Ken Moon says community energy schemes can kick-start transition to a low carbon economy
As someone who has worked in both environmental and community sector grant funded projects over the last decade I know how important grant funding can be to help get projects off the ground. And I also know that a lack of grant funding can seem like the thing that’s holding us back. If only we could get a grant, we could do all this great stuff!
But is grant funding always the most appropriate source of finance? Funding regimes can be incredibly restrictive and many projects and organisations which start with a truly transformational agenda often find themselves compromised by the need to secure additional funding. Or they simply come to an end and all that energy and enthusiasm dissipates, leaving communities and ‘beneficiaries’ wondering where all the money disappeared.
Add to this the ongoing crisis in the banking sector, coupled with the public sector spending cuts, and many of us are finding that things are getting a little tight, whilst others are genuinely concerned for the future. So has the relative abundance of grants in Wales over the last decade completely dulled our senses and closed our eyes to other sources of funding for our ideas and creativity?
Thankfully not, because while all this has been going on, we have also seen significant steps being taken to seek alternative forms of investment, which two key developments have supported:
- The rise in popularity of community share offers and the resurgence of the Industrial and Provident Society, especially around community energy generation. Well-known pioneers in this area are H2OPE and Energy for All.
- The use of on-line social marketing tools to engage with individual donors and investors such as the US based Kiva online lending platform, which since launching in 2008 has raised over $17 million for borrowers in developing countries’ from individual investors.
What these two developments have in common is that they are not asking people for donations or grants. Instead, they are asking for a loan, which will be repaid, with or without interest. This is how money is made and ‘wealth’ created.
With the introduction of the Feed-in-Tariff community energy schemes are an attractive proposition for communities looking to generate an independent source of income. They can generate reasonable returns, so they’re also a good investment making them a viable business proposition. The State Aid implications of Feed in Tariffs also means that any scheme receiving over £200,000 of government grants over three years are ineligible. This makes loan finance a more attractive proposition for a community looking to maximise the income generating potential of their scheme.
However many communities are wary of loan finance, often through past experience, or for ideological reasons. Unfavourable terms can mean much of the profit accrues to the lender rather than the community. For the majority of community energy projects, their small scale, and the associated high costs of servicing a loan, mean they are un-attractive to the corporate banking sector which is more interested in larger schemes with greater profit margins. This is where community share offers and social marketing come into their own.
Communities across Wales now have the opportunity to utilise grant funding, for example through Ynni’r Fro, Environment Wales and the Rural Development programme, to develop renewable energy schemes in their community. They can then establish community share offers, for example, through setting up an industrial and provident society and use online social marketing to secure additional investment for their schemes. With the high capital and low maintenance costs, the income generated can then be used to support additional community projects such as local food growing and transport initiatives.
This is what a sustainable funding model could look like for Wales. One in which people like you and me provide financial support to people and communities so that they can generate an income for themselves and move away from a culture of dependency.
With the financial pressure caused by the economic down-turn, now is the time to explore the ways in which communities can generate energy, cut carbon emissions, and even help finance other projects in the future. By taking a more innovative and imaginative view on where the funding comes from and how we use it, we can create localised revolving funds, which deliver for communities year on year.
At C3 (Carbon Capture Cymru) we’re developing a national financing model for Wales, replicable at a local level, which will enable communities to secure capital investment, get off the ground, and start earning. Funds can then be fed back so that other projects can derive the very same benefit. The more projects involved, the more we can put the future of communities back in the hands of communities themselves.
View the Wales Sustainability Reinvestment Trust’s C3 presentation here: