Community energy has grown across the UK in recent decades…

11 Sep 2018

In our latest paper we seek to understand the factors contributing to the emergence, growth and nature of community energy in the UK. Access the working paper in full.
Community energy initiatives have grown and spread across the UK since the late 1990s. While the exact size of the sector is not known, the latest research suggests that there are around 300 community organisations running active energy generation projects of some sort, and a range of others engaged in demand-side projects.
…and is part of a wider decentralisation of the UK energy system

In the UK’s centralised energy system, community energy groups have survived – and prospered – by creating a ‘niche’ within it, through learning, collaborating, and taking advantage of what opportunities do exist. These opportunities have largely come from shifts in government regulation, and technology development. During the last three decades, UK government policies have liberalised and privatised energy infrastructure and supply; energy technologies, particularly for renewable electricity generation, have also developed rapidly in terms of efficiency and cost. These changes have created an opportunity for small-scale energy generation companies. Community energy groups are among those that have taken this opportunity.

Renewable energy revenues have driven most community energy business models

What this means for community energy business models is that revenue has largely been provided by supply-side energy generation initiatives, rather than demand-side energy efficiency focused projects. Surplus revenues have been used to support a range of environmental and social projects, including energy efficiency and demand management activities. Grant funding has also been important for energy efficiency work, and for project start-up costs in general: however, the largest single step forward for community energy was the introduction of government revenue payments, in particular the Feed-In Tariff Scheme (FITS) in 2010. This was the first government price support mechanism aimed specifically at smaller scale renewables.

…but recent policy shifts have slowed down new activity

The publication of the government’s Community Energy Strategy, in 2014, marked a high point for community energy. More recently, political change at UK level has seen the FITS and other public policies become much less supportive of community energy. New community renewables activity has slowed down considerably.

This is unsurprising: central government plays a major role in structuring the UK energy market. If new actors are to enter this market and thrive, they will need government to ‘unlock’ it to a degree. As energy projects are characterised by high upfront capital demands and long payback times, market, and therefore policy stability is crucial for de-risking investment.

Yet community energy has strengths - and opportunities

Nevertheless, this is unlikely to be the end of the community energy story. Firstly, the sector is much stronger now than before the advent of FITS. It is larger; established projects’ revenues are generally secure; and the sector is increasingly developing economies of learning, enabling some additional community renewables projects to go ahead despite pressure on cost margins.

Secondly, there are new opportunities to seize. The recent creation of the Innovative Finance ISA may unlock finance on a greater scale, if suitable projects become available. The Clean Growth Strategy offers an opportunity to engage with policy. In Scotland and Wales, devolved policy actors continue to offer support for community energy.

The energy market is changing and technology is changing too, especially in the areas of energy storage and demand-management technology. There is also renewed interest in energy from local authorities; synergies between ‘civic’ and ‘community’ energy actors have been recognised in projects in Plymouth, Swansea, and Edinburgh, among others.


Two points seem clear. First, the sector is still in flux and not yet coalescing around a ‘new normal’. Therefore, our research into how the technological, regulatory, customer, financial, and other resource elements of community energy business models might be viably combined is timely.

Second, despite some excellent studies cited in this report, our research to date confirms the paucity of good quality and comprehensive quantitative data and analysis on the financial and economic side of community energy. It is notable that Community Energy England have also recently begun to address this gap through their annual State of the Sector survey, and we are working closely with them in order to maximise the use of our shared data. We hope that the next stages of our research will go some way to filling this gap and providing knowledge that can be used to support the future success of the community energy sector.