A new toolkit launched at this week’s Community Energy Congress in Melbourne aims to make it easier to establish and finance locally owned renewable energy projects.
Developed by Frontier Impact Group in collaboration with community groups including Sydney’s Pingala, it lays out the various governance structures and steps to obtaining financing for projects.
Managing director of Frontier Impact Group Jennifer Lauber Patterson said soaring energy prices meant the economics “stack up” even more attractively for communities.
Currently, there are more than 50 community-owned energy projects up and running, and demand for projects from local government and community groups is growing, Ms Lauber Patterson said.
The major barrier groups have come across has been obtaining financing and understanding the “complex financial models”.
Addressing this by increasing financial literacy and therefore the likelihood of successful capital raising for projects is a core aim of the toolkit.
The Australian Renewable Energy Agency funded the initiative with a $296,000 grant. Development was also supported by a steering group that included representatives of ARENA, the NSW government, Community for Clean Energy, the Clean Energy Finance Corporation, Community Power Agency and Embark.
The kit comprises two guidebooks, a Funding Basics Guidebook and a Behind the Meter Solar PV Guidebook. Two case studies have also been incorporated – Young Henry’s Pub PV project and Repower Shoalhaven’s PV installation on a local bowling and recreation club.
“If the toolkit had been available when we first started our project it would have fast tracked it significantly,” Pingala’s Tom Nockolds said.
“We used it at a later stage of the project and it still assisted us in validating our own financial modelling at a lower cost that would have otherwise been possible.”
Ms Lauber Patterson said a lot of funding for community energy projects was initially sourced from grants, for example Victoria’s New Energy Jobs grant scheme.
Those projects have value in terms of developing a template for the governance and project pathway process that can be used by others, she said.
However, she would rather that new projects be able to mobilise themselves without grants. One possibility is volunteer investment.
For example, Hepburn Wind attracted a high wealth individual who put up a guarantee against the project’s loan. Sydney’s Clear Sky Solar attracted more individual small investors wanting to financially contribute than it needed.
The drivers of community renewables
The appetite for investing in community energy had three major drivers, Ms Lauber Patterson said.
One is that the community “wants energy security”; number two is “why pay the energy retailer when you can earn a return for the communities?”
Number three is that there are communities that want to see action on climate change and want to make a difference.
She said how attractive a project was to investors depended on the community’s expectations around returns.
The toolkit looks at the risks for investors in the projects.
“Some are happy to earn less than five per cent returns, others want between six and 10 per cent,” she said.
Returns like that are attractive to those that are gaining lower interest on money in the bank than they would get from investing it in community energy. Currently, the majority of established projects are returning more than five per cent, and “a few appear to be very commercial” in terms of returns.
A better proposition than stocks?
In terms of risk, it could be a better proposition than the stock market, she said.
“This is less risky than shares because even if we have another [global financial crisis], the energy is still going to be needed.”
Appetite is also influenced by the structure chosen for governance. Options include setting up a community corporation, a trust or an incorporated entity.
The whole sector has become “quite sophisticated”, she said.
“There are a lot of different mechanisms out there and frameworks to enable community to put their own funds into it.”
Ms Lauber Patterson said the concepts in the kit could also be valuable for property developers undertaking precinct-scale or estate developments.
Behind-the-meter solar makes sense
Whether a development is an estate or a building, she said doing “behind the meter” solar made sense.
Not only does it mean energy is generated on-site and does not need to be transported to site, it could also give those developers a competitive edge.
“I don’t understand why most properties don’t have solar,” Ms Lauber Patterson said.
“The economics stack up. I think it would be a huge commercial edge for property developers.”
This is particularly true now with a level of volatility in the energy market that she hasn’t seen in the past 20-plus years.
In some of the less heated capital city markets, such as Brisbane, she said there is “huge interest” from the market, particularly with the council’s carbon neutral policies setting an agenda.
“We’re all moving down this track now. People understand the benefits, and once you get energy prices like we have, the incentive is there. There is more focus around reducing emissions and energy costs.
“The costs stack up; the economics stack up.”
Smart developers are getting on board
Ms Lauber Patterson said “smart developers” were increasingly trying to maintain an edge through technology.
There could be other incentives also.
“I think councils are going to get tough,” Ms Lauber Patterson said.
“As climate change becomes more of an issue, if councils can see a developer is doing things in a more sustainable way, the development may have an easier path to approval.”
She said there has been significant demand for the development of workshops to roll out the toolkit, and this will be the next step.
“Our thoughts are to develop community champions in utilising the toolkit so that financial literacy is increased and solar projects can be rolled out in shorter timeframes and at lower cost,” she said.
There are also potentially other guidebooks in the pipeline. Ms Lauber Patterson said there has been demand from community groups for guidebooks to explain grid-connected solar PV, bioenergy, wind projects and energy storage projects.