Options for funding your community energy project

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1 Options for funding your community energy project This resource provides an overview of the funding options that can be considered for community projects doing at least one of: Advising householders on how to fund improvements to their homes Setting up energy efficiency projects to make improvements to multiple homes in an area Whatever your project, before starting to look for funding you need to be clear about exactly what you need money for, and have a reasonable idea of the breakdown of your costs. This is partly so you can make sensible decisions about how to go about raising funds, and also because almost any funder will want to see that you have done this kind of planning. Note there is a difference between seeking funding for your project and sourcing finance for a viable (and income generating) enterprise. There are other resources on finances for community energy projects within PlanLoCaL, including Identifying realistic sources of finance, Bank finance and Understanding Green Deal Finance and ECO. Funding energy efficiency improvements or funding your energy efficiency project? When thinking about funding for your plans, it is important to make a distinction between funding for the energy efficiency improvements themselves and funding for a project to work in your community to help secure these improvements. With Green Deal, ECO and a number of Government-backed initiatives designed to help fund energy efficiency improvements in public buildings, there is a range of funding mechanisms and sources of finance for building owners to make improvements. These sources tend to have been developed to overcome well-documented obstacles to funding energy efficiency improvements. In the case of both Green Deal and ECO, they have associated customer benefits (such as Government cashbacks) which are not necessarily available for improvements undertaken outside of the Green Deal or ECO funding systems. The role of a community-led project is therefore typically more about helping building owners access these mechanisms and sources for themselves than trying to develop separate sources of funding for the improvements (see A cautionary note below). That said, there are some other possible sources of funding for the energy efficiency improvements which building owners could be directed towards (such as home improvement loans or mortgage extensions) and these are described briefly here. The challenge for a community group is how to fund its own activities to help building owners particularly householders to access the available mechanisms and sources of funding for energy

2 efficiency improvements. There are many possible sources of funding for this (as there are for many other community activities). There are also potential opportunities to earn referral fees from companies offering energy efficiency improvements and/or Green Deal Assessments by collecting details of potential customers, particularly where they have already had the scheme explained to them and are interested in taking part. The different options are described below. A cautionary note It is important to note that, unlike community-led renewable energy projects where a variety of financing approaches such as community share issues and bank project finance have been successfully applied, there is not a set of ready examples of community-led energy efficiency projects which have secured this sort of independent, enterprise-oriented financing. This is not for want of trying. Neither are there ready examples of commercially-financed and private sector-led domestic energy efficiency projects. This is also not for want of trying; financing domestic energy efficiency projects is very challenging. There are many ideas to solve this which are being actively discussed and promoted across the community energy sector, such as setting up Community Energy Service Companies (ESCos); creating community or Local Authority-backed energy efficiency loan funds; or running community share issues to raise investment finance for community energy efficiency schemes. However, these ideas have yet to be fully developed as social enterprise business propositions that have been applied and tested in practice. This is not to say that such ideas will not come to fruition, particularly given changes in the energy efficiency market which will result from the introduction of the Green Deal and ECO. But it is too early to say whether or not the ideas will prove to be viable, financially sustainable approaches. It would therefore not be appropriate for them to be presented here as genuine opportunities for community groups to replicate. If these ideas do come to fruition, details will be available on and please do inform us if you are involved in such a breakthrough! Other sources of funding for energy efficiency improvements For householders, the Green Deal represents a breakthrough in providing loans for energy efficiency improvements to homes, taking future energy bill savings and making them available as capital to invest in energy efficiency improvements in the home. The way that Green Deal finance works is explained more fully in the PlanLoCaL resource Understanding Green Deal Finance and ECO. However, not every household will want to use this sort of finance. They may prefer to extend their own mortgage or take out a loan with their own bank or another institution. While a community group would be very unlikely to be able to influence the availability of that sort of finance for the householder, they may be to link up with and promote a local or regional home improvement loan programme (e.g. Wessex Home Improvement Loans). These are often set up through Local Authorities or Credit Unions so they vary

