The Community Renewables Economy - Starting up, scaling up and spinning out Jelte Harnmeijer, Matthew Parsons and Caroline Julian - Scene
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A ResPublica Green Paper A ResPublica Green Paper A ResPublica Green Paper A ResPublica Green P
September 2013
The Community Renewables Economy
Starting up, scaling up and spinning out
Jelte Harnmeijer, Matthew Parsons
and Caroline JulianAbout the Authors About ResPublica
Jelte Harnmeijer is a director at SCENE Ltd., where he is tasked with furthering SCENE’s The ResPublica Trust (which operates under the trading name ResPublica) is an
mandate of supporting and facilitating broader access to investment in renewable independent, non-partisan think tank. We focus on developing practical solutions to
energy generation. He has many years of experience working in both the developed and enduring socio-economic and cultural problems in the UK.
developing world as a researcher and programme manager. He obtained a PhD at the
University of Washington through a NASA grant, and continues to contribute to earth Our ideas are founded on the principles of a post-liberal vision of the future which moves
systems research. Jelte is also interested in the consequences of energy supply constraints beyond the traditional political dichotomies of left and right, and which prioritise the
and climate change on economic and agricultural systems. need to recover the language and practice of the common good.
Matthew Parsons is a community renewables analyst at SCENE, where he oversees Based on the premise that human relationships should once more be positioned as
research and the SCENE Connect database. Until recently, he was working in the nascent the centre and meaning of an associative society, we aim to foster a ‘one nation’
tidal energy industry as a device developer. Matthew has published scientific papers approach to social and economic inequality so that the benefits of capital, trade
and taught in the fields of neuroscience, physics and engineering. He also has evolving and entrepreneurship are open to all. A vibrant democracy and market economy
interests in the areas of digital currencies (Bitcoin), monetary reform (Positive Money), require a stronger focus on virtue, vocation and ethos. Consequently our practical
and of course community energy, integration and investment. Matthew holds an MSci recommendations for policy implementation seek to strengthen the links between
from the University of Glasgow and a PhD from the University of Cambridge. individuals, institutions and communities that create both human and social capital,
in order to achieve a political space that is neither dominated by the state nor the
Caroline Julian is Head of Research at ResPublica. She co-ordinates ResPublica’s research market alone.
programme, and is currently managing projects within the ‘Models and Partnerships for
Social Prosperity’ and ‘British Civic Life’ workstreams. Caroline was the co-author
of ResPublica’s 2012 paper, “Re-energising Our Communities: Transforming the energy ResPublica Green Papers
market through local energy production”, and editor of “Making it Mutual: The
ownership revolution that Britain needs”. ResPublica Green Papers provide a discussion platform for single exciting ideas in public
policy. The purpose of these short, provocative pieces is to outline an argument which
The authors would like to thank Anna Harnmeijer, who designed SCENE Connect’s could spark a debate and prompt feedback and deeper reflection on the topic.
research methodology, and oversaw its co-ordination and implementation. Charlie
Loyd, Stanislav Manilov and Maithu Venkatesh coded on-line surveys, databases, and We intend Green Papers to spark debate and more extensive work and research. We
GIS functionality. Surveys were conducted by Rebecca Reeve, Ciorstaidh Couston and hope that this publication does just this.
Christina Man. Neil Mearns and Darcy Pimblett maintained the database, and Vijay
Bhopal offered management support. Vital advice was provided by Nicola McEwen and
Elizabeth Bomberg. Most of all, we are grateful to the hundreds of community members
who have worked with us over the past 24 months.
This paper was edited by Caroline Julian with the assistance of Adam Wildman. The
editors would also like to thank Gemma Grimes, Nik Perepelov and Rob Norris at
RenewableUK, Alison Hood at Airvolution Energy, Marlies Koutstaal at Infinergy, Paul
Monaghan at Co-operative Energy, Becky Willis at Co-operatives UK for all of her
insightful comments and James Edmondson for his assistance. As well all of those who
participated in our Advisory Group, particularly Laura Sandys MP.
2Contents
Foreword by Greg Barker MP, Minister of State for Energy and Climate Change 2
Foreword by Maria McCaffery, Chief Executive, RenewableUK 3
Executive Summary 4
1. Introduction 7
2. The Nature of the Sector: Capacity for Development and Scale? 9
3. Central Barriers to Growth of Community Energy 14
4. An Untapped Opportunity: The Joint Ownership Model 17
5. Towards a New Energy Market 20
6. Summary of Recommendations 26
7. Appendix: Methodology 29 �����
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1The Community Renewables Economy
Foreword
by Greg Barker MP, Minister of State for Energy and Climate Change
The UK’s transformation to a low-carbon The number of small scale energy systems in time of a rising cost of living – get the best deal
economy will require a huge national shift in homes and businesses has leapt from a few on their energy supply.
the way we generate, buy, and distribute our thousand to over half a million and is continuing
energy. With the world-leading reforms to our to grow all the time. Our Community Energy Strategy, to be
electricity market, large centralised low-carbon published later in the year, will set out our
infrastructure, such as nuclear power stations Greener, cleaner and with falling costs, there are vision for the next steps for community energy
or offshore wind farms, will continue to play a a whole range of locally deployable low-carbon together with a clear set of actions to help make
major role in our energy system well into the energy technologies that can now be exploited that vision a reality. But change won’t happen
future. However, large-scale technologies such economically. From Combined Heat and with top-down government action alone. We
as these are an important part of a diverse Power systems, solar PV, geothermal, coppiced will need to work closely with communities at
energy mix, not an entire recipe. Our move to a bio mass and a range of energy from waste the grassroots and other partners such as local
sustainable society will be a local revolution too. technologies, right through to hydro and micro authorities and the private sector.
