Carrots, Sticks and Sermons: Policies to Unlock Community Energy Finance in the United Kingdom

Community energy (CE) represents a potentially critical means of accelerating a sustainable and equitable energy transition. However, in many countries, it is experiencing a period of stagnation, typically following the dilution or removal of supportive government policies. In the absence of substantive capital grant funding, attracting capital finance has become increasingly important for the CE sector but remains highly challenging to secure at scale. Policy solutions are therefore needed to unlock finance and catalyse CE sector growth.

To develop policy solutions to accelerate CE business model innovation that can unlock finance, this paper develops a newly synthesized policy instrument, innovation system and business model analytical framework. This is applied to the case of United Kingdom (UK), employing a mixed-methods approach that included a survey of 145 projects, 33 interviews and documentary evidence. To drive business model innovation and unlock CE finance ten policy recommendations are presented that offer an essential balance across three types of policy instrument: 1) financial incentives (‘carrots’); 2) regulations and guidance (‘sticks’); and 3) initiatives to support the dissemination of information (‘sermons’). This recommended policy mix highlights the importance of striking a balance between financial and non-financial policies, and ensuring coverage across all innovation system functions.