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.
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.
Sorry we don't have any suggested related content at the moment. Please check back later.