Business models and financial characteristics of community energy in the UK

Tim Braunholtz-Speight, Maria Sharmina, Ed Manderson, Carly McLachlan, Matthew Hannon, Jeff Hardy, Sarah Mander

Research output: Contribution to journalArticle

Abstract

Community energy projects take a decentralised and participatory approach to low-carbon energy. We present a quantitative analysis of business models, financing mechanisms and financial performance of UK community energy projects, based on a new survey. We find that business models depend on technology, project size, and fine-tuning of operations to local contexts. While larger projects rely more on loans, community shares are the most common and cheapest financial instrument in the sector. Community energy has pioneered low-cost citizen finance for renewables, but its future is threatened by reductions, and instability, in policy support. Over 90% of the projects in our sample make a financial surplus during our single-year snapshot, but this falls to just 20% if we remove income from price guarantee mechanisms, such as the Feed-in Tariff. Renewed support and/or business model innovations are therefore needed for the sector to realise its potential contribution to the low-carbon energy transition.
Original languageEnglish
JournalNature Energy
DOIs
Publication statusPublished - 10 Feb 2020

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Carbon
Industry
Finance
Tuning
Innovation
Chemical analysis
Energy
Business model
Costs
Quantitative analysis
Participatory approach
Business model innovation
Financial instruments
Guarantee
Income
Loans
Tariffs
Surplus
Financial performance
Financing

Keywords

  • community energy
  • low carbon energy
  • renewable and low carbon energy systems

Cite this

Braunholtz-Speight, T., Sharmina, M., Manderson, E., McLachlan, C., Hannon, M., Hardy, J., & Mander, S. (2020). Business models and financial characteristics of community energy in the UK. Nature Energy. https://doi.org/10.1038/s41560-019-0546-4
Braunholtz-Speight, Tim ; Sharmina, Maria ; Manderson, Ed ; McLachlan, Carly ; Hannon, Matthew ; Hardy, Jeff ; Mander, Sarah. / Business models and financial characteristics of community energy in the UK. In: Nature Energy. 2020.
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Braunholtz-Speight, T, Sharmina, M, Manderson, E, McLachlan, C, Hannon, M, Hardy, J & Mander, S 2020, 'Business models and financial characteristics of community energy in the UK', Nature Energy. https://doi.org/10.1038/s41560-019-0546-4

Business models and financial characteristics of community energy in the UK. / Braunholtz-Speight, Tim; Sharmina, Maria; Manderson, Ed; McLachlan, Carly; Hannon, Matthew; Hardy, Jeff; Mander, Sarah.

In: Nature Energy, 10.02.2020.

Research output: Contribution to journalArticle

TY - JOUR

T1 - Business models and financial characteristics of community energy in the UK

AU - Braunholtz-Speight, Tim

AU - Sharmina, Maria

AU - Manderson, Ed

AU - McLachlan, Carly

AU - Hannon, Matthew

AU - Hardy, Jeff

AU - Mander, Sarah

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AB - Community energy projects take a decentralised and participatory approach to low-carbon energy. We present a quantitative analysis of business models, financing mechanisms and financial performance of UK community energy projects, based on a new survey. We find that business models depend on technology, project size, and fine-tuning of operations to local contexts. While larger projects rely more on loans, community shares are the most common and cheapest financial instrument in the sector. Community energy has pioneered low-cost citizen finance for renewables, but its future is threatened by reductions, and instability, in policy support. Over 90% of the projects in our sample make a financial surplus during our single-year snapshot, but this falls to just 20% if we remove income from price guarantee mechanisms, such as the Feed-in Tariff. Renewed support and/or business model innovations are therefore needed for the sector to realise its potential contribution to the low-carbon energy transition.

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KW - low carbon energy

KW - renewable and low carbon energy systems

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