Our response to barriers to community energy projects call for evidence

Our policy experts respond to a call for evidence regarding barriers to community energy projects.

About us

We are an independent organisation dedicated to promoting energy efficiency, low carbon transport and sustainable energy use to address the climate emergency. Our work focuses on reaching net zero by taking action to reduce energy consumption, installing new infrastructure and accelerating sustainable, low carbon lifestyles.

We play a principal role in delivering two of the UK’s leading community energy support programmes:

• Since 2018, we’ve led a consortium along with the Carbon Trust to deliver the Welsh Government Energy Service.
• Since 2013, we’ve led the Local Energy Scotland consortium that deliver the Scottish Government’s Community and Renewable Energy Scheme (CARES).

Key points

• Wider benefits: Community energy brings significant social and economic benefits to local communities, as well as contributing to net zero. A sufficient policy package needs to be in place in England to address the various financial and non-financial barriers faced by community energy organisations to fully realise these wider benefits.
• Advice: A lack of a national, impartial advice and support service in England for community energy is a critical policy gap. England should draw on the models employed in Scotland and Wales to develop a demand led, responsive national support service.
• Financial support: Financial support for community energy in England has been patchy, inconsistent and limited in scope. Consistent, cross-cutting financial support delivered alongside tailored, impartial advice should be put in place to grow the sector in England.
• Revenue certainty: A revenue certainty mechanism should be prioritised to enable project viability. This could take the form of a community energy smart export guarantee that sets a guaranteed price for exported electricity over a long duration of time.
• Income generation: It should be made simpler for community energy projects to generate income. This should be supported by:
  • Enabling the local supply of electricity, for example by passing the Local Electricity Bill.
  • Encouraging the use of Power Purchase Agreements (PPAs) between local authorities and community energy organisations.
  • Providing community energy projects with UK Government ‘top-ups’ of 1p/kWh generated on PPAs when pre-determined environmental or social targets are met.
• Clear policy direction: Certainty and long-term policy signals that community energy will play a vital role in the net zero transition is needed in England. This should be achieved by:
  • Setting local ownership targets for England.
  • Reinstating the 2014 Community Energy Strategy’s commitments for shared ownership offers to be the norm in England.
  • Ensuring renewable energy and community ownership is prioritised in national planning policy in England.
• Grid constraints: the UK Government should work with Ofgem and energy networks to identify and tackle grid constraints to enable faster renewable deployment and address high charges for accessing the grid.

1. Which type of stakeholder is responding?

1. Non-Governmental Organisation

2. Where are you, or your organisation, responding from within UK?

England

3. What are the barriers, financial and non-financial, preventing the establishment, development, and scaling of community energy projects? Please include any relevant quantitative and qualitative evidence.

Community energy faces significant financial and non-financial barriers to the establishment, development and scale up of community energy projects. Whilst some of these issues are England specific, others also have relevance to Scotland and Wales. Our response covers financial barriers before moving onto non-financial.

Financial barriers

Lack of any revenue certainty mechanism

Since the end of the Feed-in Tariff (FiT) in 2019, community energy projects have lacked any form of revenue certainty mechanism. FiT was a low-risk source of long-term income critical to community energy business models, particularly small scale solar. Without it, community energy organisations struggle to demonstrate a guaranteed, long-term income, making it difficult to develop electricity generation projects attractive to investors.

The Smart Export Guarantee (SEG), which followed FiT, is an insufficient replacement: it fails to provide a minimum export price and revenue certainty beyond 12 months. Additionally, community energy organisations cannot take advantage of the Contract for Difference (CfD) scheme which is only available for larger onshore renewable projects over 5MW. This impacts projects in Scotland and Wales as well as England.

Lack of consistent financial support in England

There has been a lack of consistent, cross-cutting financial support for community energy in England. The Urban Community Energy Fund (UCEF) was removed in 2016 and the Rural Community Energy Fund (RCEF) ended in 2022. Both funds ended without replacement, meaning organisations were without financial support until the introduction of the Community Energy Fund (CEF) in 2023.

However, the CEF is limited in scope compared to what is available elsewhere in the UK. For example, support is only available until the planning application stage, and there is no financing available for the capital costs of projects or resourcing within community energy organisations. The CEF provides £10 million in grant funding over 2 years, although Community Energy England had previously argued this fund should be for £30 million over 3 years. As such, the level of financial support is still seen as insufficient to fully grow the sector.

