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Author: Hugh Goulbourne, Director and General Counsel at CO2Sense CIC
Recently, I joined an expert panel to discuss the future of community energy in the UK kindly hosted by Ethex. The discussion highlighted the opportunity for community scale energy to boost public engagement and confidence in the net zero transition. However, to succeed the sector needs clarity soon from Great British Energy on its plans for the Local Power Plan.
Boosting net zero confidence through community energy
Voter confidence in the Net Zero transition is at a key inflection point. Research shows that voters like green technology when it works. At the same time there is a high level of distrust due to problems with insulation and solar panels and many technologies such as heat pumps just remain out of reach in terms of cost. With energy prices also remaining high, the government needs quick wins on the road to 2035.
Community energy provides just such an opportunity; a way for local people to take back control of their energy needs and for policy – makers to stop making energy look like a problem.
Whilst the government’s flagship initiative, Great British Energy works on the long-term big-ticket items such as offshore wind, hydrogen and grid upgrades, community entrepreneurs are ready to put in place projects. From solar panels on schools to farm based wind turbines, these are real tangible bits of technology which people can point to and take confidence from every day.
At CO2Sense we have been involved with delivering these types of projects for more than a decade. We have helped to enable people in communities from North Yorkshire to Bristol to work cooperatively to find a site, build the technical and financial case and then work with us to source the funds to develop that project.
Making Net Zero accessible for all
Importantly, Community Energy also makes the Net Zero transition stop looking exclusive and expensive because the revenue for the energy which is generated goes back into the local economy. In Mid Wales where we have a wind turbine, the local community group has been able to regenerate its park and community centre, and we have used our share of the income to support projects in more communities around the country.
So, what needs to happen to take the Community Energy sector from a 100-million-pound sector to a billion-pound sector, making a significant contribution to the government’s ambition of 8 gigawatts of new clean energy by 2029?
Well first we know from our work, and the work of Community Energy groups such as Energise Barnsley, who joined this week’s panel discussion that local authorities, community groups and other local landowners (for example farmers) don’t generally have the capacity or the capability to assess which are good or bad assets to secure finance.
Financing community energy projects
Unlocking development finance
Our proposal is that GB Energy should look to provide development finance to community energy developers. This would release capacity from areas where there is already excellence and support knowledge transfer across all communities – legal templates, commercial models and technical know-how.
Blended finance solutions
A second issue is the volume of available finance. Given balance sheet deficits, local authorities will struggle to borrow and commit project finance. The government has pledged a very impressive £1billion per year for the Local Power Plan, but even this huge uplift in support will be very thinly spread across an estimated 800 community groups and 400 local authorities.
We see an opportunity to structure community energy portfolios so that they attract a blend of private finance to make the government’s money go further. In some cases, this means bank loans and/or community shares. In other cases, it could mean that a percentage of the sites are sold off to private equity to fund the build out of those which will be owned and operated by the community.
In all cases, government monies would be used to ‘de-risk’ the proposition for other investors, taking a portfolio of projects through the development phase. This doesn’t mean using taxpayer money to subsidise private investors, on the contrary it is about creating investable clean energy assets which create a revenue stream for government, community and investors.
Policies for Rural and ‘hard to finance’ projects
Lastly, there is currently no policy mechanism to support ‘hard to finance’ projects such as low head river weir or farm based anaerobic digestion projects, both of which are very important for more rural areas. This includes a framework for locational energy pricing, a local energy market system that would mean residents close to a community energy asset can benefit from cheaper energy bills.
In our earliest days at CO2sense (2009-2013), we provided policy and advocacy support to local authorities and national government, which helped to create the UK’s first community energy strategy and a decarbonisation strategy for the Humber. The Local Power Plan provides a real opportunity for similar ‘knowledge hubs’ to be created across the UK. Focussed on different technologies and geographies, these hubs could work with GB Energy and government to make the changes that are necessary to enable the best projects to go ahead in every community.
Regional knowledgeable hubs
Development loans, blended finance and regional ‘knowledge hubs’ are three ways in which the Local Power Plan could turbocharge the community energy sector and enable UK households everywhere to take back control of their energy.
CO2Sense’s mission in powering local energy
We at CO2Sense welcome the local power ambition of Ministers, Mayors and other key stakeholders in national and local government who we have engaged with recently. This is a moment of incredible opportunity for the community energy sector; no longer are we talking about whether the scale up of community energy is going to happen but how and when.
Our experience tells us that it’s best to move fast, try things, see what works and then scale it up. Some failure is inevitable, and our approach is to always ensure that something is recovered from every project, even if it is just to help a local group to build on their experience and move quickly onto developing a better asset. We have 15 years worth of models and templates plus reserves of public money and we are ready to play our part to help GB Energy make good on the government’s number one mission to share wealth equally across the country.
About the author
Hugh Goulbourne is Director and General Counsel at CO2Sense CIC. CO2Sense acts an early-stage investor and partner to enable low carbon projects to grow, scale and deliver benefits to communities, businesses and the environment.
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