There are some scary numbers bandied about when discussing the scale of the energy challenge in the UK. At the recent Economist UK Energy Summit, Katja Hall, chief policy director of the CBI, warned that “if we want to get an electricity supply that is low carbon, secure and affordable, we’ll need £110bn of investment in the next decade, and that’s the equivalent to building the Olympic stadium 20 times a year, for ten years”. Yet amid the scramble toward global and institutional investors, there is one source that doesn’t get enough a mention. Us.
Crowdfunding to solve climate change
The minister for climate change Greg Baker recently said that crowdfunding could be an “incredibly powerful” way to deliver a “decentralised energy system, and help achieve the goal of turning the Big Six into the Big 60,000.” It may sound fanciful, with community-owned renewable schemes only existing in the UK on a very small scale. But in Germany, over 50% of renewable-energy capacity is community-owned. And online crowdfunding or peer-to-peer (P2P) lending, allowing individuals to lend or raise money for projects directly, could be set to kick-start community-ownership of renewable energy in the UK too.
According to Will Straw, associate director for climate change, energy and transport, IPPR, “there’s not just a potential for crowdfunding to come into the renewables space, it’s essential… we’ve hit a glass ceiling in terms of onshore wind development because communities have just not bought into it.”
£5 to save the world?
The latest player to appear on the P2P lending scene is Abundance. Set up by one of the founders of P2P pioneer Zopa, Bruce Davis, it invests specifically in renewable energy. Having funded three renewable generation schemes so far – two solar and one wind – it has raised £2.3m through crowdfunded finance. A fourth project is now online and five in the planning stage, Davis expects to see £10m invested by the end of the year.
“We’re looking at funding projects in the £1m to £4m range, up to £10m. So far 600 individuals have invested an average of between £1,500 and £2,000″, informs Davis. “There is a minimum investment of £5 and we do get people putting in £5. Everyone gets the same return based on a share of the revenues from selling the energy… the return on the current project is between 7.35% to 8.6% depending on the amount of sunshine estimated at that site.”
He rejects the idea that renewable energy is a risky investment. The Hoo Farm ground solar project is currently producing a higher than expected return for investors – though the inverse will of course be true if the energy levels drop. But more importantly Abundance only invests in schemes that are eligible for feed-in-tariffs (FITs). “There is visibility on the FIT for 20 years so that’s how long we’ll loan the bond for… You ultimately get 2-to-2.2 times your investment back at the end of the 20 years, and your initial amount back in full about half way through.”
A return of 7-to-9% however should surely be attracting bigger investors than people punting £5. “We have people investing £50,000-plus as well as the £5 people, so it’s a big range”, argues Davis. “Pension funds are buying up very similar assets. They want the £100m projects and we’re not doing anything on that scale, but they might aggregate some together – we have approached some developers only to find they have just sold it all to a pension fund.”
Increased ownership gives impetus back to community
Yet despite the billions needed to build the UK’s low-carbon energy capacity, Douglas Parr, chief scientist and policy director, Greepeace UK, argues that, “Getting people to part with their savings and invest doesn’t seem to me to be the key barrier. A local hydro scheme on the Thames in Osney raised all the money they needed in ten days from lots of individuals giving relatively small sums. There is actually quite a hunger out there on the money side… why Abundance is potentially quite interesting is that spreading ownership more broadly is more likely to engender what I would call the political permission to do more. In the same way that micro-generation on people’s houses… engenders changes in behaviour and understanding of the energy system that were previously not around, I think a broader community ownership can only help in making that happen.”
Increased levels of ownership, both literal and emotional, could help wrest the impetus away from the powerful ‘say no to wind farms’ lobby. “If it’s just presented as this big company coming from outside and dumping something in your landscape that you don’t particularly want, then frankly it’s not altogether surprising that there’s a lot of people who don’t like the idea”, says Parr. “There has been some great work done by the Centre for Sustainable Energy in Bristol positioning the debate away from ‘will you have a windfarm, yes or no’, to ‘how would you do something about dealing with energy security in your locality’ – and when you do that you get a much more nuanced and positive response… [and] a recognition that people have rights to reject, but they also have responsibilities to do.”
Straw similarly believes that, “you really need to have advocates for onshore wind in planning meetings, because they’ve got a stake in it – either an equity investment, and/or some guarantee about how much it will reduce their own energy bills… that could be transformational in public attitudes towards renewables. It also takes power away from the big developers.”
The money is welcome, but it may not be the most important contribution crowdfunding makes to renewable energy. Engaging people more directly in their energy future, on a community and a financial level, says Davis, “makes people feel more included in the process and not like it’s been imposed on them… There are only so many large scale wind farm sites in the UK, no matter what you might hear. A diverse mix of small-to-medium energy solutions, community-owned, is what’s needed. And now we can offer that.”
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