Inability to supply energy locally

Community energy organisations can install energy generation assets for self-consumption, for example solar panels could be installed on a school roof for use by that school. However, it is not currently possible for an organisation to sell any surplus electricity to surrounding properties unless they become a licensed supplier.

The costs and complexity associated with this are huge and present a significant barrier, meaning community energy organisations must sell that surplus back to large energy suppliers at a lower price. As a result, the income generation capacity of community energy organisations is lower than it could be and people are unable to benefit from lower bills from local projects.

Non-financial barriers

Lack of a UK Government backed advice and support service in England

The community energy sector in both Wales and Scotland benefit from centralised, government backed advice and support schemes in the form of the Welsh Government Energy Service and CARES (further detail provided in response to Q7). However, the type of in-depth, ‘handholding’ support delivered by these programmes has been absent in England over the last 14 years.

Given that community energy organisations tend to be volunteer led with limited time, capacity or expertise to develop projects, the lack of an advice and support service is a critical policy gap. Although Community Energy England attempts to fill this gap, it lacks the resources and capacity to deliver support to the same scale. During a forum for discussion of barriers to community energy hosted by Community Energy England, poor advice and a lack of local expertise was raised as a barrier. A lack of financial advice in particular increases the risks to community energy organisations and increases the risk that projects will be poorly developed.

Community energy has not been a policy priority in England

There has been no long-term strategy for community energy in England since 2014. There are also no targets in England for local ownership of renewable energy generation to measure progress against. Signalling a long term policy framework would help provide certainty to the sector.

Additionally, there is no obligation for commercial developers in England to offer communities shared ownership in renewable projects. Such an obligation would significantly increase the number of community energy projects that could be delivered. Whilst more ambitious policy positions have previously been proposed – with the 2014 Community Energy Strategy stating:

‘We expect that by 2015 it will be the norm for communities to be offered the opportunity of some level of ownership of new, commercially developed onshore renewables projects . . . if this is limited, we will consider requiring all developers to offer the opportunity of a shared ownership element to communities’ – subsequent UK governments have not pursued this.

4. Please indicate whether the community energy scheme(s) you typically work with are urban or rural?

We work with both urban and rural community energy schemes in Scotland and Wales.

5. Are there any regional issues impeding community energy projects? Please include any relevant quantitative and qualitative evidence.

There are several regionally dependent issues which impact on the ability of community energy groups. Our response focuses on two key issues: grid constraints and costs and the variation in local and planning authority support for community energy.

Grid constraints and costs

Specific regions face challenges in developing community energy projects due to constraints in parts of the electricity grid and associated connection charges. Community Energy England members reported that projects over 1MW are being told by network operators that connections won’t be secured until 2028, 2030 or even 2035.

Rural communities are particularly disadvantaged as they are at ‘the end of the line’ in many areas and tend to have a lower electrical capacity to match their low demand. As has been noted in Wales, rural communities also tend to face high connection costs which can undermine the business case for community energy projects.

Variation in local and planning authority support in England

Supporting community owned renewables can be complex and many local authorities do not have sufficient resources or knowledge to effectively do so. Local authority funding for community energy support has been allocated via competitive bidding processes. This creates disparities between areas, leading to some local authorities having the resources to support community energy while others will not.

Given the lack of a centralised, government backed advice and support service, this creates a postcode lottery for support in England. The data exemplifies this: more than half of local authority funding was secured by organisations in the South West of England in 2021. This becomes increasingly important as English organisations are significantly more reliant on local authority development funding than in Scotland and Wales.

Local authorities can also provide the customer base for projects, as exemplified by Edinburgh Community Solar Cooperative (ECSC). ESCS use local authority owned buildings for their rooftop solar sites and the council then pays ECSC for the electricity generated from the solar panels. Variation in support can therefore impact whether a project will have a customer base for the electricity it generates.

Additionally, the National Planning Policy Framework (NPPF) in England does not set out net zero, renewable energy or community energy as a policy priority in planning. This means local planning authorities do not have a clear direction on the need for renewable energy or the importance of community ownership when developing local plans or making decisions on individual applications. This creates inconsistencies in local planning policies around renewable energy development, where some local authorities may be ambitious whilst others will be far more restrictive.

