This is the first in a series of blogs which will present on-going action research in the new economy. Subsequent blogs will look at initiatives in the fields of housing, food and farming, workspace and technology.
Community owned energy: Two steps forward, one step back!
This short piece describes attempts by a social enterprise that I am involved with, Dorset Community Energy, to raise £500,000 of ethical investment funds to install photo-voltaic (PV) panels on local schools and community buildings, giving them very low cost – and in some cases free – electricity for 20 years.
Community solar panels on Salway Ash Village Hall
Until recently, community energy co-operatives in the UK were a success story in the global effort to replace carbon-based energy with clean renewables. There are now over 5000 groups in the UK. The sector has benefitted from government backed Feed in Tariffs (FITs), which guaranteed income for 20 years, as well as tax incentives (with investors receiving back between 30 and 50% of their investment from the tax office). They have also benefitted from the widespread adoption of a new financial mechanism – a community share offer – which enables the raising of equity investment through relatively lightly regulated (and therefore low cost) share issues.
Renewables now supply 25% of UK energy needs, outstripping coal. Unfortunately, the new Conservative government has reversed its commitment to the community renewables sector, in favour of fracking and nuclear power. A previous policy of gradual decreases in FITs and tax reliefs has been dropped – this was allowing returns on investment to remain stable as the cost of PV panels and installation slowly decreased. It is difficult to understand the government’s justification for these excessive cuts. The more recent moderated FITs have only added around 50 pence per year to average household energy bills, while dealing with nuclear waste is costing every household £79 per year. The government has also offered new nuclear power stations an index-linked subsidy for 40 years starting at 4.6 pence per kWh of electricity generated - almost 3 times higher than the 1.63 pence Feed-in Tariff now proposed for solar panels (which also only lasts for 20 years).
This policy change has been a real challenge for the new social enterprise, Dorset Community Energy, which I set up in August 2013 with the Renewable Energy Officer from Dorset County Council, Pete West, and colleagues from Wessex Community Assets - part of the Wessex Reinvestment Trust group (a community development financial institution) which I co-founded in 2002. The aim with Dorset Community Energy was to create an organisation that could, in the first instance, organise the installation of PV panels on the roofs of schools and community buildings and raise the required funding through community share issues. Preparing roof rental agreements, organising installations, monitoring power generation and the condition of equipment, plus issuing prospectuses and dealing with the financial aspects, would be quite an undertaking for individual schools and community building committees, so Dorset Community Energy was proposed as an organisation that could work on their behalf.
30 KW of solar panels on the science block roof at The Thomas Hardye School, Dorchester
Funding was received from the Communities Living Sustainably programme in Dorset to undertake the preparatory work with 3 schools and 3 community halls, a process which took rather longer than anticipated. For most people, “seeing is believing”, so it can be hard to find organisations prepared to be initial partners in what can seem a hard to understand process. Dorset Community Energy is a relatively new organisation, and did not have a track record in managing renewable energy installations or raising finance through share issues. To address this, the directors took out a loan from a sympathetic local resident to pay for the first three installations (on 3 village halls). This reassured the 3 schools, and also made the subsequent share issue easier to promote, as the 3 installations were already producing energy.
Dorset Community Energy’s first share issue was launched in early summer 2015, and within a few weeks had reached its target of £135,000. In actual fact it was over-subscribed, with £195,000 being raised, so it was necessary to cap individual share holdings at £3,600 to ensure that all applications for investor membership could be accepted. This allowed the repayment of the loan for the 3 village hall installations, as well as the subsequent installing of PV panels on the 3 schools. The total value of installations was £150,000 as £15,000 in grant funding was also received.
The success of the first share issue gave the board of directors (a group of volunteers which I currently chair) the confidence to plan a second share issue for 2016. In addition, other schools in the county could now see the benefits to the first 3 schools (they receive free electricity) and a new set of 7 schools soon came forward. Agreement was also reached with Bridport Arts Centre to install PV panels on their roof. The expectation was that these installations could be financed through a share issue in the Spring of 2016, but in September 2015 it became clear that our plans would not come to fruition unless we acted quickly. The government’s first act in undermining the community renewable sector was to announce a drastic reduction in FITs from 16 pence a kilowatt to just 1.63 pence. There was a small window to “pre-accredit” schemes by the end of September, thus locking in the higher FIT rate to allow installation within the next 12 months, and through a great deal of hard work by Pete West and another Dorset Community Energy director, Thomas Burnett, this was achieved for all 8 proposed PV installations.
The next set-back was the announcement by the government, at the end of October, that they would reverse their decision to allow continued tax relief for share offers by community renewables organisations, and halt it at the end of November 2015. This tax relief has been a key incentive for investors, so the Dorset Community Energy directors held an emergency board meeting and decided to launch a second share offer within a week. More work, but the new business case was quickly yet carefully produced and a prospectus designed and printed.
The latest news on our share offer is that £200,000 has been raised in just 10 days, with one week to raise the final £150,000. In the longer term, the challenge will be to find new business models which allow Dorset Community Energy to continue to serve the people of Dorset and create more renewable energy capacity. The story so far is two steps forward, one step back, thanks to the present “greenest government ever” (according at least to Prime Minister David Cameron). However, in the spirit of action research we shall continue to seek ways to make a positive difference in the world.
 The rise of community share offers was enabled by research undertaken by Wessex Community Assets, with support from the Friends Provident Foundation: http://www.friendsprovidentfoundation.org/wp-content/uploads/2013/03/Wessex_Reinvestment_Trust_-_Summary.pdf
 For more information, see: http://www.regensw.co.uk/blog/2015/09/renewables-and-bills-the-facts/