Reinventing community energyEthical Energy & Climate News & Features
This article appears in the autumn issue of MyGreenPod.com Magazine, distributed with the Guardian on 27 October 2017. Click here to read the full digital issue online
At the end of June, Mongoose Crowd – the UK’s first dedicated community energy crowdfunding platform – launched its first green energy bond offers. For the first time, UK investors were able to buy community energy bonds that were also eligible for the tax benefits of an Individual Savings Account (ISA).
The bond offers – in Bath and West Community Energy (BWCE) and Bristol Community Energy (BCE) – closed at the end of July and August respectively, and both reached their minimum investment targets. Once the pending ISA transfers are complete, the offers should comfortably raise over £750k each, with a combined total of just under £1.7m when all the numbers are tallied.
The money raised will help BWCE to re-finance solar projects originally underwritten by a loan from SSE, replacing commercial debt with people-powered investment. The BCE bonds will be used to fund the first ever community-owned battery storage project to incorporate the latest Tesla battery technology.
As well as enjoying the unbeatable feeling of putting their money where their heart is, investors will receive healthy returns of 4.5% (BCE) and 5% (BWCE).
THE STATE OF THE SECTOR
Community Energy England (CEE)’s recent State of the Sector report reveals community energy in the UK is widespread, significant, economically effective and beneficial to local communities. There were record levels of community energy activity in 2016, with 222 community energy organisations throughout England, Wales and Northern Ireland involved in 269 distinct energy activities.
Together, the organisations own 121MW of energy capacity, which has generated 265GWh of energy since 2002. A further 74 organisations are actively providing energy efficiency interventions in their communities. When combined with the Scottish sector, total community generation capacity in the UK is 188MW.
As well as driving the shift to renewables, in 2016 alone these projects generated an income of £620,000 for community benefit funds for local economic, social and environmental benefit.
CARVING NEW ROUTES
Unfortunately, policy and regulatory changes have since impacted dramatically on this success, with many projects put on hold or even abandoned. But in the face of reduced support, the sector is responding with increasingly creative and pioneering approaches.
‘The strong skills base, organisation capacity and appetite for innovation is seeing community energy groups adapting to wider opportunities in the energy sector’, says Jon Hall from CEE. ‘From system innovation to novel partnership approaches, communities are pioneering new routes to low-carbon development, in the context of an increasingly unsupportive political and economic climate.’
The community energy sector is increasingly self-supporting in terms of project funding and fi nance. With access to small amounts of early stage funding from regional, national and European sources, the community sector is able to secure finance through a variety of routes, including share offers, loans and bonds – and the sector’s very effective at raising funds. According to CEE, organisations have leveraged over £190m in project fi nance from £1.9m of project development funding.
Project financing is often a complex and challenging process for many communities, requiring expensive expertise and support. ‘We applaud the innovation and initial success of platforms such as Mongoose’s community energy ISA’, Jon tells us. ‘These mechanisms make it easier for individuals to invest in community energy projects, while at the same time receiving returns on their investment.’
‘The community energy sector has grown rapidly in recent years and is now well positioned to play a major role in the ongoing transformation of the UK’s energy sector, enabling greater local control and lower costs while providing a cost-effective contribution to meeting our collective obligation to reduce greenhouse has emissions. Investing in community energy offers people the opportunity to make better returns than they would from traditional savings accounts and benefi t from government incentives while supporting the creation of a more democratic, fairer, cleaner and more democratic energy system.’
Chief executive of Mongoose Crowd
Since 2015, Mongoose Energy has raised more than £90m in capital to finance the construction and management of 80MW of community-owned solar PV projects, generating enough renewable electricity to power over 20,000 homes. This includes the acquisition in July of England’s largest community energy project to date, the 14.7MW solar array at Drayton Manor in South Warwickshire (main image).
Typically, investors have received a 4.5-7% return on their investment, depending on the performance of their project.
As an FCA regulated platform, Mongoose Crowd is able to offer investors the choice of using their ISA allowance to invest in bonds, tax free, with the new Innovative Finance ISA (IF ISA). This is an ISA that the government introduced to sit alongside the existing cash and stock & shares options.
The IF ISA is designed to give people the chance to invest in alternative fi nance and get the same tax benefit of the traditional cash ISA.
IF ISA investment has proved extremely popular, with close to 80% of the total investments being snapped up in the ISA wrapper, including transfers from existing ISA accounts. A transfer represents another opportunity for investors; they can transfer money that’s built up over the years in ISA savings in order to reap better returns – and support community-backed renewable energy projects at the same time.
Mongoose Crowd will be launching new equity and bond offers in the first quarter of 2018, so watch out for upcoming opportunities to get involved in community energy projects.