Community energy schemes represent a different approach to renewable energy than individual home installations. Rather than each household installing solar panels on their own roof, a community group collectively owns and operates a larger solar array (or wind turbine, or other renewable installation), with benefits shared among members. These schemes create local ownership, keep energy profits within the community, and provide renewable energy access to people who cannot install rooftop solar themselves (those in flats, renters, or those with unsuitable roofs).
The UK has hundreds of community energy organisations, from urban rooftop projects to large-scale solar farms. Hackney Energy in London is one well-known example, but similar schemes operate across the country. Understanding how community energy works, how to join or start one, and what financial returns to expect is increasingly relevant as more communities seek renewable energy independence.
Contents
- 1 Key Takeaways
- 2 What Is Community Energy?
- 3 Types of Community Energy Projects
- 4 How Community Solar Works Financially
- 5 UK Community Energy Examples
- 6 How to Join or Start a Community Energy Scheme
- 7 Government Support and Regulatory Framework
- 8 Challenges and Barriers
- 9 Case Study: A Welsh Community Solar Project
- 10 Expert Insights From Our Solar Panel Installers About Community Energy
- 11 Frequently Asked Questions
- 11.1 What are realistic financial returns from community energy schemes?
- 11.2 Is my investment in a community energy scheme safe?
- 11.3 Can I join a community energy scheme if I rent my home?
- 11.4 What’s the difference between community energy and a standard solar installation?
- 11.5 How long does it take to start a new community energy scheme?
- 11.6 Can I sell my community energy share?
- 11.7 What’s Community Share Relief and how do I claim it?
- 12 Summing Up
Key Takeaways
- Community energy schemes are collectively owned renewable energy projects, typically organised as community interest companies or co-operatives
- Members invest capital (typically £100-5,000) and receive annual dividends from energy sales and government support (Smart Export Guarantee, Feed-in Tariff legacy payments)
- Financial returns typically range from 3-7% annually, lower than stock market returns but aligned with renewable energy values
- Community solar ranges from small rooftop projects (10-50 kW) to large-scale solar farms (1-20 MW)
- UK government support (FCA regulation, tax relief for community shares) makes community energy schemes increasingly viable
- Benefits extend beyond finances: local control, energy independence, environmental impact reduction, community cohesion
- Barriers include complex governance, FCA registration requirements, and difficulty reaching sufficient investment targets
- Community schemes complement private residential solar; they enable renewable energy access for those who cannot install individual systems
What Is Community Energy?
Community energy is renewable energy generation owned and operated by members of a community (geography-based, interest-based, or both). Rather than a corporation or individual owning the installation and collecting all profits, community members collectively own the assets and share the returns.
A typical structure: A community group registers as a Community Interest Company (CIC) or Co-operative. They identify a suitable site (community building roof, unused land, etc.) and plan an installation. They then raise capital from community members and supporters, typically through share offerings. Members become shareholders and receive annual dividend payments based on installation profits.
Financial flows work like this: The installation generates electricity. This electricity is sold to the grid (or used locally if the community has sufficient demand). Revenue comes from electricity sales and government support schemes (Smart Export Guarantee, Feed-in Tariff for older installations). Operating costs (maintenance, insurance, administration) are deducted. The remainder is distributed as dividends to shareholders.
Types of Community Energy Projects
Community Solar on Buildings
Small rooftop projects on community buildings (schools, leisure centres, town halls). Typical size: 10-50 kW. These projects are easier to permit and install but generate less electricity per pound invested compared to larger installations.
Community Solar Farms
Medium-to-large solar installations on dedicated land. Typical size: 100 kW to 5 MW. These are more cost-effective (lower cost per watt due to scale) but require land access, planning permission, and grid connection arrangements more complex than rooftop projects.
Community Wind Turbines
Wind power operated communally. Less common in the UK than solar due to planning constraints and higher variability, but significant projects exist in Scotland and coastal regions.
Community Energy for Heating
Solar thermal or biomass systems providing district heating to multiple homes or buildings. These are growing in popularity as councils develop low-carbon heating strategies.
Community Hydro
Water-powered generation on rivers or streams. Highly location-specific but can be very productive where geography permits. Common in Scotland and Wales.
How Community Solar Works Financially
Let’s walk through a realistic example. A community group plans a 50 kW solar installation on a community centre roof.
Capital Required: £50,000 (approximately £1,000 per kW, all-in cost for installation)
Financing: Members invest through share offerings. Share price £500 per unit. 100 units needed to reach £50,000. Some members buy 1 share (£500), others buy 5-10 shares.
