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Business models and financial characteristics of community energy in the UK

Author

Listed:
  • Tim Braunholtz-Speight

    (University of Manchester)

  • Maria Sharmina

    (University of Manchester)

  • Edward Manderson

    (University of Manchester)

  • Carly McLachlan

    (University of Manchester)

  • Matthew Hannon

    (Hunter Centre for Entrepreneurship, University of Strathclyde Business School)

  • Jeff Hardy

    (Grantham Institute, Imperial College London)

  • Sarah Mander

    (University of Manchester)

Abstract

Community energy projects take a decentralized and participatory approach to low-carbon energy. Here we present a quantitative analysis of business models, financing mechanisms and financial performance of UK community energy projects, based on a new survey. We find that business models depend on technology, project size and the fine-tuning of operations to local contexts. Although larger projects rely more on loans, community shares are the most common and cheapest financial instrument in the sector. Community energy has pioneered low-cost citizen finance for renewables, but its future is threatened by reductions, and instability, in policy support. Over 90% of the projects in our sample make a financial surplus during our single-year snapshot, but this falls to just 20% if we remove income from price guarantee mechanisms, such as the Feed-in Tariff scheme. Renewed support and/or business model innovations are therefore needed for the sector to realize its potential contribution to the low-carbon energy transition.

Suggested Citation

  • Tim Braunholtz-Speight & Maria Sharmina & Edward Manderson & Carly McLachlan & Matthew Hannon & Jeff Hardy & Sarah Mander, 2020. "Business models and financial characteristics of community energy in the UK," Nature Energy, Nature, vol. 5(2), pages 169-177, February.
    • Handle: RePEc:nat:natene:v:5:y:2020:i:2:d:10.1038_s41560-019-0546-4
    DOI: 10.1038/s41560-019-0546-4
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    Cited by:

    1. Nuñez-Jimenez, Alejandro & Mehta, Prakhar & Griego, Danielle, 2023. "Let it grow: How community solar policy can increase PV adoption in cities," Energy Policy, Elsevier, vol. 175(C).
    2. Fuentes González, Fabián & Webb, Janette & Sharmina, Maria & Hannon, Matthew & Braunholtz-Speight, Timothy & Pappas, Dimitrios, 2022. "Local energy businesses in the United Kingdom: Clusters and localism determinants based on financial ratios," Energy, Elsevier, vol. 239(PB).
    3. Karami, Mahdi & Madlener, Reinhard, 2022. "Business models for peer-to-peer energy trading in Germany based on households’ beliefs and preferences," Applied Energy, Elsevier, vol. 306(PB).
    4. Herbes, Carsten & Rilling, Benedikt & Holstenkamp, Lars, 2021. "Ready for new business models? Human and social capital in the management of renewable energy cooperatives in Germany," Energy Policy, Elsevier, vol. 156(C).
    5. Hampton, Harrison & Foley, Aoife, 2022. "A review of current analytical methods, modelling tools and development frameworks applicable for future retail electricity market design," Energy, Elsevier, vol. 260(C).
    6. Marta Bottero & Federico Dell’Anna & Vito Morgese, 2021. "Evaluating the Transition Towards Post-Carbon Cities: A Literature Review," Sustainability, MDPI, vol. 13(2), pages 1-28, January.
    7. Fuentes González, Fabián & Webb, Janette & Sharmina, Maria & Hannon, Matthew & Pappas, Dimitrios & Tingey, Margaret, 2021. "Characterising a local energy business sector in the United Kingdom: Participants, revenue sources, and estimates of localism and smartness," Energy, Elsevier, vol. 223(C).
    8. Li, Pei-Hao & Barazza, Elsa & Strachan, Neil, 2022. "The influences of non-optimal investments on the scale-up of smart local energy systems in the UK electricity market," Energy Policy, Elsevier, vol. 170(C).
    9. Lin, Boqiang & Li, Minyang, 2024. "Micro Mechanisms Driving China's Clean Energy Flourish: Business Expansion and Financing," International Review of Financial Analysis, Elsevier, vol. 92(C).
    10. Dioba, Albina & Giannakopoulou, Amalia & Struthers, David & Stamos, Angelos & Dewitte, Siegfried & Fróes, Isabel, 2024. "Identifying key barriers to joining an energy community using AHP," Energy, Elsevier, vol. 299(C).
    11. Windemer, Rebecca, 2023. "Acceptance should not be assumed. How the dynamics of social acceptance changes over time, impacting onshore wind repowering," Energy Policy, Elsevier, vol. 173(C).
    12. Shahid Ali & Qingyou Yan & Muhammad Sajjad Hussain & Muhammad Irfan & Munir Ahmad & Asif Razzaq & Vishal Dagar & Cem Işık, 2021. "Evaluating Green Technology Strategies for the Sustainable Development of Solar Power Projects: Evidence from Pakistan," Sustainability, MDPI, vol. 13(23), pages 1-29, November.
    13. Maksym Koltunov & Simon Pezzutto & Adriano Bisello & Georg Lettner & Albert Hiesl & Wilfried van Sark & Atse Louwen & Eric Wilczynski, 2023. "Mapping of Energy Communities in Europe: Status Quo and Review of Existing Classifications," Sustainability, MDPI, vol. 15(10), pages 1-25, May.
    14. Bauwens, Thomas & Schraven, Daan & Drewing, Emily & Radtke, Jörg & Holstenkamp, Lars & Gotchev, Boris & Yildiz, Özgür, 2022. "Conceptualizing community in energy systems: A systematic review of 183 definitions," Renewable and Sustainable Energy Reviews, Elsevier, vol. 156(C).
    15. Zhang, Xian & Wang, Jia-Xing & Cao, Zhe & Shen, Shuo & Meng, Shuo & Fan, Jing-Li, 2021. "What is driving the remarkable decline of wind and solar power curtailment in China? Evidence from China and four typical provinces," Renewable Energy, Elsevier, vol. 174(C), pages 31-42.
    16. Arias-Rosales, Andrés & LeDuc, Philip R., 2023. "Urban solar harvesting: The importance of diffuse shadows in complex environments," Renewable and Sustainable Energy Reviews, Elsevier, vol. 175(C).
    17. Arias-Rosales, Andrés & LeDuc, Philip R., 2022. "Shadow modeling in urban environments for solar harvesting devices with freely defined positions and orientations," Renewable and Sustainable Energy Reviews, Elsevier, vol. 164(C).

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