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Solar return

Can we still bank on the sun – and expect healthy returns – in a post-Brexit world?
Solar return

There has been massive financial innovation in the solar industry; over the last five years we’ve seen everything from pioneers launching small projects to sophisticated funding models involving mainstream banks and dedicated investors.Communities for Renewables CIC (CfR) was set up in 2012, when community energy was in its infancy.

‘The board, which includes some of the UK renewable energy industry’s founders, recognised a need – and an opportunity – to change the way energy infrastructure was developed, financed and owned’, explains Jake Burnyeat, CfR’s managing director.

‘The UK had made good progress in shifting to decentralised low carbon generation but, unlike Denmark and Germany, we had not managed to decentralise ownership and economic benefit at the same time.’

While most of the large-scale wind and solar projects in the UK were built by commercial developers under profit-driven models, CfR set out to show that the industry can be based on local ownership and benefit, through social enterprise business models.


To date, CfR – a community interest company (CIC) – has worked with over 20 local energy enterprises as well as councils and social landlords. Over the last 18 months alone CfR has helped deliver over £25m of community energy installations. ‘Our work ranges from helping a new local energy enterprise to get set up and develop its business plan to helping a project to get financed and built’, Jake tells us.

Since 2014, CfR has also worked with the award-winning Plymouth Energy Community to help set up a local energy generation enterprise, which has raised over £2m in community share investment and £4.5m in long-term debt finance. The money has funded solar panel installations on the roofs of over 30 schools and community buildings in the city and a 4.1MW community solar farm on a brownfield site. The solar panels help reduce energy bills and earn a return for people who have invested in the community share offer, while the surplus income generated supports work to help get people out of energy debt and green Plymouth’s energy supply.

CfR has just completed the community purchase and financing of the largest community solar project in the UK to date, at Wick Farm in Somerset. The 9.3MW solar farm will be run for the benefit of the local community and, over the next six months, CfR will involve local organisations and launch a community investment offer.


One investment opportunity that’s already up and running is the Gawcott Fields Community Solar project, a 4.2MW solar farm between Buckingham and the village of Gawcott. The olar farm was commissioned in June 2016 and has been generating energy and income from the sun since then. It’s made up of 16,000 solar panels and is expected to generate around 4m kWh of electricity each year – equivalent to the annual consumption of around 1,000 homes.

The solar farm benefits from a 20-year inflation linked Feed-in Tariff (FiT) that was secured before the cuts last year. ‘We’re hoping to raise £1.125m through the Gawcott Fields community bond offer, with the remainder of the money coming from a 15-year bank loan for which we have an offer of just over £3m from Santander’, Jake tells us. ‘The money will be used to repay the development and construction costs of the solar farm, which have so far been funded by the landowner and the construction contractor.’

People and organisations can invest any amount from £250 upwards and, while adults from any region can invest, in the event of over-subscription priority will be given to those from the local area. The 20-year bond offers an annual interest of 6% with some built-in inflation protection, too: the bond interest increases by 0.5% for each 1% rise in inflation above 3%. Bond investors get their capital retuned by year 20, with capital repaid out of revenue reserves rather than being dependent on further financing.


‘Buckingham and the surrounding parishes spend around £20m per year on energy’, Jake tells us, ‘almost all of which leaves the local economy. The Gawcott Fields Community Solar project is a step towards reducing and localising that energy spend, and making energy a benefit to – rather than a drain on – the local economy.’

Surplus income generated after operating costs, bank loan costs and payments to bond holders will be used to support community projects in the local area. The community surplus is expected to be around £10,000 per year for the first three years, and a total of around £2m over the 30-year life of the project.

For the first three years, half the community surplus will be used to fund a local programme to help people who are struggling with fuel poverty and energy debt.

‘Nearly £200 billion was invested in wind and solar generation worldwide in 2015. The technology and industry is mainstream, but the economics and risks are dependent on project-specific factors. A well developed and managed renewable energy project is an asset; the question is, to what purpose are we putting that asset to work?’

Managing director of Communities for Renewables

This programme will be run by Buckingham and Winslow Citizens Advice in collaboration with the National Energy Foundation, a Milton Keynes-based energy charity. The other half of the community surplus will be used to support a fund to provide grants to local organisations.

The grants will be awarded through an application process open to organisations operating in the local community.‘The electricity generated at Gawcott Fields is currently being exported to the local grid and sold to an energy supplier’, Jake says, ‘but we hope that market developments in the next few years will enable local people and businesses to ‘buy local’ and purchase the electricity from their community solar farm directly.’


The energy industry is already changing, with new supply companies offering an alternative to the ‘big six’ and commercial models emerging that enable small consumers and generators to become active participants in the energy market.

‘Smaller projects can be just as challenging as bigger ones and are often dependent on volunteers who put in a huge amount of time to get their enterprises off the ground’, Jake tells us. ‘That goes to show the will power that is out there to change the energy system for the benefit of people and planet.’ As CfR has grown, so too has the community energy industry, with local energy enterprises being set up in villages and cities across the UK.

Many of these enterprises are still embryonic but it shows the interest is there – and enough have reached a sufficient scale to demonstrate it is a viable model.‘The future of energy is locally generated, locally owned, low carbon and smart’, Jake explains. ‘Energy storage and management technologies will help to balance energy generation and consumption on a more local scale. This will help increase the percentage of our energy that can be generated from variable and local renewable sources and better manage our electricity networks.’


But despite the growth, benefits and popularity of community energy, those forging ahead with the transition to solar still face big challenges – whether putting solar panels on a school roof or building a solar farm to power a town.Brexit has dangled a giant question mark over the future of the renewable energy industry as much of our environmental legislation comes from Europe.

‘The falling pound will push build costs up, as the bulk of a solar installation’s cost is in euros’, Jake explains. ‘However, community energy installations that are up and running and benefit from an inflation-linked Feed-in Tariff may gain from rising inflation and energy costs, which are possible results of Brexit. That’s why we put the inflation protector into the interest terms for the Gawcott Fields Community Solar bond offer.’

FiT cuts cuts have also made it a lot harder to develop new community energy projects but, in a trend that will hopefully be sustained, community energy enterprises are buying operational renewable energy projects from commercial developers. ‘This is a great opportunity if the terms of the purchase result in a fair apportionment of value’, Jake says.

Over the last 18 months, CfR has managed the community ‘buy-back’ of £20m of solar projects – and it’s working on models to scale this up.

‘We are seeing more loan finance coming into the community energy market from mainstream and specialist sources, and this is helping the sector to scale up’, Jake tells us. ‘Community share and bond offers will continue, but the returns offered are likely to come down as the economics get tighter. The community investment offers CfR has worked on over the last two years – including the Gawcott Fields Solar offer that is still open – have been able to offer 6% returns, but we expect the returns on future offers to be lower.’

But the cuts to subsidies over the last two years represent the biggest hurdle in the transition to solar power; they’ve hit the industry hard and made it difficult to develop new community energy projects.

‘The renewables industry is now being asked to compete with little or no subsidy against a subsidised fossil fuel industry’, Jake says. ‘That’s the challenge. If we can meet that challenge through innovation in finance, smart energy technologies and new business models – all of which is happening – it will be hard to hold us back!’

Click here for more on Gawcott Fields Community Solar and the bond offer.

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