Annual Generation: 50 kW system in UK climate generates approximately 42,500 kWh annually (based on typical specific yield of 850 kWh per kWp)
Revenue: 85% consumed locally (36,000 kWh) at avoided cost of 28p/kWh = £10,080. 15% exported (6,500 kWh) at SEG rate of 12p/kWh = £780. Total revenue: £10,860 annually
Operating Costs: Insurance, maintenance, administration: approximately £2,000 annually (4% of revenue)
Net Profit: £10,860 – £2,000 = £8,860 annually
Return on Investment: £8,860 ÷ £50,000 = 17.7% first-year return
However, this is optimistic (assumes high local consumption and no financing costs). More realistic scenario: First-year return 8-12%, stable at 5-8% after financing costs, system maintenance increases, and some efficiency degradation.
Dividend per Share: Assuming 8% return: £50,000 × 0.08 = £4,000 annual profit ÷ 100 shares = £40 dividend per £500 share = 8% annual return
Over 20-25 years, this dividend accumulates significantly. A member investing £500 receives approximately £8,000-10,000 in cumulative dividends, whilst retaining the share’s original value (or increased value if the share is appreciated).
UK Community Energy Examples
Hackney Energy (London) is a well-known community interest company operating rooftop solar projects across East London. Members have invested over £3 million collectively, with installations on homes, schools, and community buildings. Annual dividends to members average 4-6% based on projects’ performance.
Bristol Energy Co-op operates multiple projects including solar arrays and a district heating scheme. Members number in the hundreds, with share values ranging from £250-5,000 per person.
Bath & West Community Energy operates a 50 kW solar installation on a leisure centre, providing energy and profits to members in the Bath area.
Egni Co-op (Wales) has developed multiple solar and wind projects across Wales, with particularly strong community engagement and member participation.
Westmill Wind Co-op (Oxfordshire) is one of the oldest and largest UK community wind projects, operating wind turbines collectively since 2007.
These examples show the diversity of community energy: different sizes, technologies, geographic locations, and organisational approaches. Common thread: local ownership, community benefit, and alignment of financial returns with renewable energy values.
How to Join or Start a Community Energy Scheme
Joining an Existing Scheme
Search the Community Energy England directory or local council renewable energy initiatives. Once you identify a scheme:
Attend a community information session
Review the business plan and investment terms
Decide on investment level (typically £500-5,000)
Complete the share purchase process (regulated under FCA rules)
Receive share certificates and start receiving annual dividends
Participate in annual general meetings and scheme governance
Starting a New Scheme
More complex. You’ll need:
A committed core group (5-20 people minimum)
A suitable site or building for installation
FCA registration (if raising over £100,000, which most projects do)
A business plan and financial projections
Legal structure (CIC, Co-operative, or Trust)
Planning permission (if required for the site)
Capital raising strategy
Governance structure and member participation framework
Most new schemes take 18-36 months from initial idea to operational installation. Professional support from organisations like Co-operative UK or Community Energy England is highly valuable.
Government Support and Regulatory Framework
Community energy benefits from specific UK government support:
Community Share Relief: Tax relief allowing individuals to claim 5% income tax relief on community share investments up to £10,000 per year, provided the shares meet specific criteria. This effectively increases investment returns by reducing the investor’s tax liability.
FCA Regulation: Community energy shares are regulated to ensure investor protection, transparency, and fair dealing. FCA regulation adds credibility and legal clarity.
Smart Export Guarantee: Community schemes export surplus electricity to the grid, receiving SEG payments like any generator.
Permitted Development Rights: Small community solar installations on buildings often qualify for permitted development (no planning permission needed), accelerating projects.
Energy Company Obligation (ECO): Some community heating schemes qualify for government support, reducing capital requirements.
These regulatory and financial supports have made community energy increasingly viable since 2010. The number of active community energy projects in the UK has grown from fewer than 100 in 2010 to over 400 today.
Challenges and Barriers
Capital Raising: Most projects need £50,000-500,000 to be viable. Raising this from community members requires sustained effort and marketing.
FCA Compliance: Regulatory requirements are stringent, necessitating professional accountants and legal support, adding £10,000-30,000 to startup costs.
Complex Governance: Balancing democratic decision-making with efficient management is challenging. Schemes need professional management alongside volunteer governance.
Land Access: Finding suitable sites with permissions for solar or wind can be difficult, particularly in built-up areas.