The growth in decentralised and community hydro schemes and more; the UK is bursting
renewables, as this report shows, has the with innovation and potential. I welcome the ideas in this report on helping
potential to reap huge dividends for the UK. communities navigate the planning system,
We want to continue to help communities and on forming productive partnerships so
Community energy has not always featured spot and unlock the exciting opportunities in that they are better able to take an active role
strongly in the approaches taken by successive their area, and successfully grow projects from in their own local projects. Our aim is to help
governments to energy and climate change planning through to implementation. This communities and local businesses seize this
policy. But the Coalition Agreement recognised means enabling communities to take more exciting opportunity.
its potential and committed to encourage control over local generation projects, while
community-owned energy schemes. In also empowering them to reduce their energy
Government, we have made great progress. demand, tackle fuel poverty, and – crucially, at a
2The Community Renewables Economy
Foreword
by RenewableUK Chief Executive Maria McCaffery
The growth of renewable energy projects A more positive attitude from local authorities is published practical guidelines which will assist
owned wholly or partly by local community needed to encourage community involvement greatly in this. The Government has asked the
groups in the UK has been remarkably swift in renewable energy projects, as well as onshore wind industry to increase the amount it
over the last decade, increasing from just over improving access to funding, financial know-how pays in local community benefits fivefold, as an
4 MW in 2003 to nearly 60 MW today. Wind and legal expertise for community groups. acknowledgement of the role communities play
energy projects account for 80% of this installed in hosting wind energy projects. It’s also worth
capacity, with solar PV providing 10% and One of the most striking findings of this report pointing out that local authorities in England
smaller contributions from other technologies is that two-thirds of communities reinvest, retain the business rates generated by renewable
including biomass, hydro, ground source heat or intend to reinvest, revenue gained from energy projects, providing a much-needed extra
pumps and anaerobic digestion. renewables in further energy generation projects source of income.
or energy efficiency technology, thus creating
This report highlights the fact that although this a virtuous circle. On a wider level, there is a An effective way to overcome these barriers
fourteen-fold increase in installed capacity over social benefit which is less easy to quantify, but involves, as this report suggests, using a joint
the last ten years represents an excellent start, nonetheless significant. Generating clean power ownership approach, in which communities
the UK has the potential to expand community also generates a positive sense of empowerment, work with renewable energy project developers,
ownership of renewables significantly; we could as local people work closely together on a and/or local businesses and local authorities
reach at least 550 MW by 2020. valuable environmental project. towards a common goal. Using this socially-
and economically-inclusive model, we have
However, we should not consider it a foregone The report rightly highlights the need to ensure an opportunity to redefine the relationship
conclusion that this level can be achieved in the that local authorities have sufficient knowledge between developers and communities to unlock
current policy environment. As this report clearly about the importance of renewable energy, so significant growth in community energy.
identifies, there are barriers to the deployment of that they can make fully informed decisions. As
community energy which need to be addressed. a result of planning reforms, DECC has recently
3The Community Renewables Economy
Executive Summary
The UK has a large and growing renewable have successfully developed into ‘renewable
“On current trends, and with
energy market and world-class wave, tidal, energy economies’.
a significant joint ownership wind and hydro resources. Even solar thermal
component, we estimate that and photovoltaic technologies, sources of But despite widely acknowledged social and
by 2020 the UK could have a renewable energy that you would not normally economic benefits, there remain very limited
combined potential community associate with the UK, are rapidly being opportunities for communities to participate
capacity for all onshore deployed across much of the country. in energy generation, to the frustration of
technologies of 5.27 GW...This increasingly ambitious and driven community
Amidst these unfolding opportunities, many groups. Most community groups seeking to
represents almost a fifth of total
developments that include an element explore community energy regularly encounter
renewable energy capacity. What of community involvement have brought the two most common barriers to entry into
is needed is a step-change in important advantages beyond those of purely this market: overbearing planning restrictions
attitude from policy makers on the commercial projects. These advantages and a dearth of external private investment.
potential for community energy.” include economic and cultural multipliers
that, in addition to enabling sustained local There are several emerging models that
development, positively feed back into the could aid community groups attempting
broader economy. So dramatic is the effect of to overcome these problems. The most
these ‘community accelerators’ that it is unlikely promising of these are joint venture or joint
that renewable energy and climate change ownership arrangements, which could very
objectives can be met without them. This quickly become the primary vehicle for growth
echoes the experiences of other countries that for community energy projects. As well as
4Executive Summary
these joint venture models, this report also Key recommendations of this report are: making’ service, where either the community or
highlights that space remains for innovations developer could easily seek local opportunities
in community benefit arrangements and 1. Incentivise the joint ownership of and establish direct contact. If a match is made,
partnership agreements with local government. community energy there should be a duty on the local authority
and local planning authority to respond and
Truly grasping these opportunities could The Department for Energy and Climate advise. Advice and independent brokers, like
reap huge dividends for the UK. On current Change (DECC) has recently announced that Community Energy Scotland, should also play a
trends, and with a significant joint ownership it is planning to increase the threshold for key role in facilitating such partnerships.
component, we estimate that by 2020 the UK community projects under the feed-in tariff
could have a combined potential community (FiT) to enable larger community energy We also recommend that this register include
capacity for all onshore technologies – wind, projects to benefit.1 We recommend that DECC the appropriate space and platform for
solar photovoltaic and hydro – of 5.27 GW should permit jointly-owned community developers to upload, or provide links to,
– up from 58.9 MW today. This represents energy projects, other than just those wholly- their own environmental data and any other
almost a fifth of total renewable energy owned by the community, to be included supporting documents required for their initial
capacity. What is needed is a step-change in within this extension. This should significantly planning application. The register could also
attitude from policy makers on the potential incentivise the starting-up and scaling-up of encourage developers to advertise, where
for community energy. community energy projects. appropriate, any other enabling services, such
as additional provision of advice and expertise
Despite promising signs from policy makers 2. Extend the planned register of for local ambitious community groups who are
in Westminster over recent months, there still community benefit to include a portal for looking to develop or invest in renewable energy
remain substantial barriers to expansion for developer-community ‘match-making’ production.
community energy projects. Existing hurdles
at all stages of the development process – In response to the recent call for evidence,2 DECC 3. Establish partnerships with leading
from project conception to securing grid has proposed that the department will work ‘pathfinder’ local authorities to develop
connectivity – are very high, and will need with community and industry stakeholders to models of co-operation3
to be overcome if we are to get the energy establish a register of community engagement
mix we need. UK community renewables are and benefits. We recommend that, once Local authorities are in a strong position to
growing exponentially. Policy makers need established, such a register should include a implement positive, enabling policies that
to make sure that this burgeoning sector is specific portal where developers can express could support the development of community
enabled to reach its full potential. an interest in developing partnerships with renewable energy partnerships. We encourage
communities. Likewise, communities should in local authorities to take a more positive view of
turn be able to express interest in owning or co- community involvement, particularly ownership,
owning renewable energy developments. Such in renewable energy developments and to give
a platform would perform an informal ‘match- greater consideration to the positive benefits
5Executive Summary
of community support and involvement when Through new powers granted by the Localism often faced by small start-up projects and
making planning decisions. We recommend Act, communities are now able to take a lead include pointers to the appropriate advice
that DECC and DCLG establish partnerships with in setting the priorities for local development portals, support services or individuals who
leading ‘pathfinder’ local authorities to develop in their area. We recommend that DECC work could provide additional support.
models of co-operation between developers, with the Department for Communities and
communities and local authorities. Local Government (DCLG) to establish closer 6. Pilot Community Commissions
links with neighbourhood planning advice
4. Encourage local authorities to act as and support services, such as Locality and the To further address problems in the planning
financial intermediaries Centre for Sustainable Energy, to pilot local process, including lack of knowledge, we
energy development plans. In producing such propose that DECC, in partnership with DCLG,
Given the new rights granted through the plans, neighbourhood forums should highlight consider piloting a series of ‘Community
Localism Act 2011 to borrow and invest, local opportunities for communities to develop and Commissions’ to assist with highlighting
councils are well placed to begin to both invest own new local energy projects, either as a sole development and investment opportunities
and financially benefit from community energy developer or in partnership with others. Where in community renewables. This model could
projects. Local authorities should establish links significant community ownership is involved, innovate further on participatory planning
with local housing associations, businesses and additional support should be offered to the activities already established within many local
churches, as well as social finance organisations community as it embarks on the planning authorities whilst also learning from international
like Big Society Capital, and its intermediaries, application, and such developments should be examples, including Australia’s use of ‘citizens’
to explore these opportunities. A further fast-tracked through the planning process. As juries’, in opening up community-wide discussion
incentive for local authorities is the potential argued previously by ResPublica, the social value on the potential for community energy.
revenue that could be generated through the of community energy must also be recognised These ‘Commissions’ would be independent,
business rates retention scheme in England. If in this process.4 Where local opportunities randomly-selected representative bodies made
community share of onshore renewables was for renewables development do not exist, up entirely of local residents, which could and
increased to one-fifth, England could have 2.6 neighbourhood forums and parish councils should be given a short pathway to planning
GW of community energy capacity by 2020, should play a crucial role in co-ordinating power, with a delegated authority to approve
with a mean installation size of 2.5 MW; this community investment in similar co-operative or community energy schemes. ‘Community
would generate approximately £30m of revenue crowd-funded projects. Commissions’ should be integrated into both the
through the business rates retention scheme per neighbourhood and the local authority planning
year – an additional incentive for local authorities We also recommend that DCLG work with DECC process, but would act as an addition tool for
to engage with community energy projects. to nationally standardise all planning and consent local authorities to excite interest in community-
application forms, processes and corresponding owned energy. In addition, such pilots could
5. Pilot local energy development plans paperwork for local energy projects. Forms to further popularise existing neighbourhood
and a planning fast-track for community be completed should be accompanied with planning forums and encourage others to form.
renewables projects guidance notes that recognise the difficulties
6The Community Renewables Economy
1. Introduction
“Despite the fact that
communities across the country
The community energy sector has grown investment in a renewable energy project,
face significant challenges,
dramatically over recent years, with three whether this be wholly owned by them, or in
interest in the role that times as many new community projects partnership with others.
communities play in starting up, conceived in 2011 as in 2005. Yet community
owning or investing in energy energy projects face significant barriers to their Despite the fact that communities across the
production assets has grown, development and growth. Recurrent problems country face significant challenges, interest
particularly within the past year.” accessing the grid, uncertainty around the in the role that communities play in starting
support mechanisms available and pre- and up, owning or investing in energy production
post-consent delays all add to the general assets has grown, particularly within the past
challenge of securing long-term investment year. Government has made moves to support
for community energy projects – a task made the growth of this sector through, most
that much more difficult by the present recently, the development of a Community
economic climate. Energy Strategy, which is due to be published in
Autumn 2013, and provisions in the Energy Bill
These factors impact significantly on to incentivise larger community energy projects
communities and community renewables. By through the feed-in tariff (FiT). But there still
‘community renewables’ in this paper, we refer remain significant barriers to growth of the
specifically to models and partnerships where sector, and much more that government and
a community - local or national - has a financial policy-makers can do to dissolve these.
