Community carbon reduction groups

The UK Government Coalition Agreement explicitly encourages community-owned renewable energy schemes. Recent work has led to the creation of a standardised model for the development of community energy groups, says Jon d'Este-Hoare.

There is a growing movement across the UK for communities to take collective action against climate change. Hundreds of groups have formed and more are launching all of the time; Box 1 provides some of the evidence for this.

Community groups are typically involved in a wide range of activities which have varying degrees of carbon reduction impact ranging from promoting the use of reusable shopping bags through to the delivery of community-owned renewable energy installations. It is the latter which is of particular interest to many communities and also the UK Government.

The benefits of community energy are, simply put:

• the localisation of energy generation to energy use;
• the empowerment of communities; and
• the creation of a regular revenue stream for the community.

But as these community groups are run on the hard work and dedication of volunteers, raising funds is a key issue. Many of the initial activities that groups undertake are relatively low cost, but when it comes to considering the installation of renewable energy systems project costs increase considerably.

Traditionally low-level activities are funded via intra-community fundraising or low-value grants up to a maximum value of a couple of thousand pounds. Community-owned renewable energy projects are traditionally funded through large grants of up to hundreds of thousands of pounds and a community share issue.

A community share issue involves a community forming itself into a legal entity which has the ability to issue shares to raise funds. These are then purchased by members of the community who subsequently hold a financial stake in the installation.

The introduction in April 2010 of the feed-in-tariff makes the financing of renewable energy schemes a lot more attractive to investors, subsequently opening up new funding opportunities for communities (see Box 2 for an overview of the feed-in-tariff).

But how might an investor find suitable communities and projects to support? Carrying out technical and financial due diligence on a proposed renewable energy project is relatively straightforward. However, assessing the community energy landscape for local groups with the ability to deliver a project is much harder.

BRE has been working closely with community groups and organisations which support their activities such as the South East England Development Agency. Through this work we have identified that while all groups are different there are considerable commonalities between groups. As such we have been able to identify six-stages in the development of community carbon reduction groups (Table 1).

The project has been delivered and the group is operating as a sustainable enterprise with a regular income stream

We have also identified the following criteria against which a group's development can be assessed and have used this to develop a process for evaluating the development level of community carbon reduction groups:

• Leadership - What does the group's leadership structure look like?
• Network - Who is the group communicating with?
• Communication - How is the group communicating?
• Funding - What is the group's funding requirements and from where is this funding sourced?
• Group internal activities - The organisational activities that the group undertakes
• Carbon reduction projects - What carbon reduction activities is the group carrying out?
• Project management - How is the group managing the delivery of activities?
• Progression indicators - The qualities that the group has to demonstrate at each level to progress
• Barriers - The barriers the group faces at any given level which have to be overcome to progress to the next level

Each of the six stages of community group development are outlined below:

Level 1 - Formation

The community group does not yet exist. Rather a group of individuals, probably friends, start talking about a need to do something about climate change and decide taking action in their community is the best place to start.

Level 2 - Going public

By Level 2 the group has given itself an appropriate name and is publicising itself locally. Carbon reduction activities that may be undertaken are typically low-cost and low direct carbon impact and designed to primarily publicise the group and attract new members. Typical activities might be:

• Awareness raising around climate change:

1. film shows;
2. creating and disseminating leaflets on domestic energy efficiency;
3. speakers;
4. the promotion of a land-share scheme; and
5. thermal imaging of houses and public buildings to show energy loss.

Level 3 - Enthusiastic action

As this level's name suggests, this stage is typified by lots of activity, and typical Level 3 carbon reduction activities are:

• Behaviour change and awareness raising, around the following areas:

1. transport choices;
2. domestic renewable energy opportunities;
3. food; and
4. domestic energy efficiency.

• The provision of reusable shopping bags
• The development of a community garden/allotment
• The energy efficient refurbishment of community buildings.

The common feature of most of these activities is that while there is a cost associated with most of them, it is relatively small. The financial mindset for groups at Level 3 can be summarised as ‘short-termist':

• No reliable income or funding stream;
• Dealing with small sums of money;
• In a cycle of: identify funding sources - apply for funding - secure funding - spend funding; and
• Little or no savings - money spent quickly on immediate carbon reduction projects or group expenses.

Funding is typically secured at this stage from a wide variety of sources:

• Parish council;
• local authority;
• donations from local business;
• fundraising activities; and
• national or local grant schemes.

