Paul Phare - Scotland's Development Manager, Energy4All
A co-operative is for bigger scale initiatives. A community project should not constrain the size of a project based on ownership issues or finance. A Bencom is a useful model for smaller scale initiatives where the community might be looking to raise sums in the region of £200-£300k plus commercial lending. However for more ambitous projects a co-operative would be a better model as membership control of the project increases investor confidence and the scale of a project being undertaken adds finacial security. Under the community co-operative rules the co-op can only pay out share interest at a rate sufficent only to raise the necessary capital, so any surplus is available to the wider community. The biggest issue however is where to access risk capital as generally communities are not willing to take this level of risk.
Distinction between Bencoms and Bona fide Societies. They are very similar in that they come under the community co-operative rules and are both are tied to the principle of offering a return to investors sufficient only to attract the capital required. The difference is a Bencom's profits are intended for the wider community whereas the profits of a bona fide co-operative are for the members to determine. I think suggesting that a Bencom could raise £20m is very wide of the mark. People simply don't like handing over so much control of how the returns are distributed to the board members, as is the case with a Bencom. The security of membership control, coupled with an FSA regulated share offer can raise much larger sums of capital and build much more profitable projects. If a community group wants to raise money through a not-for-profit organisation it really seems to struggle to finance a project of any significant scale. If we want to achieve 20% community ownership as in Denmark, we will never do it with not-for-profits and Bencoms
The term community does not have to be geographical. In the days of the internet, it can be a community of interest such as those supporting environmentalism. The Energy4All model offers the opportuity of owning shares to the local geographic community, defined by local board members of the co-op. Being a public share offer the shares are available to everyone, however priority is given to the local geograhpic community. If the money that needs to be raised cannot be found locally, then the community of interest comes in. These are people who have an interest in a project for ethical reasons and wish to invest for those reasons. These people can be drawn first from a wider regional area, say the local authority region, then beyond if necessary. The important thing is however is that all the shareholders are only being offered a reasonable return not all the profits, so community benefit will always be available to the geographic community
Help from the Government. Community ownership needs help from the Government, both financially through risk funds and loan schemes, but also through legislation.
Will Dawson - Principal Sustainability Adviser, Forum for the Future
Actual figures: according to Co-ops UK "over 7000 individual investors have ploughed over £19 million into energy co-operatives. There are currently 19 trading energy generation co-operatives, with a wholly owned generation capacity of 19.6MW, and part ownership in a further 1.22GW of capacity through investment in larger, commercial schemes. Eight further energy cooperatives are at launch stage and sixteen are in the process of, or planning to, undertake feasibility studies. Should all succeed they will bring online a further 8.5MW of generation capacity." Recent research by Camco and Baker Tilly estimates that there is potential for over 2GW of co-operatively owned renewables in the UK, or around 10% of the total capacity for onshore renewable energy.
Ownership and self-determination is most important. The Government and energy industry has been much occupied by which technologies rather than who will own them. For us, ownership an self-determination is most important. Large share issues in benn comms are achievable - for many investors the locked in community benefit is a requirement of investing - they don't want profits going to shareholders. OVESCo raised £400k in 4 weeks and Bath raised £750k at Ben Comms on their first projects. That said, there is clearly a need for coops in the energy4all sense that can distribute profits to members to enable different sectors of investors to be catered for as not enough people to get to 20% will invest in just the ben comm model.
'Completely possible' Germany, Denmark and other countries show us that it is completely possible and beneficial to the UK energy consumer to ramp up community generation and savings. Renewables employ more people over sustained periods of time than nuclear or oil. Research shows that German communities generates about 25% of its renewable energy (about 7% of that is from cooperatives). In the UK, we are at about 1%. In Denmark, 63% of on shore wind is owned by farmer and 25% by cooperatives.
Get the financing in place from start to finish. The first phases of a project are still too risky and we need to get the finance working in disadvantaged communities otherwise it will be undermined by the 'just middle classes' debate.
Rachel Coxcoon - Head of Local & Community Empowerment, Centre for Sustainable Energy
Use the support that's out there. There are loads of resources out there that you can use if you are thinking about establishing an energy project in your community. Community Energy Scotland and Ynni'r Fro in Scotland and Wales are better funded by their respective administrations than we are in England. Use the PlanLoCaL resources, Community Energy Pathways, Community Energy Practitioners Forum and other active groups to work out what you will do. Get on DECC's Community Energy Online mailing list and apply for support from Co-operative Community Energy Challenge and Enterprise Hub.
Accessing risk capital for the set up costs for a project. For example a single large wind turbine might cost around £3million to establish. You would need to raise about £200-£300k of this to get to planning permission stage, which can be an insurmountable task for some communities. Once you have planning permission, you effectively have a bankable project - i.e. a bank will want to lend you money, on project finance terms, for around 80% of the total costs of the project (for wind at least). So, the issue is development costs, and the 20% or so of equity. Hopefully, the government's Rural Renewable Energy Fund (being launched later this year) will deal with the former. What it will do is allow groups to borrow the costs of development, risk free, from the government. If they get planning permission and the project is successfull, they will pay the government back. If they don't get planning permission, they will not be liable for the development costs.
