What next for community energy businesses? Exploring next generation business models


What next for community energy businesses?

A blog written by Power to Change

Community-led initiatives to tackle the climate crisis can take shape in various ways. Power to Change’s Community Business Market Report 2022 found that a significant majority (72%) of community businesses report making a positive contribution to improving the environment or tackling climate change. Power to Change is backing the sector to build capacity and harness the huge opportunities for community businesses in the transition to a fairer, greener economy.

Community energy refers to different forms of collective action taken by local people with the primary aim to reduce carbon emissions and fuel poverty through the reduction, purchasing, management and generation of energy. Solar panel and wind turbine investments have been the bread and butter of community energy businesses for many years, but the end of the Feed-in-Tariff in 2019 reduced the viability of new schemes and slimmed down the surplus available for community benefit. 

The Power to Change Next Generation innovation programme has been supporting trials of alternative business models for community energy. It’s been a tough ride – the programme hasn’t identified any business models for that are quite as straightforward as renewable energy investments.  But it has identified several models that are ‘near viable’ or that justify further investigation, while generating considerable learning for community energy businesses and for wider stakeholders. 

This detailed final programme report presents findings on ‘near viable’ business models that could be taken further, for example,

  • Helping houses and organisations to install heat pumps or energy efficiency measures by providing advice and coordination services
  • Running ‘Pay as you save’ schemes for LEDs and other energy efficiency measures in community buildings
  • Adding Electric Vehicle (EV) chargepoints to commercial-scale solar PV installations.
  • Developing energy data apps on a cooperative basis

In rural areas poorly served by transport and by existing EV chargepoint providers, the evaluation found that EV car clubs may also be viable, and that zero carbon work with schools may also be viable in certain circumstances.  Within the community energy sector, the evaluation found considerable interest in community-led flexibility services and community-led heating systems for new homes, as well as in no-upfront-cost residential solar schemes, but these require further development to reach viability.

The evaluation found that the less innovative projects in the programme had more potential to generate social impacts in the near term than the more innovative projects. Whilst these models appear unlikely to generate surplus for the community energy sector on the same scale as renewable electricity investments, they involve more direct service delivery to local communities (e.g. on local transport, energy efficiency, retrofit etc) and can enable community energy businesses to contribute more fully to the energy transition and to meeting local community needs.

Key learning points from the evaluation for policy makers, local authorities and energy stakeholders:

  • Community energy businesses can be valuable partners for local authorities and private companies, helping them to progress their strategic objectives on net zero and the climate emergency and generate social value.
  • In response to the cost-of-living crisis, funders could usefully support community businesses take action on energy efficiency, low carbon heat and retrofitting.
  • Community energy businesses can potentially contribute added value through their ‘trusted intermediary’ role with the local community and their willingness to run services for social objectives rather than profit. Support for further demonstrations and capacity/skills building within the sector would be needed to support roll-out of these business models.
  • The more innovative projects in the Next Generation innovation programme (e.g. community-led flexibility and community-led energy in new housing) are still some way from viability. Given their potential contribution to the energy transition, and the potential added value from community energy involvement in these projects, further policy support and innovation funding for these initiatives appears justified.
  • The mentoring work undertaken by the Next Generation programme, detailed in the mentoring report, provides insights into how funders could support peer mentoring to build skills and confidence within community energy businesses.

These findings are set out in more detail in the Next Generation Year 3 Final Evaluation report and the Peer Mentoring report.  For further information, please contact Will Walker at Power to Change.