7Introduction
We outline in this paper that the total We highlight in this paper one particular
operational capacity of community renewables opportunity that could both respond to such
in the UK has grown from 4.1 MW in 2003 to barriers and catalyse growth in the sector: the
58.9 MW in 2013 – a fourteen-fold increase joint ownership model. Joint venture or joint
(an increase of over 1300%). Community ownership models, where communities or local
renewables capacity has therefore grown authorities have established fruitful partnerships
almost three times faster than the total with renewable energy developers, other
renewable energy capacity in the UK, which has local businesses or existing community
risen from 3,500 MW to 17,600 MW in the same groups, reveal untapped opportunities for
time period. Previous research has concluded communities with the ambition to enter into
that the total capacity for community energy the market and take their projects to scale.
in the UK could reach 3.5 GW – 10% of total Where communities cannot go it alone, such
onshore renewable capacity. Based on the partnerships can provide a platform, the data,
findings of our research and historical data, we expertise, investment, the assets - land and
highlight that, if certain barriers are dissolved existing developments - needed to start up and
and the appropriate policy framework put in scale up.
place, this level of capacity could be achieved
by 2027, and expand far beyond this in the We argue that policy makers, national, local
decades to follow. and hyper-local, could do more to incentivise
this vehicle for growth, where the community
Drawing on our research, we highlight that holds a financial investment in the project, and
one of the most prominent barriers faced by establish mechanisms to highlight, facilitate
communities with the ambition to set up or and support such partnerships. Government
invest in local renewable energy production has accepted and supports the principle of
is the planning process – in the broadest community benefit schemes; the next step,
sense. Guidance and access to data, legal where appropriate, is to support and promote
and financial expertise and financial cost are community ownership of energy.
particularly significant hurdles for communities
that often prevent them from entering into
the market. Although there is huge potential
for increased capacity for community energy
in this country, such difficulties prevent this
growth from being realised.
8The Community Renewables Economy
2. The Nature of the Sector:
Capacity for Development and Scale?
Although we have seen increased interest in (21.6 MW); 83 in Scotland (33.7 MW) and a further
community energy from a number of UK-based 13 installations with a combined capacity of
research units in recent years, little by way of 3.7 MW across Wales and Northern Ireland. By
“To date, 27% of all community consolidated data currently exists on present way of comparison, Ofgem reports that the
renewables projects have been capacity, range of technologies, geographical current capacity of community projects using
developed through wholly spread and business model. feed-in tariffs (FiTs) amounts to 26.5 MW – this
community-led energy co- is a significant under-report compared with our
operatives, with a further 34% Based on our research, which is drawn from data.7 There are eight different technologies
developed using other community- comprehensive online surveys and telephone represented, but the vast majority of community
interviews conducted between January 2011 and renewables capacity is made up from wind
led structures.” December 2012, and supplemented with SCENE’s turbine and solar photovoltaic installations:
on-line user-editable database, we outline in together, these constitute 91% of total capacity.
this section the current state of community
renewables in the UK, and how fast this market is By comparison, across the entire UK renewable
growing.5 We also point to the sector’s significant sector, wind and solar make up only 46% of
theoretical potential. total installed capacity.8 This disparity reflects
the great versatility and scalability of these
2.1 Capacity and technology two technologies; wind and solar can achieve
effective distributed generation at capacities
We calculate that there is 58.9 MW of total down to very small scales, whereas an anaerobic
operational community energy capacity in the digester thermal plant, for example, must be
UK.6 This is the summed capacity of 146 separate built at much larger scale with regard to both
installations, 50 of which are located in England efficiency and centralisation.
9The Nature of the Sector: Capacity for Development and Scale?
for implementing and financing the
project, either via a wholly community-led
energy co-operative or other community-
led structures. To date, 27% of all
community renewables projects have been
developed through wholly community-led
energy co-operatives, with a further 34%
developed using other community-led
structures.
• Joint Ownership: An energy developer
was responsible for implementing the
project. These take two forms -
Equity partners: For example, a
community-benefit organisation
purchases a stake in the project. This
segment currently comprises 18% of
all community renewables projects.
Community shares: A community-
owned organisation (e.g. an energy
co-operative) purchases a stake in
the project. This segment currently
comprises 20% of all community
2.2 Investment and ownership or 62%) by the community, and those that
renewables projects.
are part-owned (22.3 MW, or 38%), usually in
A growing diversity of arrangements partnership with an energy developer.
• Public/Community-led Ownership:
through which communities participate
A public body was involved in the
in renewable energy generation can be The business models are diverse, but in general
implementation or financing of a project
found in the UK: Figure 2 represents the key they can be classified as follows:
and the community also has part or full
models.9 Broadly speaking, total community
ownership of the project (e.g. Udny10). This
capacity in the UK can be split up into • Community-led Ownership: The
segment currently comprises 1% of all
projects that are wholly owned (36.6 MW, community organisation was responsible
community renewables projects.
