Evaluating innovative business models for community energy businesses
Power to Change’s Next Generation programme aims to support the development of innovative business models for community energy businesses. CAG Consultants was commissioned to produce an independent evaluation of the innovation programme; the findings from Year 2 of their evaluation has now been published.
Support and funding from the Next Generation programme has enabled Community Energy Businesses (CEBs) to take risks in developing new business models that are not dependent on Feed-in-Tariff (FiTs) subsidies. Being involved in the programme has built the skills and knowledge within 11 innovation groups, helping them to get to grips with potential new areas of work, including electric vehicle (EV) chargepoints, LED lighting, heat pumps and flexibility services. Most of the new business models explored through the programme aim to delivery community benefit directly (e.g. through low carbon heat or transport interventions) but they currently appear likely to generate less surplus for CEBs than earlier FiTs-supported business models. Innovative business models supported by the programme also involve more complexity and risk than earlier CEB investments in subsidised renewable energy.
The report summarises current findings on a number of emerging business models that are potentially viable for CEBs, within and beyond the Next Generation programme. Many of these require further support to achieve viability:
- Business models identified as being potentially viable at present include mid-scale renewable generation for onsite use or private wire, large-scale renewable generation and data co-op initiatives.
- Business models currently facing some uncertainties and limitations but identified as priorities for further investigation include energy efficiency retrofit, flex communities, solar PV plus EV investments, EV car clubs, renewable heat (both domestic and non-domestic) and domestic roof-top solar.
- More complex business models that currently appear more risky and only suitable for larger and more experienced CEBs include community-owned/operated low carbon energy systems in new housing developments, loan schemes for energy efficiency work (including LEDs) and Energy Service Company initiatives (ESCOs) working with schools.
The report also identifies a number of policy and regulatory changes that would help to make more CEB business models viable. These include:
- Clarifying the eligibility of multiple-occupancy properties for renewable heat subsidies, via BEIS’ Boiler Upgrade Scheme or other post-RHI support;
- Encouraging the Financial Conduct Authority to offer a scaled-down version of loan accreditation for small schemes run by community groups;
- Streamlining approval processes for solar PV on school roofs;
- Reducing restrictions on peer-to-peer trading of renewable electricity;
- Ensuring that Ofgem considers implications for CEBs in its targeted charges review and makes sample meter data more widely accessible to CEBs;
- Encouraging the Energy Network, Distribution Network Operators (DNOs) and Ofgem to consider social value in energy system decision making.
More generally, the report recommends that BEIS, Ofgem, DNOs, innovation agencies and funding bodies use learning from the Next Generation programme to inform the design of future innovation support for community groups seeking to take action on energy and climate issues. For example, the evaluation has developed an ‘innovation journeys model’ for CEBs, adapted from the Carbon Trust’s ‘four journeys’ model (2009), which could be used to assess the status of CEB innovation projects.
In addition to the report, a range of learning resources have been published as part of CAG’s evaluation work, including most recently:
- A video on Tisbury electric car club, run by Nadder, one of the innovation projects supported under this programme.
- Two videos about another project supported through Next Generation, Kent Community Energy, demonstrating some of the social benefits that community energy projects can support: the first video focusses on Emmaus Dover and the second on Canterbury Umbrella.
Further findings will be made available in the Year 3 report, at the end of the Next Generation programme.
Further details on the Innovation programme can be found here.