3 in different parts of the country and sometimes they are able to charge lower-than-market interest rates for more vulnerable households. For non-domestic buildings, there are various low interest loans available through different schemes, so it s worth some extra research in your local area. Some of the key ones are: SALIX finance is DECC funded and supplies zero or low interest loans to public sector organisations for the cost of energy efficiency improvements to their buildings. The Carbon Trust also offers low interest loans both to the public and private sector to fund improvements in building energy efficiency. The Rural Community Buildings Loan Fund is managed by Action with Communities in Rural England and provides loans of up to 20,000 for measures that increase the energy efficiency of community buildings. For further advice on funding for making energy efficiency improvements to community buildings, see the PlanLoCaL resource: Funding for energy efficiency improvements in community buildings. Funding your community group activities: grants and other charitable funding A separate PlanLoCaL resource, Grants and other charitable funding, explains the difference between charitable grants, government funding, company giving, in-kind funding and venture philanthropy and gives contact details for some key funding organisations and funding databases. To identify grants and funds, your local council / Local Authority, or the Council for Voluntary Service (CVS) should be aware of local opportunities. You can find your local council here: and your CVS here: The Charities Aid Foundation also lists funds: The Big Lottery Fund at has many different funding approaches, including small grants for community projects. There are a range of web based databases which can be used to identify potential sources of funding which you generally have to pay to use. However, libraries and community and volunteer support organisations may hold licenses to carry out funding searches on your behalf. The Directory of Social Change provides an overview of the main funding websites you can subscribe to, one of which is which holds a listing of trusts and foundations that award funds. Unless you are in touch with an organisation that is already subscribed, you need to pay for full access to this. Some grants, or other types of financial support, are available for specific types of buildings or locations. For example, there may be ring-fenced funding available for projects in conservation areas, in locations close to landfill sites, or for communities that fall into a particular ward or area which has been singled out for additional European, Central Government, Local Authority or other funding. Some more examples are given in the PlanLoCaL resource: Funding for energy efficiency improvements in community buildings.

4 When applying for any kind of grant, always check the criteria to make sure you re eligible (if necessary contact the funder directly) before putting time into an application that might be a waste of everyone s time. All funds are subject to changes so don t assume a fund is static in the projects it will consider, or that a closed fund will not run another round of funding awards in future. Donations and fundraisers Local fundraisers Depending on the amount of money you need to raise to implement your plans, you may be able to generate some or all of it via local fundraising. This could include donations from local people or groups, business sponsorship, or any number of fundraising activities (such as local fêtes, benefit gigs, cake sales, sponsored runs, and so on). If you also apply for grant funding, showing that you have already raised some of the money yourselves may help. Crowd funding There are more and more web based funding mechanisms which can be used to attract donations or investments from individuals or organisations.this could be easier than traditional fundraisers (mentioned above) to promote via the internet and easier to manage since payments are usually made electronically. However, success relies quite heavily on access to wide networks of people. There are a huge number of crowd funding platforms which can be broadly categorised into equity-based, lending-based, rewardbased and donation-based. If you are linking your energy efficiency project to a renewable energy project there are more options open to you (for example, and Some examples of crowd funding websites which could work for energy efficiency projects: Crowd Funder Microgenius Peoplefund.it Indiegogo Spacehive You should bear in mind that some of these are designed for raising investment in business enterprises for an investment return rather than community activities for philanthropic purposes, though this is a fastdeveloping field and new approaches are frequently emerging. Householder donations from Green Deal cashbacks Under the Government s Green Deal cashback scheme for 2013 and 2014, a householder receiving a cashback from a Green Deal Provider for installing Green Deal measures has the option when applying for the cashback to donate some or all of that money to a registered charity or Community Interest Company (CIC). In order to participate in this cashback donation scheme, your organisation must be a registered charity or CIC and you must register your organisation s details with the Green Deal Cashback Scheme administrator at