10The Community Renewables Economy
[See Fig.3 - page: 12]
The fact that communities presently play a
relatively small role in the UK energy mix
(< 0.5% of total renewable capacity)12 makes
this multiplicity of business and legal models
all the more noteworthy. In fact, both the
high variety and low capacity - compared
to Denmark and Germany, for example - are
partly explained by the fact that there has
been such a limited focus on the community
sector in energy policy so far.
2.3 Potential capacity
In terms of identifying potential community
renewables capacity, local planning authorities
have a prominent role to play. However, there
exists large variation in how planning policy is
interpreted and enacted - both from council
to council and election to election. This makes
it particularly difficult to arrive at an estimate
for the theoretically realisable UK community
renewables capacity.
A 2011 study concluded that the UK
There is also a large division in capacity capacity in England and Wales with 23.4 MW community-led projects could potentially
between energy co-operatives (47% of UK or 93% of total capacity. Conversely, in Scotland provide around 3.5 GW, or 10% of total onshore
capacity, or 27.6 MW) and other types of they are a distinct minority (4.2 MW / 12%),11 and renewable capacity.13 However, though carefully
organisation (53%). Energy co-operatives are instead development organisations own the executed, this study has two major limitations.
generally formed as Industrial & Provident majority of Scottish community capacity, with Firstly, Cambridgeshire was used as a model to
Societies, and are associated with share offers 54 such bodies owning 22.0 MW of capacity - extrapolate and make projections for overall UK
to raise investment for part or all of a planned 65% of the Scottish total. capacity, despite the fact that this county has
project’s capital spend. This model dominates a relatively low wind resource by comparison
11The Nature of the Sector: Capacity for Development and Scale?
times faster than overall renewables capacity.14
If this exponential growth continues, we
would expect community renewables to reach
approximately 140 MW of capacity by the end
of 2015.
[See Fig.4 - page: 13]
Despite this rapid growth, the market
penetration of community projects is still very
limited, simply because community energy
has taken off from an extremely low baseline
of installed capacity. Furthermore, though we
are confident that rapid growth will continue
for the next two years, we would expect this
growth to begin to slow down from 2015, as
state-aid regulations (introduced in 2010)15 make
themselves felt.16 If the market is sufficiently
agile to find effective ways around the loss
of large pre-planning grants, then a simple
extrapolation of the current exponential growth
rate would put the community renewable
sector on a total operational capacity of 550
MW by 2020.
with other parts of the country. Secondly, the On the basis of the last 5-10 years, the growth
This 550 MW figure represents a significant
study did not aim to account for the additional outlook for community renewable energy
increase, but is far below the genuine potential
potential for joint ventures or joint ownership seems bright. Community energy capacity
of community renewables. The Department
arrangements on larger-scale developer-led has grown from 4.1 MW in 2003, to 58.9 MW in
for Energy and Climate Change estimates
projects. Rather than repeat the work of this 2013, a fourteen-fold increase. In that same time
that by 2020, the UK will have 10 – 19 GW17 of
paper, we will point to the recent history of period, the total renewable energy capacity
installed onshore wind capacity and 7 – 20
this new and emerging sector, of which joint of the UK has grown from 3,500 MW to 17,600
GW18 of solar photovoltaic, while hydro power
ventures play a key part. MW; therefore, community energy capacity
could potentially contribute 3.12 GW.19 Our
during that time period has grown almost three
data shows that the relative contribution to
12The Community Renewables Economy
“Community energy capacity
has grown from 4.1 MW in 2003,
to 58.9 MW in 2013, a fourteen
fold increase. In that same time
period, the total renewable energy
capacity of the UK has grown from
3,500 MW to 17,600 MW; therefore,
community energy capacity
during that time period has grown
almost three times faster than
overall renewables capacity.”
community energy capacity through joint- all onshore technologies – wind, solar PV and
owned projects in the UK is 38%, so given the hydro – of 5.27 GW. Clearly, without the input of
baseline target for community market share is jointly-owned community energy projects – as
10% – not including joint ownership – we can the graph above demonstrates – the growth in
revise that target up to 17.6%. With this target, community energy capacity up to 2020 almost
using the DECC roadmap figures we estimate flat-lines.
a combined potential community capacity of
13The Community Renewables Economy
3. Central Barriers to Growth of
Community Energy
“Categories of commonly
recognised sector-wide barriers Many of the barriers to the growth of renewables systemic issues in the UK investment market. In
include continued uncertainty are now relatively well understood by the last 2 years, lending to small non-financial
around support mechanisms, practitioners, although their relative roles and enterprises has fallen by 3% each year, while
problems accessing the grid, and import remain poorly quantified.20 Issues that interest rates on those loans have risen by over
pre-and post-consent delays.” impact on the renewables sector at large also 30% since 2009. In general, lending by financial
affect community developments, which are often institutions into the productive economy has
more vulnerable than private sector initiatives. fallen from 20% of total investment in 1998, to
10% in 2012.22
Categories of commonly recognised sector-
wide barriers21 – those affecting developers Many barriers are specific to a particular phase of
and communities alike – include continued project development, which thus provide a useful
uncertainty around support mechanisms, framework for discussion. The most significant
problems accessing the grid, and pre- and post- barriers, for the vast majority of projects, present
consent delays. The lack of clarity over long- themselves at the planning phase.