We should not be abandoning wind in favour of other renewables - in the first place, we need a portfolio of all technologies to get anywhere near making a meaningful proportion of our energy from renewables. Secondly, wind is the most market ready at scale and is not something we can simply drop.
Benefits can be more widely spread. The share issue model does sometimes come in for criticism as only really helping middle-class types that can afford to invest in the shares. There are a couple of ways that the benefits can be more widely spread - the IPS Bencom model (industrial and provident society for the benefit of the community) allows for a lower dividend to be paid to members, while a proportion of the profits is used to support other activity in the local community that benefits everyone, rather than just those who have invested in the project. If, for example, those profits are invested in other low-carbon schemes such as insulation and solar water heating for households in fuel poverty, then you can secure a better carbon reduction outcome overall and also tackle fuel poverty.
The legal structure is really important. Lots of groups have made initial mistakes in choosing what legal structure to adopt, which can later make it more difficult for them to raise capital. CSE has produced a comprehensive pack to help groups make decisions like that, as well as looking at all the technologies, funding issues etc - it's part of our PlanLoCaL project, funded by the Department of Communities and Local Government. Also, community ownership models hold no statutory weight in the planning system in any UK country, That's really important - because a planning officer cannot give less merit to a project that is commercially driven, as long as it is in line with national and local targets on the generation of renewable energy.
Broad community engagement is really important - if your desire is to set up a community energy project because you are worried about climate change, don't be surprised if you meet opposition from large swathes of the population who don't agree with this 'need statement'. Think about broader engagement messages (energy security, fuel poverty, community re-investment) etc. PlanLoCaL will help you with this.
Don't be mean to anti-wind campaigners. Many of them are very concerned people under an enormous amount of stress because they are fearful about all the myths they have heard about wind, they fear for their health and the value of their major investment (i.e. their home), both of which are entirely rational positions. In some cases, this opposition is driven by commercial interests, funded by the petrochemical and nuclear industry. The position of a community energy project should be to show such people that not only do they have nothing to fear but they, and their wider community, could stand to gain. Only real community owned projects can offer this promise.
Ruth Bond - Chair of National Federation of Women's Institutes
We need a full public debate on the issue. Communities need to be involved from the very start. If people feel that they have ownership, this brings a sense of empowerment, which is important in making people feel that they have investment in the project, and that it doesn't feel as if it is being imposed by outsiders. All too often, communities are only made aware of these projects through the planning process, which is often far too late for them to feel any positive engagement. We believe that individuals can play a powerful role in changing the terms of debate, whether as consumers or as agents of change, and as environmental leaders in their own communities.
Start by raising awareness about alternative energy as most of these projects are hidden away. We should be talking about their successes, and we need to get better about sharing good practice and making the links with climate change. In an environment where 99% of UK energy is generated by the big six utility companies, it is hardly surprising that awareness levels are so low.
Christopher Rogers - Senior Manager, The Co-operative Bank
The largest funder of community energy projects in the UK is the Co-operative Bank, which recently helped to finance four community owned wind turbines on the Orkney Islands. Each wind turbine is 900kw in size (circa 80 metres) and over a twenty year life these turbines should provide a steady income to the islands to help with community projects (greater than £15million over all of the turbines over the 20 year period). Areas identified to use the income are fuel poverty, job creation, care for the elderly and education.
An innovative funding model. Another vehicle we are seeing more often is through a local landowner who is naturally attached to the local community offer the community a chance to invest in their project. Historically these community groups would have tried to raise grant funding. However, in the current economic environment this is very challenging. One option we have seen is instead of the local project paying an annual community benefit the community have asked for the present value of these payments over the 20-25 year life span of the project to be paid in a lump sum today. This allows for a large capital sum and for the community to actually invest in the project ( i.e own a turbine outright). This is quite an innovative model.
True community involvement. Where there has been true community involvement in projects from an early stage and the project has been designed and adapted to take into account local community concerns then we do not see anywhere near as much opposition. The problem lies in anti-wind groups that travel large distances to oppose a project that is not even in their locale or will affect them. One local joint venture between a farmer and the local community council drew these protestors out early in the process and highlighted they were not local to the local councillors. The local community actually rallied around to support this project. We have also seen instances of identity theft, where people have supposedly objected for it to be found that they had not and their details used by anti wind groups. This seems to be becoming a big problem.
Engage with funders early as there are a lot of documents and knowledge that can be shared without the expense. The bank will lend after the risky capital has achieved planning consent and secured the grid connection. Upfront capital is becoming a real problem. Ensure that you use reliable technology that has long term warranties and that the project is the best fit for the location, there is no point in getting planning for a wind turbine if it is in a low wind speed site.
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