What is community energy?

Community energy can bring economic benefits to local citizens, it can strengthen communities’ social ties and it can offer solutions to our energy challenges. So what is community energy exactly?

community-energy-copenhagen-wind-turbine

 

Copenhagen’s offshore wind turbines are 20% community owned

 

Below, I’ve described the variety of initiatives that could be described as ‘Community Energy’. In particular I’ve looked at three financial models in operation in Australia – donations, investments and bulk buys. Community activism leading to re-municipalisation and community-led energy program delivery are covered as international trends.

The common theme of all versions of community energy is that they engage citizens in non-traditional ways around energy supply and use. The carrot that community energy dangles is the unlocking of local benefits that existing energy markets have failed to deliver so far. The transformation of our energy systems is underway – community energy can play a key role in shaping the energy systems of the future and demanding that they are equitable, efficient and resilient.

Community energy advocates are motivated by the opportunity to:

  • Deliver the profit of renewable energy projects to a broader section of the community (eg rather than a single corporate investor)
  • Unlock projects that wouldn’t otherwise occur (eg by developing projects, reducing costs and offering finance)
  • Help all of us rethink what the energy system of the future might look like. (therefore the sector plays a role in advocating for policy changes and supporting innovative energy solutions)

Governments are motivated to support community energy because:

  • Community-scale projects sit between utility and household scale and is a missing part of the market at present, even though the financial opportunity is already there.
  • Community support creates social licence for renewable energy more generally and de-risks innovative projects.
  • Community energy fits with the policy ambitions of cleaner, more affordable energy and secure supply. Governments can benefit as this sector develops an effective community delivery model.

Community energy is not every community scale project or every off-grid / embedded network project. Without community ownership or community benefit these are simply private sector business models. Likewise, local government could start to play a stronger role in owning and operating community scale energy systems and government models would emerge. Regardless of the key players behind a project, it seems important that a diversity of local projects continues to develop and, over time, Australian communities can have a richer appreciation of the benefits that are unlocked under the different models.

Community Energy Examples

DONATION MODEL

Donations can come in the form of grants or many ‘crowdfunded’ donations from individuals. Donations can be used as a gift to the project, but also as a loan. The advantage of the latter is that donated funds can be re-used in a type of revolving fund.

The donation model allows supporters to contribute to something practical and long lasting. In some cases the supporters value growth in clean energy and reduction of greenhouse gas emissions. Often donors are supporters of the host organisation which will ultimately benefit from reduced energy bills.

The donation model could also be powerful when a project is not sufficiently profitable for the private sector, or when there are risks involved due to technology or the host organisation.

CORENA (Citizens Owned Renewable Energy Network Australia corenafund.org.au) runs a revolving fund sourced from individual donations with the aim of reducing greenhouse gas emissions. CORENA only loans to not-for-profit community organisations and works with each organisation to make sure the project reduces emissions and will pay for itself – usually within 5 years. Each loan is interest free. Once the loan is repaid, the organisation keeps the system and the monthly energy bill savings. CORENA has also supported other groups to set up revolving funds.

The People’s Solar (thepeoplessolar.com) is a dedicated crowdfunding platform for community energy projects. Such projects also regularly appear on other crowdfunding sites like StartSomeGood and Chuffed.

Totally Renewable Yackandandah (totallyrenewableyack.org.au ) is a typical community which has successfully driven a range of projects throughout the town. Each project has been cobbled together using grants, loans, donations and finance from the host organisation as necessary.

Powershop, an electricity retailer, encourages its customers to donate to clean energy projects and collects the money in small amounts through its billing arrangements.

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INVESTMENT MODEL

Many citizens are keen to invest in renewable energy projects, particularly for causes that are dear to them, organisations that are local to them or sites that will have an impact on them.

International precedents

In Denmark, creating social licence by allowing those affected to own and profit from renewable energy is seen as a key to wind energy development. Denmark runs four community programs to support wind power: 1) 20% of each project must be opened up to community shares, 2) community coops can access up to 10mKroner for project feasibility studies, 3) green scheme pays for projects to ‘enhance local scenic and recreational values’ and 4) a compensation scheme recognises changes in land values due to wind turbine proximity

In the UK, community shares is a particular organisation model with light handed financial regulations that allows for community investment from many individuals. Organisations from football clubs to renewable energy projects have used the model to create investments that are ‘owned’ by their supporters. The projects typically pay dividends back to both their supporters and to a local cause or community and the profitability can range markedly from a nominal return up to 8%.

Hepburn Springs Wind Farm (hepburnwind.com.au/ ) was the first site in Australia to build a community owned wind farm. The site has two wind turbines which feed power to the local community in Hepburn Springs, Vic. The group learnt so much about how to develop a project of this magnitude and navigate the energy market that it created a community wiki – embark.com.au to share the learning with other communities that also wish to develop community energy.

