a non-material change if the point of connection remains the same. If the point of connection would be different for the single project, the commercial developer would have to reapply for the connection. If the grid were constrained, they may lose their place in the queue. N/A the process will remain as just described. To remove the community organisation from a proposed shared grid connection, in a situation where there was to be 2MPANs, each with its own FIT meter. The REA would like the commercial developer to keep their place in the grid queue in this situation. This would make commercial developers less wary of entering into shared ownership discussions with community organisations. As above. N/A the process will remain as just described.

5 Amendment to the Feed-In Tariff legislation Following its consultation on support for community energy projects under the Feed-in-Tariffs Scheme the Government decided to modify the current rules to create an additional exemption to the site rule in the FITs scheme to allow two projects, provided one project is owned by a community organisation, to share a grid connection and receive separate tariffs based on their individual generating capacity. The legislation to make the amendment to the Feed-In Tariff order of 2012 was laid before parliament in January 2015 and will come into effect on 1 st April. Appendix - the legislation. The explanatory memorandum to the legislation change can be found on The 2 relevant parts of the Feed In Tariffs (Amendment) order 2015 are pasted below. The first is Article 11 which contains the definition of community organisation. The second is Article 15 which changes the definition of site The amendment order in full can be found on Article In paragraph (6) of article 11 (pre-registration of community energy installations) (a) before the definition of community benefit or co-operative society, insert charity means a charity (a) registered in the register of charities kept by the Charity Commission in accordance with section 29 of the Charities Act 2011(a); or (b) as defined by section 106 (interpretation) of the Charities and Trustee Investment (Scotland) Act 2005(b); ; (b) for the definition of community benefit or cooperative society, substitute community benefit or co-operative society means a society registered under the Cooperative and Community Benefit Societies Act 2014(a) as a community benefit society or as a co-operative society; ; (c) for the definition of community organisation, substitute community organisation means (a) any of the following which has 50 or fewer employees (i) a charity; (ii) a community benefit or co-operative society; or (iii) a community interest company; or (b) a subsidiary (as defined in section 1159 of the Companies Act 2006(b)), wholly owned by a charity, where the subsidiary has 50 or fewer employees and the parent charity has 50 or fewer employees;. Article In article 15 (site of accredited FIT installations)

6 (a) after paragraph (4)(c), insert (d) at least one of A or B is owned, or is to be owned, by a community organisation and the conditions in paragraph (7) are met. ; and (b) after paragraph (6) insert (7) The conditions referred to in paragraph (4)(d) are that (a) only A and B share, or are to share, the single grid connection referred to in paragraph (3)(a); and (b) for both A and B (i) the Tariff Dates; or (ii) the Eligibility Dates, are on or after 1st April The paragraphs below show how this amends the 2012 order (shown in revision marking). Site of accredited FIT installations 15. (1) Where an application has been made to the Authority (a)for accreditation of an eligible installation as mentioned in article 4(a); or (b)for preliminary accreditation of an eligible installation, before granting accreditation or preliminary accreditation the Authority must determine the site of the eligible installation in accordance with this article. (2) Subject to paragraphs (3) to (5), the Authority must determine the site of an installation by reference to such of the following criteria as the Authority considers appropriate (a)the meter point administration number ( MPAN ) of the meter measuring the supply of electricity to the premises at which the installation is, or is to be, located; (b)the address of the premises at which the installation is, or is to be, located; (c)the Ordnance Survey grid reference at which the installation is, or is to be, located; and (d)any other factors which the Authority considers relevant. (3) Where (a)two installations ( A and B ) share, or are to share, a single grid connection; (b)a and B are not otherwise electrically or mechanically connected; and (c)any of the circumstances in paragraph (4) applies, paragraph (2)(a) is not to be taken into account in determining the site of A or B. (4) The circumstances in this paragraph are that (a)a and B are, or are to be, attached to separate self-contained private residential dwellings; (b)a and B are, or are to be, hydro generating stations which are supplied with water by or from different civil works; (c)a and B are, or are to be, hydro generating stations which are supplied with water by or from the same civil works, and A or B consists of one or more turbines (with their associated infrastructure) driven by a compensation flow supplied by or from those civil works in a natural water course where there is a statutory obligation to maintain that compensation flow in that water course. (d) at least one of A or B is owned, or is to be owned, by a community organisation and the conditions in paragraph (7) are met (5) Except where paragraph (4)(c) applies, all hydro generating station turbines which are, or are to be, supplied with water by or from the same civil works have a single site. (6) In this article, civil works, in relation to a hydro generating station, means all man-made structures or works for holding water which are located on the inlet side of a turbine (turbine A), other than any such structures or works which supply water to another turbine before water is supplied to the structures or works which supply turbine A. (7) The conditions referred to in paragraph (4)(d) are that (a) only A and B share, or are to share, the single grid connection referred to in paragraph (3)(a); and (b) for both A and B (i) the Tariff Dates; or (ii) the Eligibility Dates, are on or after 1st April 2015