There is no doubt that communities are key to decarbonising the UK economy, and I am glad that the Government is supportive of community energy.
Ofgem has existing flexibility to award supply licences that are restricted to specified geographies and/or specified types of premises. Furthermore, following a consultation process, since February last year, Ofgem is welcoming applications from community-interest groups, co-operative societies and community-benefit societies to the industry voluntary redress scheme. This is enabling groups to apply for funds to deliver energy-related projects that support energy consumers in vulnerable situations, support decarbonisation and will benefit people in England, Scotland and Wales.
To support community energy projects, the Government has funded the Rural Community Energy Fund. This £10 million funding scheme was delivered through the Local Energy Hubs which support rural communities in England to develop renewable energy projects, which provide economic and social benefits to the community. Since its launch in 2019, the fund received 1,668 enquiries, 203 applications and awarded millions of pounds worth of grants to projects focusing on a variety of technologies, including solar, wind, low-carbon heating and electric vehicle charging.
The Government has also introduced other UK-wide growth funding schemes, such as the Community Renewal Fund and the Towns Fund, through which it is enabling local areas to tackle net zero goals in ways that best suit their needs. In addition, I know the Government encourages community energy groups to work closely with their local authority to support the development of community energy projects within these schemes and plans to reintroduce the Community Energy Contact Group to strengthen engagement with the sector.
While the Government is sympathetic to the outcome desired by proponents of the Local Electricity Bill, Ministers are concerned that mandating suppliers to offer local tariffs may be disproportionate and have unintended consequences. However, you may be reassured to know that as part of a wider review of market mechanisms the Government considered retail market reforms and responses to the electricity market consultation. The Government intends to publish a second consultation this year, and it will take decisions on shorter-term reforms more quickly where it is viable to do so.
Finally, Ofgem’s access and forward-looking charging review seeks to deliver more efficient choices about where users locate on the networks, and how they use the networks on an ongoing basis. The introduction of better price signals is important in ensuring that local generation is rewarded for the benefits it can bring to the system. It is recognised that, in some parts of the country, the costs of connecting to the grid can itself act as a barrier. Ofgem has therefore proposed to reduce connection costs for generation connections, such as community energy, by socialising more of the network reinforcement element of connection charges. Any changes are expected to come into effect from April 2023.