Subsidy scheme for local energy support (Wales)

If you are using this scheme to provide awards of subsidy, you must inform the Subsidy Control Unit – email scu@gov.wales

All-Wales

Subsidy Scheme for Local Energy Support (Wales)

• Section 60(1) of the Government of Wales Act 2006
• Section 1 of the Welsh Development Agency Act 1975

For Wales to generate renewable energy to at least fully meet our energy needs and use surplus generation to tackle the nature and climate emergencies. We will accelerate actions to reduce energy demand and maximise local ownership retaining economic and social benefits in Wales.

The scheme directly responds to Wales’s energy targets, adopted in 2023:

• For Wales to meet the equivalent of 100% of its annual electricity consumption from renewable sources by 2035.
• For at least 1.5 GW of renewable energy capacity to be locally owned by 2035, scaling up our original target for 1 GW by 2030.
• 580,000 heat pumps to be installed in Wales by 2035.

The scheme is aligned with Future Wales, the national development framework, which sets the direction for development in Wales to 2040. It seeks to:

facilitate the decarbonisation of the economy, including energy and transport choices, and promote the principles of a circular economy

The scheme aims to tackle barriers to the rapid development and deployment of sustainable local energy systems with the purpose of accelerating the delivery of and maximising the locally-retained value and benefits deriving from smart renewable energy generation, storage, distribution and use.

It will help create a sustainable and smart local energy industry in Wales, supporting Welsh economic development policies and building wider community prosperity.

Welsh Government provides a variety of support for the Welsh Public Sector, Communities, Social Enterprises and Small and Medium Enterprises to participate in and facilitate the just transition to Net Zero energy delivery.

This subsidy scheme serves to align the overarching principles for accessing the range of support for place-based energy initiatives from Welsh Government, with the intent to simplify and assure compliance with the UK Subsidy Control Act (2022) across that range of support for subsidies under £5 million.

The budget will be set yearly with an indicative budget for the scheme of £60,000,000.

Welsh Government

The scheme is directed towards the following entities for place-based energy solutions delivered in Wales:

• Social enterprises including, but not necessarily limited to:
  • Registered Charities
  • Charitable Incorporated Organisations
  • Community Interest Companies
  • Community Benefit Societies
  • Cooperative Societies
  • Companies Limited by Guarantee or Shares
• SMEs including agricultural businesses
• Local government entities including town and community councils in Wales
• Welsh public sector bodies

The scheme specifically is not intended for the benefit of the following entities:

• Large enterprises (i.e. any commercial enterprises that are not SMEs)
• Regulated energy companies

Electricity, gas, steam and air conditioning supply

31 March 2031

£60,000,000

Grants

To achieve policy objectives effectively, applications will be evaluated on a case-by-case basis.

Awards will be made according to the following criteria and in line with any additional criteria required by the specific policy scheme / support mechanism in operation:

• alignment with Welsh Government’s policies and objectives at the time of award
• alignment with the principles of a Smart Local Energy System (for clarity, applications need not be for the entirety of a SLES but will be required to demonstrate that the award contributes to delivery of a SLES)
• deliverability against identified milestones and funding timeframe
• impact (against the defined scheme criteria)
• value for money
• including valuation of wider socio-economic outcomes as assessed against Welsh Government’s evaluation criteria at the time of award

The methodology for these analyses will form part of the individual application scheme guidance.

The subsidy scheme employs a hierarchy of measures which supports minimisation of the subsidy.

Subsidy is intended to bridge the gap to enable what would be considered a commercially non-viable project to become viable in exchange for wider socio-economic and environmental outcomes.

To achieve policy objectives effectively, applications will be evaluated on a case-by-case basis with reference to the following criteria:

• alignment with Welsh Government’s policies and objectives at the time of award
• alignment with the principles of a Smart Local Energy System
• deliverability against identified milestones and funding timeframe
• impact against the defined scheme criteria
• value for money
• applicants will be required to consider possible displacement of other projects, in order that the award not displace a project which may deliver better overall outcomes.

For pre-construction (i.e. project development), including for revenue expenditures:

• subsidy will normally be awarded as direct grant to achieve specific development objectives. The reasoning here is that for social enterprises, public authorities and place-based SMEs fewer opportunities exist for mitigating development risk (e.g. through diversity of the project portfolio) than may exist for large enterprises. In the absence of such subsidy, particularly for cash-constrained small local enterprises, the perceived investment risk (cost) acts to disincentivise such local initiatives.
• subsidy will be accessed via a formal application process(es) and considered in relation to the socio-economic outcomes achieved.
• subsidy may also be provided as a repayable low-interest or interest-free loan through the Local Energy Fund

For construction (i.e. project implementation), including operational expenditure:

• subsidy will be accessed via a formal application process(es) and considered in relation to the range of socio-economic outcomes achieved alongside the conventional commercial evaluation of project returns.
• a subsidy ‘hierarchy’ will apply as noted above and direct grants will only be offered to bridge alongside, or instead of, low-interest or interest-free lending to the point necessary for a project with sufficiently strong socio-economic outcomes, and/or other wider benefits, to proceed.

Specifically in relation to the Impact and Value for money criterion applicants will be required to:

• outline the local socio-economic impacts of the project and how these will be realised. Impacts must extend beyond the applicant organisation, and applicants are required to consider wider benefits such as those linked to the Welsh Index of Multiple Deprivation, wellbeing, high quality jobs, and community involvement.
• outline the environmental impacts of the project and how these will be realised. Applicants are required to consider benefits such as those linked to greenhouse gas emissions and air quality.
• demonstrate that the public funding requirement is the minimum necessary to reasonably achieve the public good. This would typically entail a degree of quantitative analysis of economic value generated and retained locally alongside the qualitative evaluation of wider socio-economic outcomes.

The methodology for these analyses will form part of the individual application scheme guidance.

£4,999,999