About Humshaugh Community Solar Project
Our Project
Humshaugh Net Zero (HNZ) identified a potential site, a one-hectare parcel of poor-quality farmland. It seems waste was dumped here from the adjacent limestone quarry several hundred years ago.
The project will consist of about 2,000 solar panels mounted on ground-mounted frames. They will be arranged in a number of strings. At the end of each string there will be an inverter that will convert the dc electricity generated to 800V ac. The strings will be linked together in the substation. The substation will be connected to the Northern Powergrid 20kV electricity distribution grid via a transformer. The substation will also contain the import & export meters to monitor electricity production. The site will be fenced and monitored by CCTV. Access to the site, from the unmarked road running along the northern boundary, will be improved to allow safe access during construction.
The site is expected to export about 1,000,000 kWh of electricity each year. (A house typically uses 3,500 kWh.) If this was imported from the national grid, 217 tonnes of carbon emissions would be produced per year.
Community Benefit
As a Community Interest Company, HNZ was not the most appropriate organisational form to build & operate a solar farm and so Humshaugh Community Solar Limited (HCSL) was established in the form of a Community Benefit Society (CBS). CBSs reflect a commitment to the wider community, with profits being ploughed back into the community, rather than being distributed to members/shareholders beyond the fixed rate of return on shares.
The income from selling the electricity generated by the solar farm will be used to pay running costs, loan interest and repayments, and interest to shareholders first. The loans will be paid off in 10 to 15 years. Most likely after that the shareholders will have their shareholding gradually repaid at face value.
It is very likely that there will be a surplus beyond that needed to make all these payments. If so, once the necessary reserve has been put aside, the surplus will be put into a community fund to support activities aimed at moving towards net zero carbon emissions and improving biodiversity. This fund could receive around £10,000 a year based on current projections. The actual amount of the surplus will depend on the price at which HCSL can sell the electricity at the time. The details of how the fund will be administered will be determined by the Board once the members have elected it.
As part of the contracts with commercial lenders, who might provide the balance of the funding not raised locally or from grants, a reserve fund may have to be built up in the first few years to cover contingencies. Initially most of the surplus revenue will be used for this.
The solar farm will produce as much electricity as used by the domestic demand in the Parish when it was surveyed in 2020.
The Community Benefit Society
Humshaugh Community Solar Limited (HCSL) is a Community Benefit Society registered with the Financial Conduct Authority (FCA). The FCA, which sets out requirements for societies, says that a CBS's business must be conducted "entirely for the benefit of the community...” with no alternative or secondary purposes, including any that may preferentially benefit the members. The FCA also says “it is not usually appropriate for a community benefit society to give any particular group of members greater rights or benefits, because the society must be conducting its business for the benefit of the community. So, for example, we would expect to see community benefit societies run democratically on the basis of one-member-one-vote.“ Any profit made by a community benefit society must be used for the benefit of the community. Profits cannot be distributed to members of a community benefit society. Interest on share capital is an operating expense and should be subject to a declared maximum rate. HCSL would seek to provide a fixed annual return for investors and use surpluses to provide local community benefits.
The rules of the CBS can be found below.
A Nature Positive Development
Importantly, work will also be carried out at the site to improve its biodiversity. Hedging will be laid/improved, a wetland area created, wildflower seeds sown, and raptor boxes installed. The aim is for this to be a Nature Positive development. (See www.naturepositive.org for more details about this concept)
Local Energy Trading
Selling the electricity generated by the solar farm directly to local residents is not possible at the moment due to regulations on the sale of electricity. It is technically possible.
It is likely that HCSL will earn about 8 p/kWh generated over the next few years. Most people pay something like 30 p/kWh used. Ideally, HCSL would like to be able to sell the electricity locally at a price significantly below the normal tariff. If HCSL charged 12 p/kWh and charges to use the grid infrastructure were, say, 7 p/kWh, then local consumers would pay 19 p/kWh. The solar farm would be more profitable and the extra income would go into the community fund. Local consumers would benefit from cheaper prices, though they would still have to buy power from elsewhere at times, which might cost slightly more per kWh than the normal 30 p/kWh. In addition, if the oil price goes up above inflation, the solar price would not. These numbers are just for illustration, but they are realistic. (Domestic [retail] prices are given in p/kWh, commercial [wholesale] prices are given in £/MWh, e.g. 8 p/kWh is equivalent to £80/MWh.)
HNZ has lobbied for changes in legislation to facilitate such local trading but, so far, without success.
The difference in wholesale price (around 8 p/kWh) and retail price (around 30 p/kWh) is made up of charges for using the local electricity network (Northern Powergrid), the electrical transmission network (National Grid), operating costs associated with trading electricity (National Grid and others including the big electrical suppliers) and profit to the various companies involved. Locally-traded electricity would still have to cover some of these charges, mainly the use of the local electricity network and some grid management costs. It is not clear how much these would be, but they would be less than the current charges.
HCSL would like to sell the electricity locally. If the regulations change, and there is mounting political pressure for this, then the community would benefit in these significant ways.
Whatever happens, the solar farm will be generating low carbon electricity and contributing to Net Zero to fight climate change.
Risk Management
Community solar projects are not new. Initial projects had the benefit of the highly lucrative Feed-in Tariffs (FIT) payment scheme for renewable energy generation, which is no longer available. However there is still a premium and a demand for low-carbon electricity from companies wanting to be sustainable and demonstrate their green credentials. Energy suppliers such as Octopus and Good Energy are set up to buy and sell low-carbon energy exclusively.