term support through feed-in tariffs and the
forthcoming contracts-for-difference system is 3.1 Planning
partly responsible for increasing the difficulty of
securing equity investment. However, an equal The planning phase is where all of the at-risk
portion of the difficulty in attracting equity (and potentially non-recoverable) investments
and especially debt finance can be ascribed to of time and capital will be made; all inputs to
14Central Barriers to Growth of Community Energy
the project at this stage are completely at risk. Such risks impact even more significantly on involvement and scale. In certain councils,
This is where most community projects come community energy projects: the securing of under certain conditions, the involvement of
unstuck attempting to offset or minimise their planning permission in the UK presents the community groups has a significant positive
risk, or make the decision not to proceed. This single largest hurdle to communities. The influence on planning outcomes. In others, it
is an important consideration, as prior to 2010, unavoidable fixed costs of the planning process plays a statistically insignificant role. Findings
most of the money available to communities disproportionately affect smaller projects; for a such as these corroborate circumstantial reports
to carry out feasibility studies and pre-planning community wind installation, the proportion of of a highly politicised and ad hoc planning
assessments came in the form of development project costs spent on feasibility and planning process. In other words, the level of knowledge
grants.23 This grant money was intended to is 70% higher, than for a commercial installation, of local authorities and their attitude towards
leverage investment from the private sector to largely due to the fact that community schemes local energy is a strong determinant of success
aid in the commissioning of community energy are often much smaller in scale. Therein lies or failure.
projects. However, where projects fail to reach one of the major reasons that communities
the planning stage, or are refused planning collectively own only 0.5% of UK renewable Survey data from communities with successful
permission, this grant money is lost. As an generating capacity.27 projects across the UK reveals that there is a
additional complication, new EU state aid rules striking bias in communities’ opinion of their
now preclude the use of grants in combination 3.2 Lack of guidance and access to data local authority.29 Of communities involved in at
with state subsidy (i.e. feed-in tariff payments). least one successful energy project, community
Because of this, some renewable funds and Community energy projects often fail simply members are five times more likely to report
schemes have converted from a grant system to because they have not been sufficiently that their council was supportive than not,
a loan system – for example CARES in Scotland. informed and advised as to the requirements and three times more likely to report that the
of the planning process. Equally, a good grasp council was knowledgeable. Cross-correlation
Amongst EU nations, the UK is anomalous of the planning process may be hamstrung by of the results also reveals that if a council was
in terms of the risk, cost and time associated a lack of access to crucial data to determine reported to be knowledgeable, it was twice as
with obtaining planning permission for energy project viability. Our research indicates that likely to be supportive. Although these results
generation projects, especially relative to guidance at a local level, and in particular at the do not imply causality, they do indicate a
countries that implement a pro-active spatial level of the local authority, has a strong impact troubling relationship between perceived local
planning framework.24 Even for commercial on project success. authority stance and project success.
projects, the average time taken for planning
decisions to be made is still close to a year, and It is often claimed that “projects are more likely A recent example in support of the effect of
rejection rates are high.25 In 2010-11, the onshore to succeed if they have broad support and local authority attitudes and levels of awareness
wind approval rate in England was just 45% by the consent of local communities”.28 We have concerns the Totnes Renewable Energy Society
project, and 25% by MW capacity.26 looked into this matter in detail, by studying (TRESOC) wind farm. The Totnes Community
planning rejection rates for councils as a function Wind Farm, a project that Jonathan Porritt of
of time, technology, presence of community Forum for the Future described as “one of the
15Central Barriers to Growth of Community Energy
most well-designed and well-supported we’ve understanding that should the project fail to 3.4 Lack of legal, financial and technical
ever seen,”30 was denied planning permission pass through planning, the loan is written-off. expertise
early in 2013. The opinion of TRESOC was that However, the interest rate on this loan is 10%,
“Local planning authorities don’t yet have the tools effective immediately. This can potentially lead Community projects are more likely to be
to balance parochial concerns against national to a perverse incentive: given that community successful if the community has access to a
strategic objectives for deployment of renewable projects take on average 5 years to reach significant pool of professionals or qualified
energy.” This suggests that greater information completion,33 projects can reach a point where people, most likely in the areas of law, finance,
and training for decision makers – both planners even if planning permission is granted, it makes science and engineering. This was shown to be
and councillors – would be beneficial. more financial sense to abandon the project a statistically significant effect in a 2012 study,34
and write-off the loan. This was not the case and one of the major factors for success. In
3.3 Lack of financial support and under the grant system, where the pre-planning support of this, a recently completed 3-year
investment finance was gifted. research project conducted jointly between the
Universities of Sussex and East Anglia revealed
Communities must make difficult financial Liquidity constraints in UK and European that one of the main factors for success of
decisions, very early on in the process, on markets also continue to make their effects felt, community energy was ‘a strong organising
how they will fund a fledgling energy project. and debt finance for small (below £1m in capital group with key skills and commitment’.35
Community energy projects on average costs) community projects is notoriously hard to
spend 17% of the total project cost in the come by, made uneconomical to debt providers Overall project financial viability is highly
pre-installation phase, much of which is spent because of the costly due-diligence required. sensitive to the level of pre-planning and
in the pre-planning phase.31 A project with a Here, a process economists call ‘adverse planning costs, because of the level of risk
total budget of £1m might require £100,000 of selection’ has given rise to a situation where attached to these costs.36 Expertise at this stage,
money in advance of the planning application. viable projects have trouble distinguishing be it free or discounted, is therefore multiplied
This money is entirely at risk, therefore themselves from non-viable projects, to in terms of its value to the community
commercial bank loans and even community the detriment of the former. It is common compared to, for example, voluntary
shares are very difficult to obtain. These costs knowledge that private and institutional construction work offered in the construction
have traditionally been funded through grant investors see community projects as too high phase of a project. Communities that lack
schemes but, as of 2010, grants have become risk, due to the uncertainty and high upfront access to this expertise may be able to obtain
less flexible due to EU-enforced regulations over cost of the planning process. free advice from a national or local source of
the provision of state aid for capital costs.32 advice or voluntary organisation, but these are
thin on the ground and do not constitute an
In Scotland, the main source of pre-planning effective replacement for an on-hand expert
finance for communities is the CARES loan, a member or associate of the community.
