Renewable energy deep dive biannual recommendations update 2 - Finance

Investment group

Recommendation    

We will set up an expert group to explore ways of drawing down additional investment in renewable energy generation in Wales. We will prioritise local and community ownership to maximise local economic and social value.

Key highlights / milestones    

 Since the Investment in Renewables subgroup report officials have been working on delivering the recommendations arising from that report. Update provided below

Next steps towards completion

This recommendation is complete. We will continue to take forward the recommendations from the Investment in Renewables report.

Investment in Renewables sub-group recommendations

Recommendation  

1. The Welsh Government should explore developing a partnership initiative/Charter with the commercial renewable energy sector: the sector committing to standards on local and community benefits, supply chain benefits; and the Welsh Government committing to supporting the vision for Wales to be a net exporter of renewable energy, publishing updated renewable targets and clarity on community ownership requirements.
2. As Welsh pension funds look to implement their legal requirements to manage their funds and supervise risks, including protecting the pension funds from financial risks relating to climate change, Welsh Ministers will continue engaging on the opportunities for investment in renewable energy project in Wales through existing mechanisms such as the Partnership Council. The renewable energy sector also has an important role in promoting opportunities to invest in renewables in Wales. The Welsh Government will facilitate investment, for instance by bringing pension fund managers and renewables developers together to explore these opportunities further.  
3. DBW should continue to develop the business case for investing in renewable energy developments. Investment by DBW should plug identified gaps where the existing models for local and community ownership is not possible. Returns from investments should support economic and social investment in local communities. 
4. The Welsh Government should review progress in implementing the grid recommendations from the deep dive and wider UK reforms. If, following that review, the scale and pace of change remains insufficient to meet Wales’ needs, it should review and seek to make use of all the practical levers that Welsh Government can exercise to encourage direct investment in the grid infrastructure in Wales.
5. With additional funding provided to CEW to promote community share offers, work needs to be completed to understand why take up in Wales is lower than the UK average.  CEW needs to be able to demonstrate the positive impact of their activity and ensure people have adequate protection when considering an investment. CEW should report back to the Welsh Government on the effectiveness of the additional funding and report any funding gaps, should there be any.

Key highlights / milestones

Key highlights over the last 6 months include: 

Sector Deal

• The Welsh Government has already delivered on some of the aspects of the initiative/charter in publishing the revised renewable energy targets consultation and the updated guidance on local and community ownership. The Welsh Government are in discussion with Renewable UK Cymru on the best way to take forward the development of a partnership initiative/charter with the commercial renewable sector in Wales.

Opportunities for using Welsh pension funds

• Agreement that the Welsh Government would work with the public sector to agree a strategy to decarbonise public sector pensions by 2030, to bring them into line with current public sector net-zero targets. 
• Meetings between Welsh Government and the Wales Pension Partnership (WPP) officers to discuss the details of this work.
• Placing Decarbonising Local Government pensions on the agenda for the November 2022 Partnership Council for Wales.  The Wales Pension Partnership provided an update on progress and plans for decarbonising the pooled Local Government pensions. The approach was supported and members were keen for local government and Welsh Government to work together on the matter. 
• Meeting between the First Minister met with Jack Sargeant MS and Bleddyn Lake of Friends of the Earth Cymru, in January 2023, to discuss what more can be done to encourage and support Local Government pensions to decarbonise and move towards net zero, noting that Welsh Government has no statutory ability to impose targets. Following the meeting it was agreed that Jack Sargeant would discuss the issue further with the WLGA and others, to develop the thinking and a firm proposal. 
• As part of the Renewable Energy Development programme, discussions are starting to be held with Local Government Pensions authorities to explore interest in investing in wind energy, subject to appropriate due diligence. 

Development Bank of Wales’s support for renewables

• Discussions between the Development Bank of Wales (DBW) and renewable energy developers to understand any funding gaps, which could be filled directly by DBW or through funding a local community group; 
• DBW continuing to offer funding from the Welsh government backed Local Energy Fund to support smaller developers with local based energy solutions; 
• Launching DBW’s Green Business Loan Scheme, which provides support for businesses to invest in their decarb journey, a number of the initial applications have been to support the installation of solar.

Implementation of Grid Recommendations:

• See above for grid update.

Implementation of CEW Recommendations:

• See below for CEW update.
   

Next steps towards completion

Over the next 6 months our priority actions include:

• Exploring and capitalising on opportunities to support the investment in renewables in Wales.
• Attending the WLGA organised Climate Change event (under the Leadership strand of the Climate Support Programme that WG provides funding towards) to build on previous conversation on the decarbonisation of pensions and discuss whether we can commit to decarbonising Welsh public sector pensions by 2030 in line with our public sector net zero carbon ambition.
• Continuing to push the agenda for decarbonsing local government pensions at the Partnership Council for Wales.

Recommendation    

We will seek to create an alliance with devolved Governments to ensure the UK Government’s Contract for Difference (CfD) process evolves appropriately to:

a.    reflect the primacy of supply chain development and
b.    to achieve a coherent and balanced development pathway for early commercial and emerging technologies.
 

Key highlights / milestones    

We continue to press the UK Government for our key asks around the Contracts for Difference and will continue pushing for the process to secure long-lasting benefits for the communities that host renewable developments.

Key highlights include:

• Analysing the Round 4 allocations to better understand the outcomes for Wales.
• Highlighting to the UK Government the risk that the strike price for floating offshore wind may be insufficient to support this emerging technology, and could dent investor confidence.
• Pressing for a more generous ringfenced wave and tidal pot with sufficient capacity for projects in Wales to progress.
   

Next steps towards completion

This recommendation is complete, and our work to influence future auction rounds of the Contracts for Difference has now moved into business as usual.

Recommendation    

We will look at the options to support local and community renewable energy generation through Non-Domestic Rates.

Key highlights / milestones  

Key highlights include:

• Consulting on the reform of non-domestic rates in Wales, and have published a summary of the responses to the consultation. 
• Assessing the continuation of relief to community scale hydropower schemes in Wales to ensure they remain viable and deliver social and environmental benefits to communities in Wales.  
   

Next steps towards completion

Over the next 6 months our priority actions include:

• Considering options for providing long-term relief for local and community renewable energy generation.

Recommendation    

A working group will be set up to review options for how procurement can support the acceleration of renewable energy generation in Wales to maximise local economic and social value to include but not limited to:

a.    Improve procurement policy to incorporate social value including exploring with commercial developers how they can best meet local need.
b.    Options for utilising the buying power of the public sector in Wales to support reliable routes to market for community and public sector energy projects, including through long term Power Purchase Agreements.
c.    How advice and support services can better assist community energy developers access market opportunities.
d.    How to better engage the community energy sector in the Wales funding Programme.
e.    How best practice can be disseminated including feeding into the Welsh Governments best practice group or the Procurement Centre for Excellence if established.
 

Key highlights / milestones    

This recommendation will be progressing over the next 6 months with officials and members of the deep dive analysing the options in relation to Power Purchase Agreements (PPAs) alongside wider support for procurement.

This will also feed into recommendation 16 on opportunities for community enterprises on access to the public estate.
 

Next steps towards completion

We have arranged a session to work through PPA options and analysis and understand how we might unlock options for communities.  We are engaging with CEW and WGES to understand what the options for a PPA would look like.  We are also engaging with our Welsh Government procurement colleagues to understand if there are any barriers to procurement, they can help communities / public sector organisations overcome.