6. Where you have identified possible or actual barriers, do you have any proposals for how these might be reduced or removed, and why do you think the actions you propose would be effective and appropriate? Please include any relevant quantitative and qualitative evidence.

We propose several policy solutions to overcome the barriers discussed in Q3 and Q5. Several recommendations are specific to England and others are also relevant to Scotland and Wales. A combination of these policies, spanning both financial and non-financial support, will be required to address the multiple barriers to community energy.

Financial proposals

Introduce a revenue certainty mechanism

A revenue certainty mechanism would increase the number of economically viable and investment ready projects. A community energy smart export guarantee which secures a fixed price for energy exported by community schemes should be considered. This should be over a long duration, such as 20 years, to provide certainty for projects. Such revenue support should also be available in Scotland and Wales.

Lessons can be drawn from the newly introduced Small-scale Renewable Electricity Support Scheme (SRESS) in Ireland. This provides a guaranteed tariff over the course of 15 years. The policy is open on a non-competitive basis and is set to be in place until 2030. Community energy projects receive a higher tariff rate than other forms of small scale generation to reflect the barriers they face regarding planning and grid connection.

This scheme will be funded through the Irish Government’s Public Service Obligation (PSO) levy, which is a levy placed on electricity bills to fund renewable electricity support schemes. The SRESS is intended to support the delivery of the Irish Government’s target of 500MW of community owned renewable energy by 2030.

Provide cross-cutting financial support in England

There should be consistent, cross cutting financial support for community energy in England that spans all stages of project development. We recommend that such financial support in England should be linked to support provided by a national advice service for community energy, so projects receive technical, financial and procurement advice from the same place as where funding is accessed. We would point to Scotland and Wales as examples of where cross-cutting financial support has been delivered in tandem with advice (more detail in our response to Q7).

Importantly, financial support should allow community energy organisations to employ project development staff until projects are generating sufficient revenue to cover these costs. Staffing costs should be covered for at least three years given the length of time projects can take to develop. Staff could be employed on a part-time basis, with potential for funding for full time staff to be given to a cluster or consortium of community organisations. This would help enable the development of larger and more complex projects given the time and capacity requirements of getting them off the ground.

Such support is already being delivered by the Welsh Government Energy Service through the Community Energy Resource Grant. Additional capacity could also help community organisations respond more quickly to opportunities to acquire energy generation projects from private developers, which would enable them to develop income streams to then employ further staff.

Streamlining compliance with subsidy control principles to facilitate affordable community energy finance for projects in the national interest should also be considered. This would give community owned projects more flexibility regarding eligibility for public financial support, particularly to low cost capital finance, such as low interest loans.

Encourage the use of Power Purchase Agreements (PPAs) for small scale, community owned generators.

PPAs are a means through which community energy projects can secure a guaranteed income. Welsh community energy organisation Egni Coop have successfully pioneered this approach. Their operating model sees solar panels installed in community buildings, with the building owner signing a PPA for their solar electricity. This allows Egni Coop to recoup its costs whilst the community buildings benefit from a reduction in their electricity bills. The PPAs are set for 21 years, providing Egni with a long-term guarantee that they can generate revenue. Through the Welsh Government Energy Service, we played a significant role in enabling this project.

A further example is the Edinburgh Community Solar Cooperative (ECSC) which set up PPAs with Edinburgh City Council. The council will take ownership of the solar panels at the end of the 20 year PPA. This provides an additional incentive for the council to host the solar panels as once the agreement ends, they benefit from free electricity from the panels.  ECSC benefitted from both the PPA as well as FiT from the sale of surplus electricity to the grid. FiT accounts for roughly 60% of its income and the remaining 40% from the PPA. This scenario demonstrates the importance of having various policies to enable viable business models for community energy.

A standardised approach to setting up PPAs for public buildings identified as suitable sites for community owned renewables by local authorities would be beneficial to enable this approach in England. This should include the creation of template agreements that can be customised to reflect the complexities associated with individual buildings and sites simplifying the PPA process for community organisations and local authorities alike.

