Energy schemes crowdfunding urged

"Crowdfunding" schemes which allow people to invest as little as £5 could help boost community-based energy developments, a report has suggested.

The sun setting over wind turbines near Faringdon, Oxfordshire.
The sun setting over wind turbines near Faringdon, Oxfordshire.

But better regulation and greater incentives should be introduced to allow people to invest in small-scale energy businesses, the research by think-tank ResPublica said.

Major banks are failing to lend to community energy projects, but more innovative forms of funding could fill the gap to get local hydropower, wind turbines, solar arrays and renewable heating systems off the ground.

Crowdfunding, in which a project is funded by raising small amounts of money from a large number of people, has already raised large amounts of money for thousands of projects worldwide.

In the UK, £5.2 million has been invested in renewable energy schemes through Abundance Generation alone, a platform founded in 2011 which links up people and businesses to raise money for their projects.

The ResPublica report said seven projects had attracted an average investment of £1,500 per investor, with many investing as little as £5.

Many projects are also being funded or part-funded by local share offers, helping energy co-operative schemes get off the ground. Since August 2013, more than 40 share offers had raised £17 million from almost 10,000 investors.

In early 2014, there was 66 megawatts (MW) of installed community energy and 200MW in development - just 0.4% of the UK's total renewable energy capacity, but ResPublica said it could grow by 89 times that size with the right support and infrastructure.

Tax relief should be opened up to a wider range of businesses with a social purpose, tax-free savings via ISAs should be extended and financial regulation should allow smaller and more innovative crowdfunding and "peer-to-peer" initiatives to thrive, the think-tank urged.

Caroline Julian, head of research at ResPublica, said: "Community energy groups suffer disproportionately from dwindling levels of lending to small and medium sized enterprises (SMEs) in the UK.

"As small and start-up ventures, they need additional support. Crowdfunding has opened up a whole new market of investors, and has revealed a range of new ways to invest in something good and that offers a reasonable return.

"We now need a policy and regulatory framework that can further tap into this opportunity," she said.