The results from the study show that that the major economic and financial challenges facing CRE groups before 2016 were the difficulties involved in finding viable sites, and the challenge of fundraising with a lack of consistent financial support.
As Figure 4.12 indicates, identifying viable sites for renewable energy installation was extremely challenging for 28% of groups that took part in the study. However, another 40% of respondents claimed that this was less challenging and 29% did not find it a challenge at all. 1This hurdle was particularly problematic for rooftop solar PV projects which generated
between 51 kW and 500 kW of energy. This is perhaps due to the volatile property market, the complexity of tenure, and the unstable lifespan of commercial building stock. The likelihood of a CRE business model being able to scale up a project is dependent upon a site being available to host RE technology for a period of 20 years. Therefore, for community- based solar PV projects, viable sites were more likely to be on non-domestic roofs, and sites that are owned by a single entity, due to the long-term commitment needed and the high cost of the feasibility study and legal fees.
The further investigation shows that finding viable installation sites for CRE projects was a particular challenge for those set up in London and South East England, but less challenging for solar projects which were located in Southwest England, Yorkshire and Humber. Collaboration between CRE groups and local authorities, particularly in Southwest England, has provided an opportunity for projects to install technology on locally-owned buildings, such as schools and community centres. For example, community-based solar PV projects have developed significantly in Bristol as a result of active support from Bristol City Council,
1 The main reasons why identifying sites was less challenging for some groups has been explained in more details in the
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and the opportunity to use their buildings for installation.
A respondent from a small-scale community-based solar organisation in England specified that in addition to all of the previous reasons, a lack of engagement within the community and residents of host buildings was one of the main difficulties in locating a viable site for installation.
“There was a range of reasons why some organisations (including schools) did not want to be part of the project... some were simply not interested in the idea of saving energy and carbon, and therefore saving on their electricity bill. Others were interested, but it was not a priority for their organisation, so they did not take the time to consider this opportunity."
While there were various sources of funding available (i.e. the Government and other commercial and social sources), this study has shown that fundraising was the second extreme challenge facing CRE groups (Figure 4.12) and 25% of respondents stated that it was an extremely challenging hurdle to overcome.
Figure 4.12: Economic and Financial Challenges Facing the UK’s CRE Groups
Potentially due to the high risk involved in taking out of a large loan to fund the project, some 0 5 10 15 20 25 30 35 40 Finding viable
sites Fundraising Lack of financialsupport Access and useavailable government funding Finding investor(local shareholders) 28% 25% 25% 25% 17% 40% 57% 48% 44% 47% 29% 14% 17% 21% 25% 3% 4% 10% 10% 11% Num be r of Go up s
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CRE groups have chosen to receive community benefit funds rather than take risks involving community investments (Haggett, et al., 2014).
It has also has been pointed out by Julian and Olliver (2014) that there is a lack of faith in small projects, and therefore banks are less likely to invest in CRE projects, preferring instead to opt for sole ownership, making it a challenge for CRE groups to raise funds.
This is illustrated by a feedback from a CRE intermediary organisation located in London that said:
“Developing our 230 kWp solar projects was more challenging than our 10 MW solar project, we started both scheme almost at the same time and finished our 10 MW earlier.”
Furthermore, the UK lacks a reliable financial support scheme, such as the likes of those which are in place in other European countries. In Germany KfW bank provides long-term lending at a 1% interest rate, which helps to reduce the risk involved in the deployment of community-based renewable energy. Simpson argues, in the UK this ‘could be assigned to Green Investment Bank, but it has not been’ (Simpson, 2013,pp4).
Figure 4.12 reveals that a lack of financial support during the development stages of projects was a major challenge for 25% of respondents, and somewhat challenging for nearly half. This was mainly caused by recent changes to UK RE policy, including the removal of tax incentives in November 2015, the drastic reduction in FIT rates in 2016, and also the withdrawal of Urban Community Energy Funding (UCEF) scheme in July 2016, which was notably very close to the data collection period for this study. UCEF provided funds for CRE projects to assess the technical and structural feasibility of their sites and pay for legal services to be put into place. Recent policy changes have made it very difficult for established groups, in particular solar PV and hydro organisations, to develop further projects, and virtually impossible for groups that are not yet established.
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Access to available Government funding such as UCEF and Rural Community Energy Funding (RCEF) was extremely difficult to gain for 25% of groups in the study, and somewhat difficult for 44%. This was challenging in terms of bureaucracy, as the application was a complex and time-consuming procedure. However, 21% of respondents did not find it particularly challenging to access Government funding.
Figure 4.12 indicates that finding investors (raising community share) was less of a challenge for CRE groups. This is possibly due to the emergence of co-operative share offers, and crowdfunding, which all provide an opportunity for individuals to invest in local energy generation projects (Julian and Olliver, 2014). Similarly, the emergence of intermediary organisations and online investment platforms allowed CRE organisations to raise funds and community share. Further statistical analysis shows that raising community shares was relatively manageable for CRE groups that were established between 2012 and 2015, as they were able to access to the Tax Relief scheme (SEIS and EIS) which was launched in 2012. These schemes increased the profitability of projects and encouraged communities to invest money in CRE projects. However, as of 30th November 2015, CRE groups were excluded from this scheme.