Additionally, owners of renewable electricity generation can obtain better terms if they can guarantee to supply large volumes. These volumes are typically significantly more than most community owned renewable schemes. As such, we would recommend a mechanism and toolkit of template documents for PPAs to be signed with a consortium of community energy generators. This would enable them to aggregate their supply and sell to a purchaser, secure a better price for their output and enhance the benefits for their communities.

From administering support schemes on behalf of the Welsh and Scottish Governments, we know that at the small scale community energy tends to operate at, relatively minimal government support could tip the balance towards project viability. Such minimal support could take the form of UK Government ‘top-ups’ on PPAs when pre-defined targets relating to carbon savings or social benefits are achieved. A strategic ‘top up’ of 1p/kWh generated that enables project viability, attracts further public and private investment and recognises the wider environmental, social and economic value of community energy.  There would be less need for this type of support if community energy projects were able to supply locally (see below) or through PPA consortia and therefore enjoy revenue streams that would be higher than the Smart Export Guarantee. The UK government could introduce the ”top-up” as an interim step ahead of delivering reforms that enable local supply.

Enable the local supply of energy

Community energy schemes should be enabled to generate income through selling energy within their local area. A mechanism to do this has been proposed through the Local Electricity Bill, which was one of the recommendations in Chris Skidmore’s Net Zero review. This would place a requirement on larger suppliers to collaborate with community energy schemes to sell the power they generate to local people and businesses. We should look to the EU who have already taken steps to enable the local supply of energy through the Renewable Energy Directive (REDII), which provides community energy organisations with the right to produce, store, consume and sell renewable energy. This would apply to Scotland and Wales as well as England.

A mechanism to facilitate supply of electricity from community owned generators to local heat pump based heat networks at prices below current retail prices should also be considered to facilitate decarbonisation of heat.

Non-financial proposals

A UK Government backed community energy advice and support service for England

A national community energy advice and support service for England should be prioritised. Such a service should provide impartial, tailored advice. Its aim should be to develop solutions across all stages of a project to drive completion. A national service would also help to address the postcode lottery of community energy support in England.

Both the Welsh Government Energy Service and CARES provide tried and tested models of government backed support services for community energy (further details are provided in our response to Q7). England should learn lessons from these programmes to reap the wider social and environmental benefits of community energy.

Address grid constraints & costs

Grid constraints and associated connection charges can be a barrier for community energy projects, with long wait times and insurmountable costs. The UK Government should work with the relevant distribution and transmission companies and Ofgem to identify and tackle grid constraints. Areas that are particularly constrained or are of strategic importance should be prioritised. To limit the need to reinforce the grid, a flexibility first approach should be taken and DNOs should be encouraged to offer innovative connection options. For example, Electricity North West offer a variety of flexible connection options to enable new connections to the grid without having to reinforce the network.

Local energy generators are also required to pay for the use of the entire electricity network, including at the transmission level. If local distribution continues to grow, reducing import from and export to the transmission network, there is a case for transmission costs to be borne only by those generators that require access to it. This should be looked at to prevent the underdevelopment of the distribution networks and to reduce costs of connection for local supply-focused community schemes. The decarbonisation benefit, as well as the local social and economic benefits, could also be reflected in connection costs.

Investing in local distribution ahead of need would also help to reduce constraints on the grid network. Ofgem should reform the price control process to require DNOs to invest based on a pathway of energy need in line with net zero. These recommendations will also be relevant to Scotland and Wales.

Set a clear policy direction for community energy in England

Clear policy direction is needed to send signals to developers and communities alike that the benefits of community energy will be considered in decisions relating to planning permission and funding support. This can be achieved in the following ways:

