Renewable energy deep dive biannual recommendations update 3 - 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    

N/A

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

Decarbonisation of pension investments:

• In December 2023, the Welsh Local Government Association, together with Friends of the Earth, facilitated an event to build on conversations across Wales on the decarbonising of pension funds.
• The event included guest speakers and considered the challenges to decarbonising pensions, and how to overcome them.  Consideration was also given to how investments can be more sustainable and what support and resources would be required to achieve those goals.
• Discussion at the event acknowledged the primary role of the funds has to be ensuring the funds meet pension requirements of their members. However, there was general agreement on the potential for a share of the funds to be used to support expansion of sectors that generate a return but also contribute positively towards net zero goals and reversal of nature loss. Affordable housing, targeted SME finance, clean energy and natural capital were all identified as examples that have such potential. It was noted that efforts are being made to develop a common framework that the eight funds in Wales can work towards in terms of decarbonising their funds.
• Whereas much pension fund investment is currently in global listed bonds, possibilities in terms of a greater focus on place-based impact (PBI) investments were identified. The Greater Manchester fund, for example, is currently investing 5% of its fund in projects in the region. The meeting also heard about the Swansea Fund’s investment in timber and sustainable grassland, contributing to carbon sequestration and biodiversity.

Next steps towards completion

Decarbonisation of pension investments

• WLGA held a meeting with Friends of the Earth to start planning ahead for  a follow-up event.  A paper has been prepared for the Partnership Council for Wales for the March 2024 meeting to note this and future work on the potential of pension fund decarbonisation.

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 continue to discussions 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

Investment 

• Ynni Cymru will expand community owned renewable energy and smart local energy systems, which retain the benefits in Wales. Through consultation with the energy sector and key stakeholders such as Community Energy Wales and the Welsh Government Energy Service, we are starting to identify immediate emerging priorities and activities for Ynni Cymru. We are currently developing the business case for Ynni Cymru, which will outline its scope, remit, and parameters of work.  
• Trydan Gwyrdd Cymru will be launched in the spring, with an independent Board which will include non-executive competence in maximising community value from the developer’s work.

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    

• Welsh Government has responded and inputted into the CFD consultations and discussions.
• Welsh Ministers raised concerns in relation to AR5.
• The Welsh Government supported the Offshore Energy Alliance to commission a piece of work on Supply Chain to highlight opportunities.

Next steps towards completion

• This recommendation is complete. We will continue to take forward the recommendations from the Renewable Energy Deep Dive.
• Welsh Government continues to  work closely with the Crown Estate in relation to the Celtic Sea and its Supply Chain opportunities

Recommendation    

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

Key highlights / milestones  

• We have consulted on and legislated for two new measures to support the use of renewable energy in non-domestic properties, from 1 April 2024. 
• We are providing an exception from rating assessments for the properties they are part of, for plant and machinery used in onsite renewable energy and electric vehicle charging points. The types of renewable technology excepted from valuations include those used for the generation, storage or transmission of power from biomass, biofuels, solar, water, wind and geothermal sources. 
• Through a new Heat Networks Relief, we are providing full (100%) relief for heat networks providing thermal energy generated from low-carbon sources. The relief is intended to support the development and growth of this sector that is anticipated over the next decade, by helping to minimise the financial barriers to the establishment of networks. The qualifying conditions are explained in more detail in the guidance.

Next steps towards completion

• We will monitor the impact of the new measures providing non-domestic rates support for renewable energy.
• This recommendation is complete. We will continue to take forward the recommendations from the Renewable Energy Deep Dive.

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 is partly met through the Well-being Impacts Working Group (the “Group”) was established in September 2022 to support the Welsh Government in the delivery of the recommendations contained within Cwmpas’ report following their review of the social value landscape in Wales. (NB this working group is separate to the one referred to in previous updates to the deep dive).   The Group is made up of stakeholders from across the Welsh public sector who have worked together to develop a consistent methodology for measuring and reporting social value through well-being impacts.
• The work of the Group is being undertaken in the context of much broader legislative reforms affecting public procurement in Wales.
• The UK Government’s Procurement Act 2023, which received Royal Assent in October 2023, will create a simpler, more flexible set of rules, making public procurement more accessible to businesses including our Welsh SMEs. The “public benefit” objective in the Act means that Welsh contracting authorities (“WCAs”) need to consider how their procurement activity can deliver additional benefit, including how to maximise social value through the delivery of more well-being impacts. Furthermore, the Act will allow WCAs to take account of measures that will help improve local economic, social, environmental and cultural well-being where it is relevant to the subject matter of the contract.
• The Welsh Government’s Social Partnership and Public Procurement (Wales) Act places a socially responsible procurement duty on WCAs, which requires them to consider how they can improve the economic, social, environmental and cultural well being of their area by carrying out public procurement in a socially responsible way, in accordance with the sustainable development principle.
• Alongside the legislative reforms, the Cyd service (formerly the Procurement Centre of Excellence) has operated as an alpha service since October 2022. Since inception the service has used Net Zero as a focus policy area through which the Cyd service has been developed. Cyd now provides a digital platform cyd.cymru which sign posts buyers to relevant case studies, best practices, toolkits and other resources to assist them in their roles.

Next steps towards completion

• A procurement journey has also been launched which has started to map the resources to the procurement lifecycle. 
• The resources are being extended to include Wales procurement policy notes and relevant legislation which is now also starting to be mapped.