FinancialIncentivestoPromoteCitizenInvestmentin

RenewablesJosephCurtin,UCC

Thursday8th December

Fundedby:

1. (Very)shorthistoryofIrishrenewableenergydevelopment

2. Thecasefor(andagainst)citizeninvestment3. Theuseoffinancialincentivesand“typicalmodels”infourjurisdictions:Germany;theUK;Denmark&Ontario

4. Futurework5. Conclusionsandpolicyimplications

Overview

AshorthistoryofIreland’sEnergytransition(wind)

SEAI,2003

208Farms

2532 MWIWEA(2016)

AshorthistoryofIreland’sEnergytransition(wind)

AshorthistoryofIreland’sEnergytransition

Twoviewsonpromotingcitizeninvestment1.WillunlockthenextphaseofIrishdecarbonisationbybuildingsocial“buy-in”

• Generates localincomeandregionaldevelopment• Morelocallyappropriatedevelopments,morelikelytoreceiveplanning• Contributetounderstandingofclimateissues• Disposecitizenstomakingfuturelow-carboninvestments

2.It’snotpossibleintheIrishcontext

• Increasescosts ofdevelopingprojects• Burdenonprojectdevelopers(slowsdownprojects,fiduciaryandregulatorresponsibility)• Irishcitizensaretooriskaverse• Windprojectsinpipelineto2020havegridconnections/approvals

Proportion of total electricitygeneration (%, 2014)

Local Ownership

Renewables

Wind Solar PV

Germany 25.8 9 5.0 Over half of total investment in wind andsolar has come from citizen investors

Denmark 53 40.5 .2 Over half of total wind investment fromlocal citizen investors

UK 19.1 9.5 .6 Low levels of community and citizenownership, though increasingly since2000 and especially since 2009

Ontario 28.7 4.4 Less than.1

Low levels of community and citizenownership, though increasingly rapidlysince 2009

FourCaseStudies

**OntarioHow?financialincentivesHow?FocusedonModelsofParticipation

Timeline

1980s

1990s

2000s

2010s

FiT forwind&incomeeligiblefortaxrebate(1992)

Veryhighenergyandcarbontaxes

FIP(2003)

Grants:30%ofwindturbine(1979)

Mandatedequityoffertolocalcitizens(2009)

Guaranteeschemeforloansforfeasibilitystudies (upto€70,000) (2009)

DevelopmentFeasibility OperationConstruction

IncreasedFIP(2009)

DevelopmentFeasibility OperationConstruction

Timeline

1990s

2000s

2010s

UndifferentiatedFiT&significanttaxadvantagesfromresultantincome

Pilotsoftloans&grantsprogrammeforSolarPV

Expandedsoftloans(2%)programme forPV

Technologyandsize-specificFIT

Tenderschemeforlargeprojects

Allsoftloanprogrammesconsolidated:upto100%ofInvestmentcosts

State/Regional-levelprogrammes

Localorganizations&citizenassociationsencouragingenergycommunities

Timeline

1990s

2000s

2010s FiT forsmallerprojectsunder5/10MW

ContractforDifference

NonFossilFuelObligation

Grantforfeasibilitystudies (upto€26,000)

RenewablesObligationGrantsupport(CRI)

Grantsupport:lowcarboncommunitychallenge

Grantforpre-planningdevelopmentwork(upto€26,000)

30-50%taxrelieftoinvestorsinnewcompanies,earlystagestartupsandsocialenterprises(ended2015)

Voluntaryequityoffer

DevelopmentFeasibility OperationConstruction

OntarioTimeline

2000s

2010s FiT:Technologyandsizedifferentiated+ADDER

EnergyPartnershipProgram:grantfundingandfinancetocoverplanningapplicationsandotherstudies(coveringlegal,technical,financialandduediligenceandsoftcosts)

TaxexemptionforAboriginalcommunities

DevelopmentFeasibility OperationConstruction

EnergyPartnershipProgram:Grantfundingandaccesstofinancetocoverfeasibilityassessments

2011:25/25MWsetaside

2014:competitivetenderingprocesswithlocalownershipasimportantcriteria

**

TypicalmodelsSmallerProjects(oftensolar) LargerProjects(oftenwind)Co-ops for solar PV and some smallerwind

Limitedpartnerships(GmbHandCo.KGstructure)formanywind*

Denmark For-profit guild structure with co-op-like decision-making for majority of fully community-owned and shared ownership (wind) projects

TheUK No typical model evident: Communitybenefit 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 (onewind)

JVbetweenaboriginalcommunitygroupsandprofessionaldevelopers(wind)

Impactoffinancialincentiveontypicalmodelisevident.e.g:• Germanytaxtreatmentofprofit• OntarioFiT legislation

*Notnecessarily“local”investors

FutureWork

CastStudypaper:underreviewatJournalofCleanerProduction

Conclusions:Specific• Incentivesrequiredatallstagesofprojectdevelopmenttoovercomediscretebarriersforcitizenandcommunities• Grantsandaccessto(soft)financeatFeasibilityandDevelopment(+accesstotrustedintermediary)• Operationstage:WhileFITshavebeencorrelatedtohighlevelsofcommunityinvestmentinmanycases,notinstrumentchoicebutdesignedcharacteristicswhicharemostimportant• Tender/quota-basedschemescanbedesignedwithcommunitiesinmind(Ontario,Quebec,notUK)• Taxefficienttreatmentofprofitsisanimportantconsideration

Conclusions:General• Promotingcitizen/communityinvolvementinrenewableprojectsispossibleinIreland• Butverychallengingastheseinvestorsaredifferent:requireslong-termandpersistentpolicyfocus• Usefultopromotetypicalmodels/vehiclesthroughdesignoffinancialincentives• Cost:wecan’taffordtodothisV wecan’taffordnottodothis?• Speedofdeployment:faster orslowerdecarbonisation?• Alienatedcitizenry,populism:getruralandmarginalcommunities“invested”