• Setting a target for local ownership of renewable energy in England. This has already been undertaken in Scotland and Wales: The Scottish Government has a target of 2GW by 2030 and the Welsh Government has a target of 1GW by 2030. Both Governments have made considerable progress towards their targets. In 2023, the Scottish Government was 51% of the way towards their target and the Welsh Government had progressed 97% towards their target as of 2022.
• Strengthening national planning policy in England to ensure renewable energy and community ownership is prioritised at a local level. Such direction has already been provided by the Welsh Government who have stated: Planning Policy requires planning authorities to plan positively for the use of locally generated electricity and heat to help meet the national target of one Gigawatt by 2030… The social, environmental and economic benefits associated with any development should be fully factored into, and given weight in, the decision making process.
• Reinstate the 2014 Community Energy Strategy’s commitment for it to be the norm for developers to offer shared ownership in England to enable further participation by local communities. This is again an area where lessons can be learnt from the Scotland and Wales: Wales set a target for all new renewable energy projects to have an element of local ownership from 2020 and the 2022 onshore wind policy statement in Scotland stated: ‘We continue to encourage the renewables industry to consider, explore and offer shared ownership opportunities as standard on all new renewable energy projects, including repowering and extensions to existing projects.’ Introducing a mandatory offer of 15% of shares to community ownership as a condition for receiving government support via Contracts for Difference (CfDs) or where projects require leases on public land could also be considered to increase shared ownership. Any such policy ambition on shared ownership must be backed by an independent support and advice service to assist communities through the shared ownership process. This is important as very few communities will have readily available skills and time to represent themselves in engagements with commercial developers, with less affluent and more marginalised communities more at risk of missing out.

Enable community energy involvement in LEAPs

Local authorities have a vital role to play in scaling community energy as the potential leaders of Local Area Energy Plans (LAEP). As of 2023, LAEPs have been, or are being, undertaken by around 1 in 6 councils in England and Wales. LAEPs can be used to identify sites that would be appropriate for community energy projects, enabling community organisations to have a clear view of potential projects and serve as the basis on which to receive planning permission. An approach to Local Area Energy Planning that integrates community energy, endorsed and supported by the UK Government through funding and guidance would empower all local authorities in England to take this step.

Lessons can be taken from the Scottish pilot of the COBEN programme. This sought to develop an approach to community-led Local Energy Plans which considered the whole energy system within an area, considering a community’s energy generation, energy efficiency, heat, transport, storage and future usage together. Through the pilot, led by Local Energy Scotland, a common local energy planning methodology and supporting toolkit for communities was developed. Any community led Local energy plans had to feed into Local Heat and Energy Efficiency Strategies (LHEES) which all Scottish local authorities were required to produce by the end of 2023.

7. Which existing or past government support mechanisms and policies have been most helpful in implementing community energy projects and why? Please include any relevant quantitative and qualitative evidence.

There are several existing support mechanisms that have been helpful in developing community energy projects Scotland and Wales. The Welsh Government Energy Service and the Scottish Government backed Community and Renewable Energy Service (CARES) both have been instrumental in developing the sector in the two nations. Going beyond energy generation, the plugged-in communities grant fund in Scotland is successfully enabling community organisations to expand local sustainable transport options. Lastly, the Feed-in Tariff (FiT) is a clear example of a successful revenue certainty mechanism for small and medium scale generators.

Welsh Government Energy Service

The Welsh Government Energy Service supports renewable energy projects for the public and community sectors, including solar, wind, hydro power, and energy storage technologies. The Welsh Government Energy Service also supports public sector energy efficiency and low carbon transport projects. Support is available to community energy organisations covering a range of areas that create barriers to project completion, and tailored advice is delivered to individual projects. The financial support available is broad in scope and projects have access to the following:

• Development grants towards costs that cannot be delivered by the service, such as legal work, complex grid applications and specialist surveys.
• Development loans for projects that require significant pre-construction finance.
• Grant funding to directly cover resource costs within community energy organisations.
• Grant funding to support communities looking to develop shared ownership opportunities.
• Access to construction grant funding available through the Welsh Government.
• Exclusive access to capital loans available through the Welsh Government and the Development Bank of Wales.

The success of the Welsh Government Energy Service is evident, having supported the installation of 44.5 MW of renewable energy capacity since 2018, the equivalent of the electricity needed to power 18,000 homes.

Community and Renewables Energy Scheme

CARES support is available to projects in Scotland relating to renewable energy installation, decarbonisation of community buildings, community shared ownership and community benefit funds. Support includes procurement support for technical advice consultants and project management support. Advisors with regional expertise are available for those accessing the service to help them develop credible plans to move projects forward. The financial support covers a range of areas necessary for project completion, including option appraisals, feasibility studies, grid connection agreements and payments, land agreements, as well as installation and construction costs.

