UK Financial Conduct Authority nudges community groups towards LEMs

Posted on Aug 27, 2014
UK Financial Conduct Authority nudges community groups towards LEMs

UK Government says it’s keen to encourage localisation, including localising the provision of energy. The Government said, in its Community Energy Strategy of April 2014, that it sees a strong role for communities in helping the UK to meet energy and climate change challenges.

The Government’s modifications to its incentive regimen (feed-in-tariffs and renewable heat incentives) will support the deployment of community energy generation, but its strategy doesn’t encompass supply, so currently communities can make their own energy locally, but they can’t sell it locally. This is such a major flaw that we wonder how the Government expects real change in the price of energy to occur in the much derided current energy supply model, where outdated large centralised suppliers impose high prices on consumers.
It now seems that the Financial Conduct Authority (FCA) is joining the government in hampering the engagement of communities with their energy use. In the UK, co-operatives (aka mutual societies) are the normal business model for communities seeking to benefit from energy incentives. However the FCA has recently refused to approve a number of energy co-operatives, because it says there would not be enough member participation. To register a co-op, FCA rules require a mutual to show participation which it lists as “buying from or selling to the society”, “using the services or amenities provided by it” and “supplying services to carry out its business”. Just having a single power purchasing agreement to sell electricity generated from a community scheme doesn’t meet those criteria, the FCA reckons.
The current FCA approach will severely limit the ability of communities to establish their energy projects. But what if prospective community energy co-operatives facilitated the trading of electricity (and/or heat), between their members, through a local energy market? The members could not only make their own electricity, but trade it within the community at locally set prices; so the co-operative would meet the FCA’s requirements.
Local energy markets empower communities to make and use their own energy, creating a more sustainable and equitable power system and reducing reliance on the “Big Six” energy suppliers.