ClearSky Solar (clearskysolar.com.au/ ) The clearsky model is to develop projects at the $100,000 size, often on the rooftop of mid-sized businesses who don’t want to make the upfront capital investment. ClearSky limits each project to 20 investors and typically offers returns from 5-8%. The projects are each set up under a trust mechanism. An investment offer usually sells out within 24hrs, demonstrating that project development is the bottle neck.

Pingala (pingala.org.au/ ) demonstrates that partnering with a business like Young Henry’s Brewery and reaching their fans can create a robust investment community.

Sydney Renewable Power Company (www.sydneyrenewable.com/ ) has taken a traditional approach and will raise $1.5m from over 500 shares in a share offer, for a 520kW solar array on the Sydney Convention Centre.

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BULK BUY MODEL

The third model attempts to cover those scenarios where the funders and the beneficiaries are the same people but the benefit has been gained by working together as a collective. Bulk buy models emerged as rooftop solar started to become popular. In return for reducing the costs of customer acquisition, equipment providers often provide a benefit to aggregators, or discounts to the community of buyers.

There have been many once-off initiatives with little ongoing presence. The following list gives a sense of the different models that have been explored.

Sun Crowd (suncrowd.com.au/ ) is currently running bulk buy initiatives for solar systems with battery storage, capitalising on the market’s need for vetters of new technology.

Victor Harbour Council (victor.sa.gov.au/solar ) granted the tender for their solar program to Zen Energy in 2009 to provide a reliable solar panel installation service to residents. Essentially the Council provided vetting of the provider and (from memory) Zen provided a small community benefit in return. Other versions of this model such as Our Solar Future (oursolarfuture.nsw.gov.au/) use independent community groups such as the Alternative Technology Association or the Moreland Energy Foundation (MEFL) to provide the vetting services.

There are many other ‘collective’ scenarios where a private sector partner seeks to reach a community through a trusted community partner and share the benefits with that partner.

A school in WA sold solar panels to its parent community in return for a free panel on the school.

Energy Locals (energylocals.com.au/ ) is a new social enterprise retailer seeking to sell electricity through community groups in return for benefits (such as a solar system) for the community group.

The housing development sector often has captured communities in apartment buildings and other multi-residence housing developments. Sometimes these developers deliberately choose to install an embedded network and capture the electricity sales to those within the development. Sometimes this is simply a historical decision. More recently, new development projects are driven to consider this option by the increasing cost of connecting to the electricity grid. Fremantle in WA[1] will have a grid connected system with storage and peer to peer trading – an experiment in new technologies and reducing the capacity required from the grid. Newcastle in NSW[2] will have a development that chooses to be completely off-grid. There are just two of many examples.

[1] https://onestepoffthegrid.com.au/peer-peer-solar-trading-kicks-off-wa-housing-development/
[2] smh.com.au/it-pro/business-it/offgrid-suburb-a-perfect-storm-for-energy-giants-20151207-glh7l5.html
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RESPONDING TO COMMUNITY DEMANDS

In USA and Germany there has been multiple examples of disenfranchised communities taking energy matters into their own hands. When private sector utilities have failed to deliver cleaner energy, despite repeated requests, communities have voted to change the status quo.

Some of these movements have focused on bringing grid ownership and control back into Local Government hands. In the case of California, the wholesale purchasing of energy became the role of groups of Councils under community choice aggregation schemes. This drives the development of locally produced power projects.

Enova Energy (enovaenergy.com.au/ ) in Northern NSW is Australia’s first example of community ownership within the mainstream National Electricity Market (NEM). Enova is an electricity retailer with an ownership structure similar to a Trading Coop – voting rights are limited so large funders do not control the entity. Approximately $300 million a year is spent on electricity in the Enova region. The company estimates it can return as much as $80 million a year locally in the form of profits, jobs, and sourcing local staff and suppliers. They are also working in partnership with local businesses and the wider community to harness more renewable energy sources, reflecting the values of their local shareholders and customers.

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ENERGY PROGRAM DELIVERY

Finally, one of the features of international community energy that is mostly lacking in Australia is the richness of program delivery across the energy sector by numerous NGOs with differing relationships to governments. NGOs tackle everything from energy efficiency and fuel poverty to electricity market innovation and industry development. Invariably government or legislated targets create foundational funding streams but the community sector is able to reach multiple sources of funds and be agile enough in its business model to be continuously providing those services which are most needed and valued.

Moreland Energy Foundation (http://www.mefl.com.au/ ) exists because the Moreland Council owned its own electricity infrastructure at the time of privatisation in the 90’s in Victoria. As a result they made the decision to re-invest the value of selling assets into energy service delivery.

Community Powerhouses (see cpagency.org.au/ ) featured in the Home Grown Power Plan for the last federal election campaign, supported by GetUp and Solar Citizens. The concept of communities delivering energy options and services for locals (possibly under a Landcare for energy model) is well supported by international successes.

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About Heather

I am an energy and climate change specialist with a background in industrial energy efficiency and climate change policy.
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2 Responses to What is community energy?

  1. Pingback: Communities creating power across the world | changing weather by Heather Smith

  2. Pingback: Why I’m joining Tempus Energy | changing weather by Heather Smith

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