Institutional
Another huge challenge that faced CRE groups in this study was the lack of policy support and the difficulty of gaining planning permission.
Approximately half of the respondents found the lack of structured policy support extremely challenging. In-depth statistical analysis has revealed that the majority of projects which reported that lack of policy support was the most challenging barrier they faced, were established in 2009 or 2013.
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Figure 4.13: Institutional Challenges Facing the CRE Projects in this Study (pre-2016)
This can be explained by two main factors: the high grant dependency of CRE projects existing prior to the introduction of FIT in 2010, and the first reduction of FIT rates in 2012. However, projects which were established after 2014 could benefit from the Community Energy Strategy (launched in 2014 and updated in 2015) and the establishment of the Community Energy Unit which facilitated the formation of CRE projects after 2014.
Despite this, one of the respondents interviewed stated that:
“There is no sign of updating the Community Energy Strategy after renewable energy policy changes, and the status of the community energy unit within BEIS is currently blurry.” Also, another of the respondents interviewed stated that:
“Virtual abandoned community energy strategy has been restricted what community energy
can do.”
Whilst planning permission is expected to be a less challenging process for local RE projects, this study indicates that it was extremely difficult for over a quarter of respondents, particularly for CRE projects based in Wales. Almost half of the respondents found gaining
0 5 10 15 20 25 30 35
Lack of policy support Planning permissions 46% 26% 28% 45% 18% 20% 8% 8% Num be r of CRE Gr ou ps
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planning permission to be at least somewhat challenging. Planning permission was not expected to be a hurdle for all types of CRE projects, due to permitted development rights for renewable projects such as rooftop solar PV projects. However, the semi-structured interviews reveal that the major challenge for solar projects was in regards to leasing permission.
Planning permission for wind projects depends on the region where the wind farm is based within the UK. If the project is based in England and Scotland, certain wind turbines are permitted without planning permission, but they must be certified by the microgeneration certificate scheme (MCS). However, wind projects based in Northern Ireland and Wales require planning permission for any system (TheGreenAge Ltd, 2016).
Figure 4.14 Planning Permission Challenges by Type of Technology
Figure 4.14 shows, gaining of planning permission for hydro projects proved somewhat challenging due to the requirement of an environmental licence. An environmental licence involves the assessment of potential impact on the surrounding landscape, the nature conservation and the water regime (Planningportal, 2012).
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projects was not a major challenge. However, the Energy Act 2016 shifted the decision- making process for wind farms back to local planning authorities, rather than the previous Secretary of State, who originally dealt with wind farms with an energy output of over 50 MW (UK Parliament, 2016). This makes the process for large scale wind farm more difficult as they may face local opposition.
Cultural
Engaging the community with local energy generation is a vital to the success of any CRE project. Community engagement allows trust to build between individuals and the project itself, which in turn will help organisations source volunteers to participate in CRE projects.
Figure 4.15 Cultural Challenges Faced CRE Pin the UK before 2016
Over half of the respondents found it challenging to engage with the local community, as the process of building trust in a CRE project can take a long time. However, 31% of groups that participated in the study did not find this an issue.
Figure 4.15 shows, 61% of groups in the study did not experience any public opposition in 0 5 10 15 20 25 30 35 40 45
Community engagement Public opposition
7% 5% 57% 29% 31% 61% 5% 5% Num be r of CRE Gr ou ps
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the first stages of their projects’ development and only 29% found it challenging to engage
the local community. This shows that CRE projects in the UK face less public opposition compared to other types of renewable projects and indicates that having ownership and responsibility for renewable energy generation can increase trust in local energy projects and reduce opposition.
Technical
The main technical challenge that faced UK CRE projects was the issue of network connection. This challenge was recorded as a major obstacle for 19% of groups in the study, and in particular for wind and hydro energy projects. Network connection was not challenging for over a third of groups.
Figure 4.16 The Primary Technical Challenges Facing CRE Projects in the UK
One respondent who was involved in a non-active hydro project in Scotland stated that:
“We paid £42 K to [company] for grid connection in September 2014, to be connected in September 2016. However, a year before our grid connection was due, we were informed
0 5 10 15 20 25 30 35
Network Connection Technical Feasibility 19% 3% 34% 47% 37% 46% 10% 4% Num be r of CRE Gr ou ps
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that it would be postponed to 2020 because of network capacity issues. We were given the option of waiting until 2020, or getting connected with only 50 kW rather than 100 kW, as in the initial plans. This would have made raising money difficult and halved our income.” Technical feasibility does not appear to have been at major barrier for the majority of CRE groups; 46% of the groups reported that it wasn’t a challenge at all, and only 47% found it
somewhat challenging.
However, the semi-structured interviews conducted indicate that community-owned solar projects have faced other technical issues, such as the difficulty in installing export meters in host organisations like schools, and monitoring renewable energy production after installation.
One respondent from a community solar project in London stated that:
“Obtaining export meters for schools was very challenging and time-consuming because of the third-party ownership model of our projects”.