state-funded and privately administered pot
from which projects can apply for loans, on the
16The Community Renewables Economy
4. An Untapped Opportunity:
The Joint Ownership Model
“As outlined in this paper, not all
communities have access to the
needed legal, financial, technical A crucial and popular question that has been developments will have to be built to a larger
increasingly raised by government and other scale, and indeed this is the trend we observe.
and project management expertise
national and third sector bodies is: how can In the period 1996-2012, the median community
‘in-house’ to develop projects on community energy achieve scale? We argue project capacity was just 20 kW, while in the 12
their own...Where time or expertise here that there is one particular ‘untapped months leading up to June 2013, a total of 17
is missing, much of the gap could opportunity’ that could provide a key to the MW of capacity came online, split with 16.7 MW
in principle be met by commercial immediate growth of community energy, by split between just four projects.
developers working in partnership enabling communities to more easily enter into
with communities.” the market and overcome the barriers that we One way to achieve such scale is for ambitious
highlight above. This opportunity is the joint communities to go it alone. The UK currently
ownership model, where communities have boasts two wholly community-owned projects
forged successful partnerships with private with capacity above the FiT cut-off: these are
businesses, such as developers, or public the Lochcarnan Community Windfarm at Stora
bodies, such as the local authority or housing Uibhust on South Uist (6.9 MW) and the Westmill
associations, and importantly, where the Wind Farm Co-operative in Oxfordshire (6.5 MW).
community holds a financial stake. The planning application for what would have
been the UK’s largest community renewables
If the growth of UK community energy capacity project - the 11.5 MW Cove Community Windfarm
is to be maintained, it is clear that future in Rosneath, Argyll - was recently retracted.
17An Untapped Opportunity: The Joint Ownership Model
These community-led initiatives are such as Neilston Community Wind Farm, in communities to partner with developers and
tremendous achievements, particularly addition to the more usual private limited deliver projects at scale.
considering that volunteers typically carry companies. Examples include partnerships in
out much of the hard work. However, in which community shares are held by trading There is further evidence that widespread
many cases community-led development is companies that are themselves subsidiaries appetite exists for such investment and
infeasible. As outlined in this paper, not all of charitable community development trusts partnership. Our research indicates that,
communities have access to the needed legal, limited by guarantee, such as the Fintry where communities have the choice of
financial, technical and project management Development Trust based in Stirlingshire, how to use project revenue much may be
expertise ‘in-house’ to develop projects on and others where co-operatives receive re-invested into the renewables economy.
their own. Projects below 5 MW typically streams of project revenue on a contractual Almost two-thirds (62%) of communities
rely on the FiT, rather than the Renewables basis without owning bona fide equity in invest or plan to invest generation revenue
Obligation (RO) as the preferred financial project vehicles, such as Baywind Energy into the planning and construction of further
incentive mechanism, as it is less complex than Co-operative Ltd in Cumbria and Boyndie energy generation or energy efficiency
the RO,37 however, this is a complexity divide Windfarm Co-operative Ltd in Aberdeenshire. technology. Remarkably, this represents the
that will widen further with the impending single-most common use of renewables
phasing out of Renewables Obligation UK renewable energy partnerships revenue, more common even than covering
Certificates (ROCs) in favour of Contract-for- involving communities remain relatively running costs of community activities (52%).
Differences (CfD) in 2017. Such projects need to rare. Nevertheless, community equity Popular destinations for this investment are
be taken forward by specialist developers, but held in several projects already accounts insulation and other efficiency measures,
preferably with room for genuine engagement for a surprising share of total community ground source heat pumps, and other - local
with affected communities. renewables capacity, with 20.6 MW of and non-local - generation projects. This
community owned projects being owned self-propelling ‘sectoral synergy’ makes a
Where time or expertise is missing, much jointly with commercial developers, through formidable policy case for supporting co-
of the gap could in principle be met by shares in projects of under 50 MW. When ownership, community-led projects and
commercial developers themselves, working completed, the very sizable 370 MW Viking smart benefit arrangements.
in partnership with communities. Projects in Windfarm, 45% of which is owned on behalf
which communities have an ownership stake, of the community by the Shetland Charitable Joint ownership arrangements can also take
and in which they are partnered with one or Trust, will be the third largest onshore place with public sector entities. The growth
more other stakeholders, are known as joint windfarm in Scotland. The appetite for of community renewables in many European
ventures or joint ownership arrangements. partnership is clearly there. It is the success of countries has been greatly facilitated
In the UK, these community or non- these large joint ownership projects that have through collaboration and co-ordination
community partnerships make use of a wide not been considered in previous estimates with municipal and other local government
and growing diversity of legal structures, of UK community renewable capacity, and bodies. Consider Danish co-operatives such
including limited liability partnerships, which could provide further impetus for as the Middelgrunden Wind Farm outside of
18The Community Renewables Economy
Copenhagen, where members jointly own put forward, as evidenced by the novel legal
equity equivalent to 20 MW of generation structure used in the recent Carbon Free
capacity, in an equal partnership with a Development and Neilston Development
local municipal utility. Partnerships between Trust partnership.39
community groups and public bodies hold
great promise for the UK, as do partnerships
between commercial developers and local
authorities on behalf of the local community,
as increasing numbers of government bodies
and public agencies are looking to renewable
energy for revenue streams.
