10 August 2020
What Green councillors are proposing is that the city council provides officer resource from its commercial investment team to identify opportunities for investment in solar power, battery storage or energy efficiency to generate a financial return alongside social and environmental benefits. As discussed, the issuing of Community Municipal Investment bonds (CMIBs) could be one way of raising the capital required. We stressed that this work should be led by the commercial investment team. Green Party councillors are aware that the Environmental Strategy team, led by Richard Willson, has been working or will be working to scope potential for installations of solar panels on council assets, potentially in conjunction with Norwich Community Solar. However, the primary function of the proposals Greens are proposing is to generate income for the council and therefore it seems right that the Commercial Investment team should be leading (no doubt with input from Richard).
The reasons for proposing to explore CMIBs as a source of finance are as follows:
CMIBs could provide a way for council to continue to raise money even if PWLB conditions are restricted.
They can induce greater engagement of residents with council, if done right (for example, this has been done successfully in Plymouth)
They provide multipliers for local economy. In Swindon, 40% of investment came from local community, meaning that returns go back into the area, unlike the interest paid on PWLB loans.
The crowdfunding model is accessible – people can invest as little as £5. If done in Plain English it is accessible to people who wouldn’t normally invest. (Though a balance has to be struck between helping low-income people and raising enough finance for large projects).
Investment-based crowdfunding allows greater transparency and hypothecation of investment capital inflows into the local authority, while holding the risk separately and having this risk managed via the local authority’s standard operating practice.
In other words, the advantages of CMIBs can mirror the city council’s corporate plan objectives of inclusive economy and healthy organisation. The specific projects that could be invested in would also contribute to the council’s 2040 Vision, as outlined below.
We also noted that raising capital through CMIBs would not necessarily displace loans from the PWLB, where the latter are still appropriate following the results of the Government consultation on the terms of PWLB lending.
In regard to the kinds of project that can be invested in, Greens would propose solar power, battery storage, and energy efficiency, amongst others. I have summarised the main points about each of these below.
The most cost-effective solar installations are collocated with high-energy users, especially those with predictable demand. In this regard, we were very pleased to hear that the council is scoping the possibility for solar PV on the cold store in Corby. Other, more local, options could include supermarkets, the new East Norwich site, other large roof space areas, or out-of-town sites specifically designated to host solar arrays. It was suggested that solar panels on council or social housing could deliver the greatest social benefit, however this is unlikely to generate the greatest possible financial returns. The solar arrays would not need to be local.
As an example of the potential of investing in solar power, West Suffolk council now has over 40 Solar PV arrays and over 2.5MWp on its own building, Leisure Centres (owned but operated by a third party), on businesses and community centres using power purchase agreements. The legal side of things is that the Council rents the roof on a long term lease agreement and then agrees to selling the power used on site at a discounted rate - this provides the return on the investment, typically over 10% internal rate or return. Furthermore, the council also invested £14m into a 12.4 MWp solar farm - the power is sold via auction and this is currently bringing in £1.5m per year to the Council, an IRR of 10%. [Here, information was given for a contact at West Suffolk Council that could provide further information.]
There are plenty of other examples of councils investing in solar farms to generate financial returns – Swindon was mentioned, as were West Berkshire and Warrington. Although the Feed-In Tariff has now ended, making a significant profit on solar investments is still highly viable especially if solar arrays are collocated with battery storage.
The University of Leeds report on the potential of CMIBs recommended that a first step for harnessing that potential is to identify feasible projects that would require capital investment. Greens hope that Norwich City Council will devote resource to that first stage with a view to raising the required capital through CMIBs.
The technology for battery storage has advanced rapidly and, as the reports on energy systems for the East of England that Cllr Maguire and Richard Willson attended the launch of in January this year highlighted, will be increasingly important in a more flexible and decarbonising grid. There are benefits of collocating battery storage with solar PV. For example, Warrington has partnered with energy infrastructure company Gridserve to invest in a 34.7MWp solar farm with 30 MWh of battery storage to maximise revenues. There is also the potential for battery storage for the power generated by offshore and onshore wind in the East Anglian region. Battery storage has become a viable investment in its own right as well, as South Somerset has recently invested in a 25MW battery facility that they hope could generate returns of up to 14%, or at least 4% (I have not been able to find out over what period that return is).
There is local expertise on battery storage and a potential local supply chain in the form of Connected Energy, which has its technical base at Hethel Engineering Centre: https://www.c-e-int.com/
The council already has expertise and contacts in this area through the Cosy City programme. The University of Leeds report referenced a case study in Bristol in which Bristol City Council could raise finance through CMIBs and then enter into an Energy Savings Agreement so that payments can be made regular, offsetting the unpredictability that is inherent in returns on energy savings. Bristol did not follow through on this in the end, however my understanding from peers in Bristol is that this was due to a lack of officer resource being devoted to it rather than the scheme itself being unviable.
Norwich would be an ideal area to pilot investment in energy efficiency due to the high proportion of social housing and the aforementioned existing expertise through Cosy City. Greens therefore hope that officer resource from Norwich City Council can be devoted to assessing the potential financial returns that could be made from using CMIBs to roll out further energy efficiency measures.
Overall, as Green Party councillors we hope that this provides a summary of the discussions that were had during the meeting and provides the basis for taking forward this potential area of investment.
Cllrs Sandra Bogelein, Ben Price, and Jamie Osborn