A considerable change occurs between Levels 3 and 4 and consequently for many groups Level 3 is the climax to their operations. This is not a negative. The development model for community groups that we have identified is a mechanism to categorise the development stage of groups; we are not saying that each progressive level is better than the one before. Each group will find their own natural climax development level.

Level 4 - The project

At Level 4 the group's mindset changes to one which is thinking long-term and has decided that it is going to pursue a large-scale carbon reduction project; examples of such projects are:

• A community wind turbine

1. a 330kW wind turbine with a mast height of 50 meters and a blade diameter of 33 meters;
2. capital cost of £800,000; and
3. potential annual income of £30,000 - £40,000

• A micro hydro-electric scheme

1. a 14.5kW Archimedes screw hydro-electricity turbine with potential annual energy generation of 103 MWh
2. capital cost of £158,000
3. potential annual income of £17,000

• A photovoltaic installation at a Junior School

1. 33.3kW of PV on the school roof
2. capital cost of £220,000
3. saving the school £12,000 per year in energy costs.

These projects are different from the carbon reduction activities of Level 3 in a number of ways:

• Scale - they have considerably greater carbon reduction potential.
• Cost - they are expensive and require considerable expense to undertake the associated feasibility studies as well as considerable capital investment.
• Professional expertise - expert advice and understanding of all aspects of the project is required to deliver these projects.
• Time - the group is required to think long-term, both in terms of the length of time required to deliver the project and its operation.
• Pragmatic selection - as a result of the scale, cost and time commitment required for these projects they are not undertaken lightly. They are undertaken as a result of a pragmatic and considered selection process aiming to make best use of the group's skills and location.

The primary activity at Level 4 is the assessment of the feasibility of the project (‘feasibility studies' is used as a collective term to describe all of the assessments undertaken at Level 4).

Level 5 - Raising the money

At Level 5 the project which the group has identified and pursued has been found to be viable and funding is being sought to make it happen. Typically the scale of funding required is in the region of £100,000 - £2 million.

This funding is sought from a variety of sources including:

• grant awarding bodies;
• trust funds;
• corporates;
• banks; and
• the local community.

As previously mentioned the introduction of the FIT as an additional revenue stream arising from these projects should make it easier for groups to generate investment finance.

Level 6 - Sustainable enterprise

There are not many examples of groups progressing to Level 6; consequently we know least about this level. We have identified three primary directions that a group can take on the completion of their project.

• The group decides that it has done as much as it wants to with regards to pursuing major renewable energy or energy efficiency projects, or there are no more realistic projects to pursue within its community
• The group decides to undertake another carbon reduction project within its area and goes back to Level 4 to investigate the feasibility of a new project and undertake the associated fundraising
• The key individual(s) who have project managed the delivery of the project realise that they have a lot of expertise that they can share with other groups and decide to set up a not-for-profit business to help other groups develop carbon-reduction projects.

BRE is working with a number of companies and other organisations that are looking to support UK-based community scale renewable energy projects. The model we have developed will help them to assess this investment landscape. T

The development model should also be helpful for community organisations seeking financial support because it can provide them with a development roadmap and, at the latter development stages, highlight the qualities that investors require before they will provide funding. Ultimately this will result in increased financial support to community energy projects across the UK.

Acknowledgements

We would like to acknowledge the South East England Development Agency who had the vision to commission the work looking at how community carbon reduction groups can be supported, and Forum for the Future and Business Support Kent with whom BRE have partnered projects working with community groups.

Box 1:

Some of the community groups in the UK who have registered or affiliated themselves to umbrella organisations. There are many more operating independently.

• There are over 169 registered transition towns (and 198 considering registration)
• 140 communities have signed up to the Greening Campaign, a community pledge to sign up to actions to reduce carbon emissions
• DECC's Low Carbon Communities Challenge received over 500 expressions of interest and 276 applications
• NESTA's Big Green Challenge received applications from 355 community groups

Box 2:

A brief overview of the feed-in-tariff (FIT) which provides a regular payment for generators of renewable energy for up to 25 years

The feed-in-tariff is a government scheme to incentivise the generation of electricity from the following renewable energy technologies up to a maximum installation generating capacity of 5MW:

• Anaerobic digestion
• Hydro-power
• Photo-voltaics
• Wind

A payment per kW of electricity generated is made to the registered generator of the electricity and this is a guaranteed, index-linked payment for between 20-25 years depending on the technology and installation size. The payment has been calculated to provide a return on capital investment of approximately eight per cent.