Financing Community Energy Case Studies : Brighton and Hove Energy Services (BHESCo)

Cairns, Iain and Hannon, Matthew and Braunholtz-Speight, Tim and McLachlan, Carly and Mander, Sarah and Manderson, Edward and Sharmina, Maria and Hardy, J. (2020) Financing Community Energy Case Studies : Brighton and Hove Energy Services (BHESCo). University of Strathclyde, Glasgow. (https://doi.org/10.17868/69790)

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Abstract

This report presents the final of four case studies of UK community energy organisations conducted during 2018/19, which will later be included as part of a synthesis briefing alongside a series of sector-level interviews. The case study makes use of a combination of qualitative (e.g. interviews, organisation reports) and quantitative (e.g. financial reports) data. Summary of key lessons includes: Energy efficiency and heating services can constitute a core offering of community groups. Unlike many other community organisations, BHESCo has been able to develop a compelling value proposition, centred on delivering affordable comfort and warmth, through a combination of efficiency and generation measures. By employing a Pay As You Save model, it has unlocked a previously untapped revenue stream for communities, which importantly is less reliant on generation subsidies such as the Feed-in-Tariff (FiT). However, we find the model is limited in its ability to assist the fuel poor, who cannot be expected to share any cost savings generated, and tenants of rented properties where landlords are uninterested in investing in energy savings. Financing a serviced based model presents uncommon challenges in the community energy sector. Compared with other community energy groups, BHESCo’s investors must consider higher operating costs, on-going capital needs and a more complex offering, based on its business model rather than a singular asset. However, BHESCo has negotiated these challenges deftly and is open to alternative approaches, involving blended finance and working in consortia, as it explores potential larger scale projects. The complexity of BHESCo’s business model presents both advantages and disadvantages. On the one hand, its relative complexity makes the venture less dependent on any single technology, customer, revenue stream or subsidy (such as the FiT), versus most other community energy groups. This helps to insulate the organisation from market and policy shocks. On the other hand, the complexity of BHESCo’s business model and the novelty of its proposition mean it has taken time to mature as a venture. For a time, it relied strongly on grants and the commitment of its key founder and CEO. The adoption of the bona fide co-operative legal structure stems from both financial and ethical considerations. A co-operative model was adopted largely as a means of raising relatively low cost community shares. This was largely a reaction to a lack of affordable finance being offered to community-led energy efficiency oriented businesses like BHESCo, even from ethical investors. Beyond finance, the co-op model was also selected on ethical grounds. Specifically, the cooperative model's 'one shareholder-one vote' model provides a broader distribution of power versus the 'one share-one vote' model employed by companies limited by shares. Furthermore, the absence of an asset lock provides its citizen investors with the option that assets can be liquidated to pay back their investment.

ORCID iDs

Cairns, Iain ORCID logoORCID: https://orcid.org/0000-0003-0753-9589, Hannon, Matthew ORCID logoORCID: https://orcid.org/0000-0002-7811-3991, Braunholtz-Speight, Tim, McLachlan, Carly, Mander, Sarah, Manderson, Edward, Sharmina, Maria and Hardy, J.;
CORE (COnnecting REpositories)