{"id":12588,"date":"2019-12-10T10:01:37","date_gmt":"2019-12-10T10:01:37","guid":{"rendered":"https:\/\/www.powertochange.org.uk\/?post_type=blog_post&p=12588"},"modified":"2021-07-30T13:55:49","modified_gmt":"2021-07-30T12:55:49","slug":"five-things-weve-learned-new-community-energy-models","status":"publish","type":"post","link":"https:\/\/www.powertochange.org.uk\/news\/five-things-weve-learned-new-community-energy-models\/","title":{"rendered":"Five things we\u2019ve learned about new community energy models"},"content":{"rendered":"

The new world of cross-vector energy is inherently more complex: there is no one-size-fits-all. And the fantastic thing about community energy, of course, is that local groups are often best-placed to identify the niche opportunities in their area.<\/p>\n

– Felicity Jones Partner, Everoze\u00a0<\/em><\/p><\/blockquote>\n

Power to Change\u2019s <\/strong>Next Generation<\/strong><\/a> programme is incubating community energy models of the future. <\/strong>Felicity Jones is a consortium member of the Next Generation Programme, and Partner at employee-owned consultancy Everoze. She shares her top five learnings from the programme so far.<\/strong><\/p>\n

\"\"

When you talk to people about community energy, they\u2019ll often think of solar farms locally owned and controlled and financed through community share offers. But with the closure of feed-in tariffs (FiTs), which subsidised many projects in the past, this model is now under threat. Community energy businesses are having to get creative once again and explore new untested models.<\/p>\n

Enter Next Generation, which helps turn bold ideas into scalable solutions. It\u2019s a programme funded by Power to Change<\/a>, and managed by CSE<\/a>; Everoze<\/a> is on board to provide technical and commercial input. The programme offers grants to support community energy groups in developing new business models. Here\u2019s what we\u2019ve learned so far.<\/p>\n

    \n
  1. The new models being developed are notably diverse \u2013 not consolidated<\/strong><\/li>\n<\/ol>\n

    The old model was quite samey: most community energy projects relied on FiTs subsidies and money raised from share offers to develop or buy up solar farms and run them for community benefit. But the applications we\u2019ve received under Next Generation<\/em> have been striking in their sheer diversity. We\u2019ve seen a vibrant explosion of ideas: from an electric vehicle (EV) car club, to community energy powered new housing developments, flexibility and grid services, peer-to-peer trading and more.<\/a><\/p>\n

    The implication \u2013 accepting failure, accepting complexity<\/u>: Will all of these models work? Probably not. Ideas are diverse because the sector is still figuring out what works; genuine innovation means accepting \u2018failure\u2019 of some models. But even as the sector matures, we\u2019re expecting some of this model diversity to persist. The new world of cross-vector energy is inherently more complex: there is no one-size-fits-all. And the fantastic thing about community energy, of course, is that local groups are often best-placed to identify the niche opportunities in their area.<\/p>\n

      \n
    1. New community energy models require greater resources during operations \u2013 and less upfront<\/strong><\/li>\n<\/ol>\n

      The old solar model is (comparatively) passive during operations; yes, there are ongoing financial, asset management and other considerations, but the bulk of work is nonetheless upfront. \u00a0New energy models, by contrast, typically require a much more proactive role during operations. For instance, running an EV-charging scheme means being available to address consumer issues as they emerge.<\/p>\n

      The implication \u2013 organisational rethink<\/u>: This shift in effort has significant organisational and resourcing implications for community energy businesses. It potentially requires a more direct customer-facing set-up. This is about people, not just assets.<\/p>\n

      \"\"

        \n
      1. New energy models are complex, with real revenue risks \u2013 and lower capex risk<\/strong><\/li>\n<\/ol>\n

        Under the old solar model, much of the financial focus was on managing capital expenditure and development expenditure \u2013 and ensuring that you got a robust solar asset for your money. FiTs substantially derisked the revenues. But in the new energy world, we\u2019re seeing a transition from asset infrastructure risk to revenue risk. Revenues are often merchant, and often stacked.<\/p>\n

        The implication \u2013 bringing partners on board<\/u>: This elevated revenue risk has sparked lots of discussion in the Next Gen team. How to ensure that risk\/reward profiles are fairly communicated in community share raises? And how to ensure that revenue risk is well managed? One solution is to bring advisers on board, to provide independent, robust scrutiny of financial models. Or perhaps even to outsource some of the complexity via close collaboration with private sector actors well-equipped to manage that risk.<\/p>\n

          \n
        1. Community energy groups need to articulate their Unique Selling Point (USP) \u2013 not just be seen as the cheap option<\/strong><\/li>\n<\/ol>\n

          In a sector under disruption, a question we constantly ask ourselves when assessing business models is this: why should this model be led by community energy, rather than other actors? Why is a community energy group uniquely positioned to do this? The Next Gen team is eager to support ideas that can withstand the competitive storm to deliver long-term local benefit.<\/p>\n

          Implication \u2013 enhanced trust, not lower cost:<\/u> Some might say that community energy\u2019s USP is cost based \u2013 undercutting the private sector through relying on volunteer labour. I find that patronising. \u00a0The best models we\u2019ve seen have a clear articulation of their added value. Often, their USP centres on leveraging the inherent trust<\/em> in community energy groups to mobilise local actors and help drive place-based change which otherwise wouldn’t occur.<\/p>\n

            \n
          1. We need to learn and adapt we go \u2013 not develop a rigid plan<\/strong><\/li>\n<\/ol>\n

            Newness brings uncertainty with it. If we were funding conventional projects, then we\u2019d agree the funding milestones upfront for each project, and largely tick off the milestones as projects progress. But because this is an innovation <\/em>programme, unexpected roadblocks emerge such as changes in regulation, revenues, etc.<\/p>\n

            Implication \u2013 agility:<\/u> I\u2019ve been impressed by the agility and flexibility of community groups, responding to issues as they emerge, #SwarmGovernance<\/a> style.\u00a0At Next Gen, we have to find a way to accommodate these changes whilst also ensuring that grant funds are well spent.\u00a0This isn\u2019t always easy; but we\u2019re constantly testing how to find the right balance.<\/p>\n

            Onwards<\/strong><\/p>\n

            So there are five lessons learned so far. It feels good to write them down! But now let\u2019s focus on the doing. It\u2019s still early days. The Next Gen projects are a portfolio of experiments testing out new models for community energy. Let\u2019s rapidly gain experience, share feedback and swarm on solutions.<\/p>\n

            Find out more about the Next Generation programme.<\/a><\/p>\n