5 If your community group is not a registered charity or CIC, there may be charities or CICs prepared to receive donations on your behalf and transfer them to you (though at the time of writing and the launch of the cashback scheme (January 2013) this sort of clearing house was not available). To make this cashback-based donation scheme work for your group, you will need to think about how you market this opportunity in your area and whether you will need to provide support and help to the householders in return for them agreeing to make the donation in this way. It may be that householders will be more willing to make the donation if it is clearly earmarked for a specific charitable purpose (such as providing support and advice to more vulnerable households in the community) rather than if it is presented as a payment for your group s help to them in accessing the Green Deal. Funding your community group activities: referral fees for Green Deal and ECO Finding householders interested in taking up Green Deal and/or ECO and installing energy efficiency improvements is a task for which Green Deal Providers, Green Deal Advice Organisations, accredited installers and energy suppliers are likely to need help. Alongside their marketing budgets and brand-building spend, a number of these companies will be willing to pay money for referrals to their schemes. This will be true for referrals of interested households in general and of specific types of lower income and vulnerable households which qualify for the ECO affordable warmth programme. These referral fees may not be widely advertised or targeted towards rewarding community groups in particular (as opposed to private sector doorstep, telephone or shopping centre canvassers or website operators). But there is no reason why community groups could not develop their own projects to take advantage of this potential income. There are some challenges to engaging with what are often large companies operating over large areas (see the PlanLoCaL resource: Establishing the right partnerships ), so you will need to think about how you can make a strong case for how your proposed activity in your area will create extra value and greater opportunities for your partner company s business. You will also want to think about how promoting the partner company s activities to your community might impact your group. What if the company proves to be an unreliable installer or is unable to deliver on its promises? If you do go down this route, the PlanLoCaL resource: Identifying and minimising risk contains an exercise that will be useful to work through. As with all projects, you should work out what you are planning to do, what it would cost, what you think you will achieve and therefore the potential referral fee income. Be careful not to be over-optimistic about the level of take-up locally as a result of your activities. This is particularly important since partner companies are likely to pay a relatively low fee for a simple referral to their scheme, but rather more for a referral which leads to a contract to install measures. At this stage, it is very difficult to put a value on the level of referral fee which you might reasonably expect because Green Deal and ECO projects are not yet well enough established for there to be

6 replicable examples. The level of the referral fee might depend on factors such as the value or works carried out (which will be significantly larger for, say, solid wall insulation than for loft insulation); the priorities of the company paying the referral fee; and the need for customers or measures at any given time or in a particular geographical area. Some Carbon Emission Reduction Target (CERT) schemes, which ran before the Green Deal and ECO, offered referral fees to community groups of per lead for works costing in the region of 400. However, some CERT companies were offering for referrals when they were under pressure to hit targets and avoid penalties. The best opportunities to generate revenue from referral fees are likely to be either through the ECO, where companies need to reach customers to hit their targets, or by working with Green Deal organisations on particular measures that they are keen to promote. There is a wide body of research showing that people s initial interest in energy efficiency improvements to their home (i.e. the referral) often fails to translate into actually making the improvements (i.e. the installation). It may be that community groups can think of ways to sustain contact with interested households to help them avoid this inaction. It is possible that initiatives will develop to help local community groups to work together to secure fees for referrals to different Green Deal Providers and Advice Organisations and ECO programmes. However, at the time of writing, these sort of collective brokering schemes had not yet emerged. Raising funds from renewable energy projects Recent government initiatives such as the feed-in tariff and the Renewable Heat Incentive mean that if you install renewable energy technologies to generate electricity or heat, you will qualify for payments. Over time this could generate an income for your community group which could be used to support energy efficiency activities. There is a wide range of PlanLoCaL resources on renewable energy technologies, community engagement, project planning and case studies as well as a series of short videos on a range of topics including more resources on funding and finance for energy projects. See Other funding options In addition to those outlined above, you may find there are other sources of finance you can tap into to support your activities. These could include Local Authority funding or business sponsorship. There are sometimes specific pots of funds managed by Local Authorities which, if their aims align with your project, are worth exploring. These include Section 106 funds, the Community Infrastructure Levy and Allowable Solutions. These all relate to new building developments and associated planning decisions and would require engagement with the planning process at an early stage to ensure that any available funding from these approaches give priority to community-based energy efficiency projects.