UK lawmakers talk tariffs and taxes to sweeten green power growth pill

The UK is looking to Europe for ideas on how to put community benefits at the heart of a streamlined planning and consenting process as the government tries to speed up the expansion in renewables and grid infrastructure.

A special parliamentary session on the topic this week heard calls for local benefits to be made an integral part of a legislative push aimed at turning green energy into a key driver for skilled jobs and economic growth and making the country's electricity system net zero by 2030.

Britain's new Labour government, led by Prime Minister Keir Starmer, has promised to “supercharge efforts to make Britain a clean energy superpower” and, to pursue this aim, a bill that will create a new public company called GB Energy is expected to be put to a vote in the New Year.

Energy minister Ed Miliband has also made it clear that delivering a net zero power system on time will require the overhaul and streamlining of a planning process that is often blamed for the failure of the UK’s outdated grid infrastructure to keep up with the development of offshore wind capacity, as well as opening a path for more onshore investment.

In an early statement of intent, Miliband issued approvals for three large solar farms in July and ended local veto rights that amounted to a de facto ban on onshore wind farms in England.

But his promise to face up to the “blockers” and “delayers” of renewable energy infrastructure has exposed a new fault line in British politics, with Conservative opponents increasingly willing to champion the cause of local groups resisting wind turbines, solar farms and overhead transmission lines in the countryside.

In the parliamentary debate, shadow minister Mark Garnier criticised the government for “weakening” the planning system for infrastructure projects, arguing that “local people should be heard on matters that impact the environment.”

Scottish member of parliament Angus MacDonald, who led the session, called for strengthened community benefits to be placed at the heart of the energy sector reforms now taking place.

“We must end the injustice where people living in some of our poorest regions bear some of the highest electricity prices in the country while they look out of their windows and see the industrialisation of their countryside and watch the electricity going south,” he said.

Norfolk South MP Ben Goldsborough, whose constituency is facing new solar projects, a transmission line and a battery energy storage development, criticised an “unresponsive regulatory system” and said residents felt they are not being heard. He warned that net zero and grid upgrading ambitions "could fall flat" if such concerns were not addressed.

'Revenue tax better than pounds per megawatt'

MacDonald’s proposals for tackling such concerns included earmarking 5% of all gross income from newly consented renewable energy projects for community energy funds.

He argued that offering communities upside benefit from the price of electricity would serve as a greater incentive than offering a fixed sum related to each megawatt of capacity, as is common practice currently.

MacDonald advocated a 1.25% green consumer tariff to shield investors from extra cost and predicted that such a measure would result in £5bn ($5.5bn) of levelling up funds for rural communities over 10 years.

MacDonald also argued in favour of mechanisms that provide stronger incentives for common ownership of renewable energy.

Parliamentary under-secretary for energy Michael Shanks said the government will speed up the delivery of renewables and decarbonise the UK electricity system by 2030.

“The current system is too slow and is holding back investment,” Shanks said, stating that a Planning and Infrastructure Bill aims to shorten and streamline the permitting process.

Shanks said upgrading a grid means committing to infrastructure, and claimed that the government aims to do that by “collaborating with host communities not coercing.”

He said the GB Energy bill is being drafted to give people in the UK a chance to play a bigger role in the sector and includes “increasing common ownership of energy”.

“We will develop set of proposals to speed up infrastructure needs, but with communities at its heart,” he said, adding that the government is still reviewing how best to deliver on this.

The previous Conservative government had begun to go along a similar path by consulting on plans to update the old community benefits protocol covering onshore wind farms in England.

The existing protocol recommended developers should offer annual packages paid to community benefit funds or in-kind benefits worth £5,000 per megawatt of installed capacity for the operational lifetime of projects.

Benefits in kind typically cover community facilities but can also include negotiating a local discount on electricity.

These schemes have produced some positive outcomes, but communities all too often complain that amounts received do not amount to adequate compensation for the inconveniences faced, notes Aoife Foley, chair in net zero infrastructure at Manchester University.

Developers and local community groups are also free to negotiate shared ownership or financial partnership schemes. Some of these have worked well, Foley says, such as the Isle of Gigha’s community owned wind turbines in Scotland, where significant income has been generated to support local housing and business development.

"But the complexity of the regulatory process has tended to delay shared ownership projects in England, reducing community access to financial benefits," she added.

For grid infrastructure, a report commissioned under the last Conservative government and published in 2023 recommended discounts of up to £10,000 on electricity bills for properties closest to transmission lines, as well as wider benefits to communities.

The new Labour government has not yet indicated if it will follow this path.

Overall, Shanks promised “a more holistic and strategic approach” to planning and said the UK government is “looking at examples from Europe”.

Other speakers referred to measures taken in Germany, Denmark and elsewhere to improve the consenting process for renewables infrastructure.

Is going underground the grid's best option?

Garnier was unimpressed by such initiatives and claimed that prioritising a 2030 net zero target for the UK electricity system is damaging the whole consenting process, due to growing anger by affected communities.

He suggested the government should defer its net zero to 2034 to allow more technical analysis of the economic feasibility of “undergrounding” the new transmission lines rather than using pylons and overhead lines.

In Germany, MacDonald described what he described as a presumption that underground cables were a preferred solution to overhead cables.

Garnier nevertheless argued that has become technically and economically feasible to bury cables, offering a way to "decarbonise the grid without such an impact on the countryside".

Food for thought

German regulations include a €0.2/kWh tariff that wind turbine operators and PV plant operators can pay to local municipalities under the German Renewable Energy Sources Act (EEG) and can also allow BayWa r.e. — as an IPP — to propose a 10% discount on electricity bills within a certain radius of the turbines.

Baywa.re applies the EEG tariff on its projects, but does so proactively to make sure that those monies are used in the most equitable way, Packwood says.

"I also like the discount mechanism because it goes to the heart of what we do, which is generating electricity. Locals can see they are getting their electricity because we are here," he said, adding that the company has already operated a similar scheme in the UK.

Packwood stressed the holistic aspect of his company's strategy, pointing out what is relevant in an area with several thousand dwellings may have little impact in a remote, sparsely populated region.

"The local area and all the different local stakeholders really do define what is the best strategy and the better developers out there come up with a better strategies to deal with it," he said.

Packwood said shifts towards considering the wider public interest in clean energy and the provision of some extra resources for permitting bodies have also played their part in bringing some improvement to the German planning process.

But he stressed that there is "probably not a single country out there" that would not benefit from having more people in the permit processing chain and boosting efficiency through things like digitalisation".