Financing community energy case studies: Edinburgh Community Solar Cooperative

Commencing in 2016, the Financing Community Energy project provides a comprehensive quantitative and qualitative analysis of the role of finance in the evolution of the UK community energy sector.

This report presents the first of four case studies of UK community energy organisations, exploring how these organisations have sought to finance their projects against a backdrop of diminishing government support for grassroots sustainable development.

Overview of case study

Edinburgh Community Solar Cooperative (ECSC) is a Community Benefit Society (BenCom). Its objectives are a combination of environmental and social, with an explicit focus on reducing emissions, alleviating fuel poverty, improving energy security and promoting sustainable development education.
ECSC quickly settled on renewable power generation as a means of delivering this combination of environmental and social value. Today it operates 1.4 MW of solar PV panels on the roofs of 24 council-owned properties in Edinburgh, including schools, leisure centres and community halls.

The buildings’ owner – the City of Edinburgh Council – purchases the electricity and any excess is sold to the grid. It also raises substantial income through the Feed-in-Tariff, equating to approximately £190,000 per annum. Any surplus revenue is recycled into other local sustainability-related initiatives via its Community Benefit Fund; another means of delivering on its objectives. The vast majority of ECSC’s capital costs were covered through the £1.5m it raised in community shares, with approximately another £300,000 raised in loans.

A key challenge for ECSC was that a high proportion of Edinburgh’s population live in tenement flats, with very limited private or communal land, which residents could use to generate renewable power. Whilst there was still significant roof-space for solar PV installations, a lack of access to rooftops made this difficult to use. Rooftop solar PV on these tenements generally required the consent of all apartment owners and possibly also building management companies. Furthermore, not all tenement blocks are suitable for solar PV generation, due to their pitch, aspect etc., meaning that only people living in suitable properties could have benefitted.

ECSC’s solution has been to deploy cooperatively owned solar PV panels on the roofs of publicly owned buildings. This circumvented the difficulties of installing solar PV on privately owned tenement buildings, whilst creating the opportunity for local residents to join the cooperative for the price of a community share. As one founding member explains:

“Edinburgh’s quite a high-density city, everybody lives in a flat… So, the idea that you could own a solar panel for £250 was quite attractive for people in tenements”.

Key lessons

• The ability of community energy organisations to raise community finance is underpinned by government subsidies. Price guarantees like the Feed-in-Tariff have provided ECSC with a long-term guaranteed revenue stream. These have in turn de-risked ECSC’s renewable energy projects. Their removal has now however presented potential future investors with a less attractive proposition, likely closing down an important stream of finance.
• Local authorities are a key facilitator of community energy projects. In the case of ECSC, the local council purchased the power generated from its solar PV and also provided the building roof space to enable this power to be generated. The latter is highly dependent on the extent to which the procurement process and council leadership values locally supplied, low-carbon energy from not-for-profit organisations.
• Intermediaries are a key provider of economic, technical, social and political capital to community energy organisations. For ECSC the intermediary project developer Energy4All has been central to its success. It used its extensive experience of establishing other energy cooperatives to inform the design of ECSC’s business model, whilst also managing the day-to-day running of ECSC. Most importantly, Energy4All facilitated the raising of both share and loan finance, acting as a gatekeeper to a wider community energy investor community.
• Choices around legal structure have an important bearing on the financing and governance of a community energy organisation. For ECSC the primary reasons for establishing a BenCom was mostly grounded in ECSC’s appetite to raise community shares. However, other factors were also influential, such as incorporating ‘community benefit’ into the legal entity and because if it were legally constituted as a private or commercial enterprise it would be ineligible for some key government funding.