Show me the money. Community energy financing. The BIG money

With our work on community renewables moving at a pace it’s now research time in terms of how to capital fund or pay for the community energy install. Previous blog mentioned how we have been dealing with financing the riskier development stage through a mixture of government, NGO’s and trusts/foundations. It is also interesting to see a few people developing the idea of a revolving feasibility fund. (you borrow and if the project works through feasibility stages then you payback plus an extra to cover the projects which did not progress)

training chirkThen we get to the six and seven-figure funding required to build the chosen renewable. We have been discussing with Banks such as the Cooperative and Tridos who focus on social investment. On smaller projects (<;;£1m) they are either not really geared up or their costs on aspects such as due diligence can be disproportionately high as a % of the overall project costs.Also consider the Pure fund but with a £50k max and a quick ish payback

There have also been an explosion of the crowd source funding orgs. The debenture model as run by Abundance energy or the Industrial Provident Society non trade-able model by Sharenery, 10:10 and others. Both providing a good rate of return for the investors who want to make a difference. I have also seen variants on this in terms of those who can’t not afford the share can pay in installments. This model can sometimes dissipate the benefit that a wholly owned community system can bring in terms of community investment (more of the profit is spread over a wider area and therefore the local impact can be less) But they have their place

There are as many variants as there are projects. We have been looking at SEED EIS and full EIS share investment into renewables. Early research has shown it is a good tax investment for the investor and if correctly structured a low cost source of funding for the project…but setting up the share prospectus and due diligence can be very expensive. The community can also lose control of the project if the investors decide to do something else. (you could set the project up on an EIS and then refinance once you have enough of a track record that a bank would loan the money to the project).

Where to get your funding from? We have now started looking into the pension market. Several local authorities are already putting their money where their strategies are. Discussions with a few people on this are proving to be ‘interesting.’ Vast reserves looking for certain, well thought out, long-term and safe investments. Think there may be movement in this sector in the coming years.

Overall the funding does not seem to be an issue as long as the projects are well planned, all consents in place and give a nice safe return with all of the titles to the assets nice and clear.

There are certain funds available in terms of loans from NGO’s, Government departments or sanctioned bodies but interest rates can be high because of state aid issues and also capped capital sums. Again ideal if its to bridge a gap or for a small project

Financing community renewables is the one area where more clarity, certainty and also group buying and lumping projects together could be looked at. much more on this as we progress through the uncertain mine field of community energy financing

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One Response to Show me the money. Community energy financing. The BIG money

  1. A really comprehensive blog Keith, and one that chimes with much of the study we have been undertaking in this area. Thank you.
    Whilst I personally have a heart to see much more community renewables happen, thus “democratising energy”, one major barrier is still the timescales normally needed to mobilise a specific community into action; this is definitely undesirable with fast-changing incentive regimes. Some of the organisations you mention can help a lot here as they aggregate projects, but then the community aspect is diluted.

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