Smart local energy finance report outlines roles for crowdfunding of Smart Local Energy Systems (SLES)
7 July 2023
Citizens could directly fund some elements of emerging smart local energy systems, says a recent report by Tyndall researchers Tim Braunholtz-Speight and Maria Sharmina, and Jeff Hardy of Sustainable Energy Futures.
Smart local energy systems (SLES) promise efficient decarbonisation through involving energy users in matching energy generation and use at local or regional scales – minimising costly national-scale infrastructure upgrades. The SLES approach shares an emphasis on decentralisation and public participation with citizen finance (crowdfunding or community shares). Could they be used together? The researchers interviewed energy finance professionals, and analysed quantitative data (including a Coops UK survey of community shareholders) to better understand what part, if any, citizen finance could play in funding SLES; and what impact it might have on the distribution of financial benefits from the energy transition
The study finds that citizen finance is well suited to funding less risky elements of smart local energy systems, typically renewable electricity generation projects costing less than £5m. Citizen investors may tolerate slower returns than commercial finance, enabling more projects to go ahead. More novel and complex projects are less suitable for citizen investors: yet as the financial profiles of SLES projects become better understood, the scope for citizen finance may grow. Notably, one citizen-funded 20MW battery project is already in development.
Can citizen finance make investing in SLES accessible to local residents and/or people who could not otherwise afford to invest in an energy company? The researchers also found that citizen finance can certainly engage local investors, but is likely to also rely on investors from further afield. And people on low incomes have bought community energy shares, but most investment is from those in the middle to upper income bands. Citizen finance therefore has a role to play in a just transition, but is not a panacea.
The research was also presented at the People, Place and Policy 2023 conference.