Yet a further variant of a community “Joint ownership arrangements
joint venture is the community/housing can also take place with public
association partnership model. In this
sector entities. The growth
model, the housing association may use the
proceeds of generation revenue to support of community renewables in
housing developments; one example being many European countries has
the recently consented joint venture project been greatly facilitated through
between Berwickshire Housing Association collaboration and co-ordination
and Community Energy Scotland. with municipal and other local
government bodies.”
There remains ample room for innovation
in the UK joint venture space, and we
foresee that much of the future growth of
the UK renewables sector will be realised in
conjunction with private sector stakeholders.
Consider that six years on, the partnership
arrangement between Falck Renewables and
Fintry Development Trust (FDT) has still not
been replicated,38 though several developers
and communities are presently seeking to
implement similar community investment
opportunities. New models continue to be
19The Community Renewables Economy
5. Scaling Up the Community
Energy Market
“Incentivising such joint venture
models is crucial to ‘scaling up’
community energy projects,
and in enabling communities to Government should review the opportunities 5.1 Supporting joint ownership
to promote and incentivise partnerships
play a significant role in the UK’s
that can enable communities to achieve DECC has recently announced that it is planning
energy market.” scale. We have highlighted in this paper one to increase the threshold for community
particular opportunity – the joint venture, or projects under feed-in tariffs (FiTs) to enable
joint ownership model – as a potential key to larger community energy projects to benefit.40
immediate growth. In order to actively advocate Support for community renewable projects
this model, government should explore how over 5 MW is currently available under the
opportunities for such partnerships can be Renewables Obligation (RO) and will migrate to
supported, brokered and highlighted. We the CfD after 2017. As we have highlighted in this
recommend that this be considered within paper, there are currently only three community
the Department for Energy and Climate energy projects (between 5 and 50 MW) that
Change (DECC) Community Energy Strategy, are wholly community-owned, which make
in partnership with other government up 47% of current operational capacity in this
departments and industry stakeholders, and class, with the remainder (53%) coming from
warn that if this model is not proactively joint ventures with developers. The projects
promoted and supported, the growth of that are wholly community-owned have also
community energy within the UK will stall. managed to achieve this status and scale because
20Scaling Up the Community Energy Market
of negotiations with existing and incoming 5.2 Brokering joint venture arrangements neighbourhood forums or other local bodies
developers at the outset. – should in turn and in response have the
Apart from the initiative of ambitious opportunity to express interest in owning or
Incentivising such joint venture models is community groups, and pioneering developers co-owning renewable energy developments.
therefore crucial to ‘scaling up’ community and local authorities, little by way of national or If a match is made, there should be a duty
energy projects, and in enabling communities to local intermediary platforms or organisations on the local authority and local planning
play a significant role in the UK’s energy market. exist to broker connections between authority to respond and advise. Such a
While there are some reservations regarding a communities and their potential partners. platform would perform an informal ‘match-
proposed extension to the FiT capacity threshold, Independent registries have recently emerged making’ service, where either the community or
especially given the limited funds available for to fill this gap and should be supported developer could easily seek local opportunities
existing FiT scale projects, DECC should use to facilitate knowledge exchange and and establish direct contact. Such a service
this as an opportunity to carefully consider development of best practice. would build on the existing work of a number
how government can incentivise community of initiatives such as the Communities for
and particularly joint venture schemes, where One further opportunity to establish such a Renewables Network.43
communities hold a financial investment in a platform at a national level has also emerged
project. We recommend that joint ownership through DECC’s consultation on onshore wind Because lack of access to the environmental
models, rather than those wholly-owned by the and community engagement.41 In response to data needed to determine project viability
community alone, should be included within the recent call for evidence, DECC has proposed has been highlighted as a major barrier for
the FiT extension. that the department will work with community communities, we also recommend that this
and industry stakeholders to establish a register register include the appropriate space and
Such incentives must be carefully explored of community engagement and benefits, which platform for developers to upload, or provide
and the increased funds required anticipated ‘will provide a tool to record publicly the range links to, their own available environmental
appropriately through the Treasury’s Levy of benefits offered from different projects in data and any other supporting documents
Control Framework in order to ensure that there a transparent manner and will help support required for their initial planning application.
is a long-term, stable and clear commitment to communities in engaging and negotiating The register could also encourage developers
supporting small scale renewables, community benefit packages that best suit their needs.’42 to advertise, where appropriate, any other
energy projects and joint ventures. The option We recommend that the community benefit enabling services, such as additional provision
to enter into the Renewable Obligation/Contract register, once established, should include a of advice and expertise for local ambitious
for Difference should also remain available for the specific portal where developers can express community groups who are looking to develop
relevant projects, should they wish to pursue this interest in principle for forging a joint venture or invest in renewable energy production.
route rather than the FiT. partnership with a community. Likewise, Further support would then be offered to the
communities – be they specific groups, community if a partnership arrangement were
established community energy initiatives, to be agreed.
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