Since 2010, CARES has offered advice to over 1,150 organisations and delivered over £65 million in funding to over 900 organisations. This has helped support the installation of 60MW of renewable energy in Scotland so far.

Why have they worked?

The success of both services is their ability to provide in depth, handholding support to community energy organisations and guide them from project conception to completion. They function as one stop shop style services for all support relating to community energy, supporting organisations through the planning process, grid connections and development of financial models.

Trusted advisors are key to success. They are experts in the sector with regional expertise, understanding the specific challenges of a given area and tailoring their advice accordingly. Projects are supported from an early stage, which is particularly important to get projects from the inception stage to an investment ready position. Advice is also delivered alongside access to a cross-cutting financial support package. The Welsh Government Energy Service, for example, provides access to financial support covering a range of areas to mitigate barriers to project development as much as possible.

The programmes are demand led and responsive to the needs of community energy organisations, providing solutions for as many barriers as possible. In practice, this looks like engaging with other actors within the energy system when necessary as well as adapting the support available. For example, the Welsh Government Energy Service introduced the Community Energy Resource Grant in response to a lack of resources within community energy organisations which prevented projects from developing.

The model provided by both the Welsh Government Energy Service and CARES exemplify what is possible for a similar style service in England that combines cross-cutting financial support with the availability of impartial, tailored advice.

Plugged-in communities grant

Going beyond just involvement in energy generation, lessons should be drawn from Transport Scotland’s plugged-in communities grant fund regarding how to support communities develop sustainable transport options. The fund supports community organisations in Scotland to purchase or lease zero emission vehicles, from cars to minibuses. It removes upfront cost as a barrier, covering 100% of the cost, up to £75,000 per vehicle, excluding VAT.

The success of the programme is evident: since launching in 2021, more than £3 million of grant funding has been provided to support 39 different organisations purchase 53 electric vehicles.*

*This fund closed following full funding allocation in FY 2023/24 and future funding has not been confirmed, if the fund returns in future terms of the fund may be subject to change.

Projects supported include local car clubs, which enables access for those who cannot afford the upfront cost of an EV. Additionally, the fund has supported the decarbonisation of community ran transport services, which provide for those who would otherwise be unable to use public transport, such as those in rural areas or people living with disabilities. The fund exemplifies how local communities can be supported to contribute to a just transition for transport.

Feed-in Tariff (FiT)

The FiT scheme is a clear example of where UK Government support successfully enabled the development of small and medium scale community owned electricity generation. Its success lay in its ability to provide small scale generators a guaranteed price for the electricity they sold over an extended period, with contracts lasting for between 10 and 25 years dependent on technology type. This provided guaranteed revenue and was critical in enabling economic viability for community energy organisations. The impact of FiT is evident in the data: the rate of growth for community owned electricity generation projects went from 81% in 2016-17 to 2.4% in 2020-21 after FiT had closed to new applicants.

8. Could you share any evidence, either quantitative or qualitative, demonstrating how community energy projects are supporting the delivery of the UK’s national net zero targets and providing additional benefits (e.g., reducing fuel poverty and improving community well-being).

Community energy supports the delivery of the UK’s national net zero targets as well as creating additional social and economic benefits for local communities, from job creation to fuel poverty alleviation. We highlight some of these benefits below:

Net Zero targets

2035 power decarbonisation target

As of 2021, there was 331 MW of community owned energy generation capacity across the UK from solar, hydro and wind power. A 2020 report by WPI economics has estimated this could rise to up to 5.3 GW by 2030 if provided with the right policy support. This would be enough to supply electricity to as many as 2.2 million homes, showing the massive potential community owned energy has in supporting the UK Government’s target to decarbonise power by 2035.

Community energy can not only support this target through increasing renewable energy capacity, but it can also reduce the need for grid upgrades if supply and demand could be matched locally. Energy Local Clubs in Wales are a clear example of where communities are innovating at a local level to match supply and demand. Households pay a reduced price when the local hydrogenator is working at maximum and an energy supplier partner sells power to households when demand exceeds the local hydro supply. Households are encouraged to use energy when it is provided by the local generator, reducing bill costs when they do.

