Putting community energy at the heart of our renewables revolution

| 7th November 2014
A public tour of the Hepburn Community Wind Farm on its launch day, 5th November 2011. Photo: Tibor Hegedis / Hepburn Wind via Flickr.
A public tour of the Hepburn Community Wind Farm on its launch day, 5th November 2011. Photo: Tibor Hegedis / Hepburn Wind via Flickr.
This is an exciting time for community energy, writes Julia Groves. New guidance will make it easier for local people to invest in local renewable power projects, while other opportunities are opening up for risk averse investors. And the more of us join in, the sooner we can displace the Big Six who dominate UK energy markets.
For community energy to be truly democratic, everyone should be able to own a stake in solar and wind farms, no matter where they live.

Big energy companies can behave like a law unto themselves, levying inflation-busting price hikes with impunity and apparent indifference to political criticism and energy consumers' wallets.

There is, however, a realistic solution. One that will provide more sustainable, and potentially cheaper energy for everybody while making Britain less reliant on imported energy - and it's within our power - ordinary consumers - to make it happen.

Community energy refers to renewable energy sources that are owned, operated or funded by energy consumers and communities, and it is a sector of the energy market which should not be underestimated.

It could even mean communities selling electricity to energy companies at a discounted wholesale rate in order to buy it back at a lower retail price than is usually offered via standard tariffs. So lowering carbon and lowering costs.

Such agreements could connect supply and demand in a healthy and transparent way, since communities can see how much they are charging for their power and also how much they are paying. The profits and savings made by all parties are clear for everybody to see, not hidden in some complex tariff structure.

Taking a stake in local renewable power projects

There are already 5,000 community-owned energy plants in the UK, and it looks like a good many more may be on the way, at least projects in which local communities have a stake.

It just so happens that the UK's Green Investment Bank has chosen today to announce that it's making £200 million available for community-scale investment projects across the UK.

And earlier this week, energy secretary Ed Davey launched the 'Shared Ownership Taskforce' strategy, under which local people can become part-owners of large (costing more than £2.5 million) renewable energy projects connected to public electricity networks. Depending on the size of the project, they may take from 5% to 25% of the project, with the minimum stake set as low as £5 to encourage participation.

This initiative is currently voluntary but has support across the industry, and applies to any projects entering the planning system from this week. It's also important because it recognises the huge potential of the community ownership model, and could help push it further along the track.

Savvy solar and wind developers will also recognise the marketing opportunity beyond the administrative burden of setting up such community ownership schemes.

And it may be that local people now opposing wind turbines or field-scale solar farms may feel differently if they stand to benefit from the projects - as is already the rule in Demark, Germany and other countries where renewables have taken off in a big way.

But we should all be able to benefit

But while the changes are to be welcomed, it's not enough. Only those lucky enough to live close to the natural resources can currently benefit. Also millions of homes are unsuitable for solar panels, and people in the middle of cities cannot easily set up wind projects.

For community energy to be truly democratic, everyone should be able to own a stake in solar and wind farms, no matter where they live. Remember, we all pay for the 'feed in tariffs' and other schemes used to subsidise renewable energy, so shouldn't we all be able to benefit from them?

Community energy should be inclusive, involving the whole population if possible. That way, we will all have a vested interest in the creation of more renewable energy. And MPs in all areas will begin to see it as a relevant issue for their constituents, whether by wanting to help create a project or facilitating investment or access to cheaper tariffs for those unable to set up their own schemes.

This may start with local groups getting projects off the ground, but by providing the means by which anyone can lend or invest even a small sum in community energy projects, crowdfunding sites such as Trillion Fund can give everybody the opportunity to benefit from community energy, either through lower bills or by making a decent financial return.

People don't even have to believe in global warming - they just need to be motivated to earn a decent return on their savings, and (we hope) like the idea of being involved in renewable electricity generation, rather than just being an energy consumer.

Breaking the grip of Big Power

And, when it reaches scale, local generation can introduce some much needed competition into the energy market, essential if we are to escape the grasp of the Big Six and pay a fair price for our power.

Take the example of Triodos Renewables, who are now crowdfunding their new share offer, with minimum investments of just over £50 - on the same terms as those investing £50,000 for their personal pension plan.

They are raising £5m to continue to grow the UK's green energy supply to have a meaningful impact, almost 40,000 homes worth of home-grown sustainable energy sources that will be part of our energy mix for 20 years to come.

They are now the UK's most widely owned renewable energy company with over 5,200 shareholders. Both the volume of energy and the level of engagement (for every one shareholder, there are probably 10 other people who considered it) are meaningful and this is the scale of initiatives we need to make a real difference to our energy future.

So let's be ambitious. Let's define community energy in broad terms so that we get the financial and political backing we need to have a real impact on our energy market.

Here's our check-list of the five key tenets of community energy:

  • Fair - profits for the many not the few
  • Inclusive - relevant and beneficial to all in the community, not just investors
  • Engaging - connecting people, educating, rewarding
  • Connects supply and demand - influencing consumption, changing bills
  • Scalable - to have a real impact we have to do this again and again and again.


Cooperatives are great - but not ideal investment vehicles

We don't think it is a great idea to limit the definition of community energy to cooperatives and community benefit schemes. Those are wonderful things, and more power to them, but they are designed to be by, and for their own communities, and are very definitely not investment vehicles.

Recent moves by the Financial Conduct Authority to clarify what the purpose of an initiative must be, for it to be deemed a cooperative or community benefit scheme have led to some schemes being denied mutual status.

While more schemes being held up in this way might stymie development, more consumer protection - the kind that will reassure cautious investors putting some of their life savings into a community scheme, must be welcomed by the industry, if community-owned energy is to reach the scale required to beat the Big Six.

But equally, that protection must not be so heavy-handed that ordinary individuals can no longer gain access, which is why conversation with the regulator on this issue is so important.

If you have a view that is relevant to the FCA as it considers how to move forward on co-operative definitions, join the consultation before the November 28 deadline.

Making the renewable energy revolution happen!

The switch to zero carbon energy is, in my view the challenge for our generation: we are the ones in a position to make a difference. We have the data that our parents didn't have, and the time that will run out before our children can take the reins.

We need this to be relevant to as many people as possible. Whether their motivation is environmental or financial. Whether they want to be hands-on or leave it to the professionals. And whether they live near a windy hill or rent a flat in a city centre.

So let's define our community as the whole country. A network of communities cooperating to reach meaningful scale, and forcing an energy revolution in the UK which will ease the cost of powering our homes for everybody, and give us all a more sustainable future.

 


 

Julia Groves is Chief Executive of Trillion Fund. An experienced founder and director of early-stage digital and renewable energy businesses, she joined Trillion Fund from Engensa, a leading UK domestic solar installer. Prior to Engensa, Julia spent five years building a wind turbine business Quiet Revolution, which designed and built turbines for the Olympic Park.


Key documents