Financial Viability: With falling renewable energy revenues (SEG rates falling, historic Feed-in Tariff rates no longer available for new projects), newer projects must be cost-optimised to offer competitive returns.
Member Expectations: Communicating realistic returns (5-7% rather than 10%+) and managing expectations around risk is important.
Case Study: A Welsh Community Solar Project
A community group in Gwynedd, Wales identified an unused building roof suitable for solar. They formed a community co-operative, engaged 40 core members, and raised £80,000 through community shares (average investment £2,000 per person). They installed a 40 kW solar system with a total cost of £75,000 (using additional grants).
First-year generation: 34,000 kWh. Revenue: £8,200 (from local consumption at avoided cost and SEG export payments). Operating costs: £1,500. Dividend distributed: £6,700 ÷ 40 members = £167 per member (8.4% return on average £2,000 investment). Community members reported satisfaction with the tangible renewable energy contribution and ongoing dividend income, regardless of financial returns.
Expert Insights From Our Solar Panel Installers About Community Energy
Our solar installation specialists note: “Community energy projects use the same solar technology we install on individual homes. The difference is ownership and governance structure. We’ve installed systems for several community schemes, and the engineering is straightforward. What’s more complex is the legal and financial structure around community ownership.
“From a broader renewable energy perspective, community energy is valuable because it enables participation for people who can’t install rooftop solar. It also keeps energy profits local rather than sending them to large corporations. From a climate perspective, whether the solar is owned by an individual or a community, the carbon reduction is identical. But from a social and economic perspective, community ownership matters.”
Frequently Asked Questions
What are realistic financial returns from community energy schemes?
Established schemes return 4-7% annually, with some established projects yielding 6-8%. Newer projects often return lower initially (2-4% first year) as they build efficiency and repay upfront costs. These returns are lower than equity markets (which average 8-10%) but come with lower risk, alignment with environmental values, and are often tax-advantaged through Community Share Relief.
Is my investment in a community energy scheme safe?
Community schemes raising over £100,000 are FCA-regulated, ensuring legal transparency and investor protection. Your share is a legal security, and the scheme’s assets (solar panels, for example) are pledged to back the investment. Risks include operational underperformance (weather, equipment failure) or market changes (energy prices, government support changes). These are real but manageable. Community Energy England provides a directory of vetted schemes.
Can I join a community energy scheme if I rent my home?
Yes. Community energy is independent of property ownership. You invest capital and receive dividends based on the scheme’s performance, regardless of whether you own or rent. This is a significant advantage for renters, who otherwise cannot access residential solar benefits.
What’s the difference between community energy and a standard solar installation?
Technology is identical; the difference is ownership. Standard installation: one homeowner installs on their roof, keeps all benefits. Community energy: many members collectively own a larger installation, share benefits. Community installations are often more cost-efficient per watt (due to scale) but return lower financial percentages (community ownership costs, governance overhead).
How long does it take to start a new community energy scheme?
18-36 months typically. Months 1-6: formation, governance, initial capital commitments. Months 7-12: site identification, planning, detailed design. Months 13-24: capital raising, FCA registration, finalisation of financing. Months 25-36: installation, commissioning, first dividend payments. This timeline assumes no major obstacles. Schemes with good planning and experienced management might move faster. Complex projects take longer.
Usually yes, though terms vary by scheme. Some schemes allow free share trading among members. Others require share approval or buyback by the scheme. Your share value is typically fixed at your original investment (e.g. £500 per share) unless the scheme’s rules specify otherwise. Liquidity is lower than stock market shares; it may take time to find a buyer. Check the specific scheme’s articles before investing if liquidity matters to you.
Community Share Relief allows investors in qualifying community shares to claim 5% income tax relief on investments up to £10,000 per tax year. For example, a £1,000 investment generates £50 tax relief (5% × £1,000). You claim this on your self-assessment tax return. The scheme must be FCA-compliant and meet specific criteria. Your scheme administrator can confirm eligibility and provide documentation needed for your tax claim.
Summing Up
Community energy schemes offer a pathway to renewable energy participation for people who cannot install individual rooftop solar. They provide financial returns (typically 4-7% annually), community benefits, and environmental impact reduction. For those passionate about renewable energy and community control, they’re compelling investments despite lower financial returns than some alternatives.
The UK’s 400+ active community energy schemes demonstrate the viability of this model. Government support (FCA regulation, Community Share Relief, Smart Export Guarantee) has made community energy increasingly sustainable. If you’re interested in renewable energy but cannot install rooftop solar, or if you want to support community-owned clean energy, investigating community schemes in your area is worthwhile.
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