With our societies becoming more environmentally minded and with more people gaining interest in renewables, many of people have asked us whether Community Energy is a good investment. The answer is yes, and below we outline some of the reasons why.
Because it’s good for the environment
A one megawatt solar array or wind farm produces enough electricity to power approximately 250 homes, and the more electricity we generate from renewables the less we’ll need from non-environmentally friendly sources like coal and gas fired thermal plants. Moreover, a one megawatt installation represents saving 400 tonnes of CO2 a year. For comparison, 400 tonnes of CO2 is the approximate amount a Boeing 747 generates on a return flight from London to New York. If you’re concerned about the environmental impact of traveling long-distance, offsetting as much of that CO2 generation as possible by investing in community energy is a good place to start making an impact.
There is virtually no place in the world that won’t be affected by Climate Change. We can talk about disappearing glaciers, rising sea levels, reductions in arable land, alterations to habitats that cause sedentary and migrant animals to change their behavior, extinction of plant and animal species and invasion by others that are displaced… whether you live in a small village in the English countryside or on a stilted home in the Mekong delta, we all stand to benefit from protecting the natural world.
Because it offers solid financial returns
Depending on the scale of the project, most community energy schemes promise returns in the 4 to 8% range. On top of that, shares owned in Community Energy groups fall under the Social Investment Tax Relief act, which offers a 30% deduction on Income Tax over the amount invested in the scheme. So a person purchasing £1,000 worth of shares would receive a tax deduction of £300. Combined with interest payments this can boost the returns rate as high as 13% in some cases.
And what about risk? Do community energy projects fail frequently? The answer is no. There is a significant number of Community Energy projects that never reach fruition, but such projects almost always fail in the planning stage, before they are open for investment. In other words, the projects you can invest in have already passed the largest cull community energy groups have to face, which is going from idea to implementation. Once a project receives planning approval and can begin raising money the risk is also minimized because open share offers function by taking pledges from would-be investors, whose money doesn’t actually go to the community energy organization unless a minimum threshold is passed. If the share offer doesn’t reach the minimum required amount to proceed investors simply keep their money.
And what about after that — once a project is operational? Community energy is largely non-speculative. The two most popular types of renewable energy, solar and wind, have been around for decades and performance predictions are very reliable given that there is ample experience with the technologies in the UK. Projects that have received Feed in Tariff accreditation and pre-accreditation are the safest because they are guaranteed to receive a subsidized rate for the electricity they sell to the grid for 20 years. Recent regulatory changes that will reduce subsidies have some people worried, but there is also hope that the continued reduction in installation costs, especially for solar, will be able to make up for this loss in the near future.
Because local communities also gain from it
There are three legal forms that community energy groups take on in the UK: Community Interest Companies, Co-operative Societies, and Community Benefit Societies (BenComs). The most popular of the three are Community Benefit Societies and one of the things that makes them unique is that they are legally required to have what is called a Community Fund. Community funds are exactly what the name suggests, special funds that are used for the benefit of the community. A fixed percentage of the profits generated by these groups are put into their community funds and these are used for various philanthropic and social causes. BenComs are governed democratically, so all the people participating can have a say in how the profits they generate are spent. Each local community has its own unique needs and wants, and successful community energy projects can contribute tens of thousands of pounds to their respective funds every year to help address local issues and improve the quality of life of community members. For an example check out the BWCE 2015 Fund Allocations by our partner Bath and West Community Energy, who this year have distributed nearly £20,000 to various local causes.
The great thing about this system is that it allows community energy groups to be very flexible. Investments can go from anything like making repairs and improvements to local facilities to fostering the development of new community energy groups and renewable energy initiatives, the only limit is the its members’ creativity.