Different types of community energy project will have different funding requirements. Small projects focusing on engagement and behaviour change may not need much money at all. Larger projects such as energy efficiency programmes and community renewables will almost certainly require funding.
For large projects different types of funding may be required at different stages. For example it may be difficult to attract commercial finance before planning permission has been granted. This is because there is greater risk that the project may not go ahead while planning permission remains outstanding. Commercial lenders may not be willing to provide this ‘at risk’ finance without additional guarantees and security. A useful study of these issues is available here.
There is a logical order of events when developing larger renewable projects. Practical issues like land access, grid connection and planning permission will usually need to be resolved before commercial lenders and investors are willing to commit. Projects may have to rely on the funds they can raise within their community in order to fund these early stages.
Preparing a Business Plan
If you are seeking finance through either a loan or through investment you will almost certainly require a business plan to show to lenders and investors. This is a document that sets out what you are going to do and how you are going to do it including projected income and expenditure. They will want to see this to understand how you intend to payback your loan, or to pay the return on investment that they require. Forth Sector have developed a business plan guide aimed at social enterprises.
Funding and Finance Options
Once a need for funding has been identified there are a wide range of options to explore. This varies from traditional small-scale fundraising approaches applied by charities and voluntary organisations across the country through to complex investment and finance structures to fund large scale ventures.
As a general rule the more money that is required, the more effort will be needed to secure it. Lenders and commercial investors will want more information and have more stringent terms and conditions than local investors and supporters with a personal stake in the project.
Different funding options also allow for different levels of community ownership and control in terms of both decision making and retention of earned income. Achieving your sustainable energy goals may at some point require hard choices between maintaining a pure vision of community control and the practical realities of obtaining finance on commercial terms. Giving some thought to this in advance will help the group to prepare and work out what your collective thresholds are.