Copy of an article Neil McInroy from CLES and myself recently did for Public Finance magazine.

Councils should be leading the way with renewable energy schemes. They can reap important economic and social rewards as well as environmental benefits

A report published this week by the Association for Public Service Excellence (APSE) suggests there is still a business case for local government-led renewable energy schemes.

We are finding that many councils around the UK are pushing ahead with the renewables agenda and would urge others to do the same. Our new research provides evidence as to both the business case and broader impacts of renewables for local economies and communities.

APSE commissioned the Centre for Local Economic Strategies (Cles) to examine the issue. Our report, Powerful Impacts: Exploring the economic and social benefits of renewable energy schemes, assesses the benefits of projects in terms of: payments from Feed in Tariffs (FiTs); number of people employed; value to supply chains; training and skills development; and savings in carbon emissions.

Cles researchers found that £1 invested in local renewable energy schemes that were early to get off the ground could deliver an average £2.90 in cashable benefits. They also found that a scheme fitting solar panels to 500 homes can create 12 full-time equivalent jobs and save 650 tonnes a year in carbon emissions.

The model built in sensitivity tests for factors that are liable to fluctuations, principally FiT rates, borrowing rates, equipment costs and energy costs. While government proposals to cut FiTs for solar schemes might have dented confidence, public sector decision-makers are now recognising that lower tariffs can be offset by falls in costs of equipment that are forecast.

Researchers re-calculated the return on investment in light of the latest information on reductions to FiTs. Based on reducing the tariff from 43.3p per kWh to 21p for solar schemes, they found this falls to £1.50.

A return on investment of £1.50 is obviously a drop compared with rewards for those trailblazer projects. But £1.50 can still be a healthy return and the predicted fall in the cost of solar panels also means the initial outlay is reduced.

The report features case studies demonstrating how forward-thinking councils have not only developed renewable energy projects as a way of cutting energy bills, enhancing energy security and reducing emissions, but also used them as a catalyst to stimulate jobs, skills and supply chains locally.

It must be remembered that solar is just one element of renewables. While the authorities discussed in our report have used solar technology, we believe similar benefits can be derived from other projects such as wind, biomass, electric fleet and energy efficiency schemes.

APSE’s previous publication, The Virtuous Green Circle, set out how a ‘revolving fund’ for investment in sustainable energy can operate in local government. Cles researchers found critical success factors are to deliver schemes at minimum cost and risks to the local authority and to ‘lock in’ economic benefit – and that a direct local authority approach offers most ability to control these factors.

Our new report argues that impacts of renewable energy on local economies should be fully recognised in local decision-making and national funding mechanisms. To this end, we are pleased that the Department of Energy and Climate Change appears to have recognised the need to differentiate between schemes that provide a community benefit and those driven by profit and will consult to protect social landlords from an additional cut for multi-installations.

This distinction is an important one. If cuts to FiTs make commercial rent-a-roof schemes less attractive to those seeking purely to maximise profits, there is all the more reason for councils that can make a sound business case for renewables but also have broader environmental, social and economic ambitions, to take a direct approach.

Fortune has most definitely favoured the brave and pioneering authorities have seen the best return on investment in renewables schemes. We suggest that others should push ahead as a matter of urgency.

Although many Armageddon prophecies have been written about the coalition Government’s proposed cut to Feed in Tariffs for solar PV and its impact on the wider renewables agenda, I have to say that I don’t quite buy this vision of the future.

Whilst I am as disappointed as everyone else at the proposed reduction from 43p to 21p from early December, I recognise that the budget of £880m has been used up as commercial organisations cashed in on a financial windfall created by FiT’s, coupled with the dramatic falls in the price of solar panels. Government only ever intended that participants would make a return of 5% on a scheme funded by the general public; being honest many schemes were likely to yield a greater dividend than this.

Obviously, a number of local authorities and housing associations are partially through the delivery of schemes and it is unfortunate to say the least that the review has been brought forward from 31 March to now. APSE will be writing to Greg Barker calling for an exemption from the early reduction in tariff's for local authorities who have acted in good faith, based on Governments stated intention and entered into contractual arrangements aimed at delivering large volume schemes by 31 March. After all it is the public purse which will suffer if contracts need to be terminated.

On a wider renewables point I believe that there will be a pause for breath and then authorities will continue with their renewables programmes at pace. Solar will continue to have a place amongst wind, biomass and others; it will probably just not be as prominent as it was in the past.