What does the future hold for community energy?

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After our first year in the community energy sector, we penned a piece for Business Green on how the industry (and government legislation) has changed in the past year and what needs to happen for it to grow further – with this came a first look at why we will be launching a supply business later this year. 

To view it in full please visit the Business Green site.

It’s fairly safe to say that the community energy sector has had a roller coaster of a year. But those groups who are making it happen permanently surprise and impress me.

If we look at the last 12 months – since Mongoose was founded to help community groups get started, secure funding and use best-practices to run profitably – the sector has seen the government remove EIS tax relief on investments with almost no warning, only for the community benefit societies (bencoms) that run these projects to step up and deliver the sector’s best ever month (November, raising £12.8 million).

It has seen the government reduce the feed in tariffs (FiT) for renewables, only for it to then soften its stance slightly… and in turn for the sector to refocus and look to acquire existing sites that qualify for the historically higher FiT.

And most impressively of all, one project in David Cameron’s Oxfordshire constituency even managed to get the Prime Minister to issue a statement in support of solar technology playing “an important part of the UK’s energy mix”, and underlining his support for community energy initiatives.

BWCE's Portworthy array in Devon has just secured £1.6m in funding through one of the UK's first community energy bond offers

Attracting investment

These constant changes have knocked confidence in certain parts of the sector. Indeed, this is something you hear from people on the periphery of the community energy industry. But as soon as you begin talking to well established community energy groups, you hear a more positive outlook and see many of the equity and bond fund raises go quickly. If anything, the public is more aware of the investment opportunities community energy presents.

Even with big changes, like the ending of EIS tax relief, we’re still seeing significant demand from investors, for example Bath and West Community Energy (BWCE ) raised £1.6 million in just six weeks, during a period that also included Christmas. And Bristol Energy Cooperative (BEC) has already raised over £2 million.

As of the start of April, we have 34MW of capacity under management services, which is forecast to generate 33,946MWh* of electricity annually – enough to power 10,950 homes**. We also have a further 30MW of capacity in the pipeline forecast to generate 30,334MWh* a year of output, enough energy to power an additional 9,785 homes**.

The ending of EIS means some bencoms have begun to offer new products like fixed-term bond offers that promise up to 6% returns pa and have proved successful, among the first of these was BWCE’s December bond launch.

BWCE's Lewis House rooftop array in Bath

A more cohesive strategy is still needed, however

Community energy started as a very bottom up business model around 10 or 15 years ago, largely driven by the rising awareness of climate change, and with local energy co-ops becoming early adopters.

Many of these were fantastically run businesses that understood that to increase the amount of renewable-electricity capacity in a region, and to create profits that could be ploughed back into local initiatives, they had to be well run and profitable. This is why companies like Mongoose and organisations like CEE (Community Energy England) were set up, making it easier to access knowledge and skills.

The cost of solar and wind has fallen astoundingly in recent years. For solar, we’re within 3-5 years of hitting grid parity and then FiT subsidies will no longer be required anyway. But, the government’s recent legislative changes mean that, as an industry, we need to come together and operate more cohesively.

 

Community owned supply

If community groups are to benefit fully, they need to work together to move further up the food – or in our case energy – chain. This is why today we are officially announcing that Mongoose Energy will launch a supply business by the end of the year.

We believe this model – one where the supply business is majority owned by community energy groups – will be a first for the UK… it certainly is on this scale. And, with the majority of the firm’s profits going back into the communities, I believe this will transform the nature of energy ownership in this country.

A key objective of Mongoose Energy is also to bring more well-funded, and successfully run community energy projects into existence, so we are actively looking for community energy organisations to join us and share in the benefits that will be generated. So if you want to find out more visit http://www.mongoose.energy.

 

 

 

* Annual output is calculated using the specific yield (kWh/kWp) which is based on irradiation data and performance ratios at each site.
**Annual output is divided by the Ofgem’s Typical Domestic Consumption Values (TDCVs) to give number of domestic homes powered.