Public support & engagement for net zero

The UK will not reach its net zero targets without public engagement and behaviour change from households and communities. Community energy can help make the transition real for people; they can see firsthand the benefits of decarbonisation within their communities. Polling consistently shows the public are overwhelmingly in support of net zero and the increasing deployment of renewable energy. Support for renewable energy can be enhanced through community ownership. This has been demonstrated by research regarding local perceptions of onshore wind in Scotland: communities with a degree of community ownership showed greater acceptance of local wind projects and were more likely to associate renewable energy with just outcomes.

Community energy organisations can also play a role in encouraging and normalising new behaviours required for net zero. For example, Bath and West Community Energy’s ‘Flex Community’ project runs various research trials to explore community energy’s role in facilitating or aggregating flexibility services. The project has found that community energy organisations can add value as intermediaries to generate interest and build local trust in new services.

Decarbonising transport

Community energy organisations play a vital role in supporting a just transition for transport. For example, Charge My Street in the North West of England raises funding through community shares to invest in on-street EV charge points for those without driveways and addresses gaps in the charge point network in rural areas.

Community EV car clubs also enable access for those who are unable to afford the upfront costs, helping to ensure no one is left behind in the net zero transition. Such projects have been supported through the Plugged-in communities grant as discussed in our response to Q7, such as South Ayrshire Community Transport.

Wider societal and economic benefits

Whilst the wider impacts of community energy can be hard to quantify, it clearly brings wider societal and economic benefits to local communities. Community-owned windfarms have been found to provide an annual average return of £170,000 per installed MW back into their local community, 34 times more than privately owned windfarms.*

* Please note that figures may include projects supported by the Feed-in Tariff, and the level of returns for community-owned renewables in a post FiT environment is likely to be significantly lower.

Revenue from community owned electricity generation is reinvested in the community to a far greater extent than commercially owned assets, and surplus revenue is often redistributed to community initiatives via community benefit funds. From administering the Welsh Government Energy Service and CARES, we know there are a range of initiatives being supported in this way, from Egni Coop’s climate education programme to developing and maintaining off-road paths to encourage green travel.  

Several community organisations also funnel profits into fuel poverty alleviation work. A study of fuel poverty alleviation work conducted by two community energy organisations found that for every £1 they invested, there was a net social return on investment (SROI) of £9. As not-for profit companies, community energy organisations also deliver lower energy prices for their local consumers. For example, Brighton and Hove Energy Services Co-operative (BHESCo) ensure their customers who host solar PVs, such as schools and community buildings, pay a lower price for their electricity than they would if they were with one major energy suppliers.

This is not to mention the job creation opportunities from local contracts and jobs within community energy organisations themselves. Research has suggested that up to 5,900 jobs could be supported in 2030 because of community owned renewable energy generation.

9. Could you share any evidence, either quantitative or qualitative, of the wider system impacts (positive and negative) of community energy schemes and how any negative impacts can be mitigated.

It is our view that the wider system impacts of community energy schemes are overwhelmingly positive as detailed in our response to Q8. As such, our response to this question only details two further wider system impacts that need to be considered when policy is being developed to support the sector.

• Historically, revenue certainty mechanisms that community energy organisations have benefited from, such as FiT, have been funded through levies placed on electricity bills. This has contributed to the price differential between gas and electricity, which can disincentivise heat pump uptake. For any new revenue certainty mechanism for community energy, the funding approach must be considered in light of the need to avoid any further distortion of electricity prices in order to increase heat pump uptake in line with the UK Government’s target of 600,000 heat pump installations per year by 2028. Several policy options for rebalancing levies could be considered instead of putting the costs on electricity bills, such as funding the cost through general taxation, or applying a clean heat discount that would allow for electrically heated homes to be exempt from paying current or future levies. The UK Government committed in the Powering Up Britain strategy to outline an approach to rebalancing energy prices by the end of 2023/24, yet nothing further has been published since.
• Another potential impact is that areas of higher deprivation without existing groups may struggle to participate in community energy projects. The development of community energy organisations often relies on engaged local communities who volunteer their time and resources. To mitigate against this, funding should be made available to build capacity within local communities as discussed throughout our response. We’ve also consistently recommended that a nationwide awareness raising campaign is implemented on net zero. Within this campaign, there should be reference to community energy, the benefits it brings and the ways in which local communities can access support to encourage engagement. This would raise awareness and help local communities seek out the advice and support they need to take community energy projects forward.