How we can build confidence and capital in community energy

In March 2025, the UK’s Energy Secretary announced the first major project for Great British Energy – a core pillar of the Labour Party’s election manifesto, which promised a new publicly owned energy company ‘by the British people, for the British people’.

By Whitni Thomas, head of corporate finance at Triodos Bank UK

An initial investment of £200 million ($270 million) will support schools, the NHS and devolved governments to install solar panels, build local clean power and bring down energy bills.

Within this package, £5 million ($7 million) is earmarked in grant funding to support community energy groups to develop their own clean energy projects.

Community energy refers to renewable energy projects that are owned and managed by local groups or cooperatives. Projects can include solar, wind and hydro electricity generation, with the electricity either sold back to the grid or retained via a direct line to a community asset.

But why is community energy so vital in the first place?

The unique potential of community energy is that it puts people at its heart: bringing communities along on the journey of developing renewable energy sources and empowering local residents to be a key part of the energy transition in their area.

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This is especially impactful at a time when powerful voices from across the political spectrum are seeking to discredit net zero, and position climate action as something being “done” to the taxpayer – rather than climate action being crucial to delivering long-term prosperity and stability for all.

And with the world currently off track to triple renewable electricity generation by 2030, community-owned energy is part of the range of solutions needed to stop relying on energy generated by national governments and large global corporations.

If scaled, community energy could go a long way towards plugging this gap; in 2018, 275 locally-owned and run community energy projects were active across England, Wales and Northern Ireland, preventing 56,000 tonnes of carbon dioxide equivalent from entering the atmosphere annually. By 2021, this increased to at least 495 projects.

Today almost 600 organisations comprise the community energy sector in the UK.

Additionally, these projects can be a lifeline for communities, tackling fuel poverty by helping to reduce energy bills, or generating profits that can be reinvested into community projects, from local schools and community centres to subsidised transport and food banks.

According to Community Energy England, projects in the UK are generating £4.4 million ($6 million) of savings on energy bills, as well as creating hundreds of new jobs for communities.

Follow the money

Despite the relative affordability of renewables, it is still challenging for community energy groups (which are largely volunteer led) to access stable revenues and finance new projects.

And whilst funding support such as the £5 million committed by GB Energy can go some way towards tackling these financial barriers, scaling community energy in the UK means securing a consistent means to help fund the early-stage development of projects.

The removal of the feed-in-tariff in 2019 and a lack of tax relief schemes also mean there is a limited certainty of income. Community energy projects do not benefit from the economies of scale that large commercial projects can rely on, increasing the risk of their economic viability.

With a limited availability of grants and in the absence of government subsidies – combined with higher interest rates that have driven up the cost of borrowing – community energy groups face significant barriers to sustaining their operations.

Major government grants and subsidies are making a real difference elsewhere in Europe, such as in the case of Traais Energies Collectief in the Netherlands. This community energy project is working to make Terheijden free from fossil fuels, thanks to a subsidy from the national programme Proeftuin Aardgasvrije Wijken (Pilot Projects for Natural Gas-Free Districts), which is making €435 million ($508 million) available to support the heat transition away from natural gas by 2030.

Future-fit financing

Thrive Renewables – first established as the Wind Fund plc by Triodos Bank in 1994 – is a UK-based renewable energy funding initiative, which generated enough clean energy to power 42,000 homes in 2023.

Thrive has proposed several measures that GB Energy could take to further support community energy projects in the UK long-term. This includes calling on the government to enable community energy projects to participate in its Contracts for Difference auctions, which most projects are currently ineligible for as they are too small.

Another solution proposed is for GB Energy to fund the grid infrastructure for new projects and then charge communities an annual fee over a project’s lifetime, helping projects to attract lower cost of capital by reducing their risk profile.

Unlocking local investment is also key to scaling community energy, and can help to transform the perspectives and attitudes of local communities towards renewables. Thrive, for instance, has a long history of facilitating shared ownership, and has committed to offering local Community Benefit Societies up to a 10% stake in all its future projects.

Crowdfunding is also starting to gain traction as a form of alternative finance that can help raise capital for community energy projects and engage a wider range of supporters. Thrive currently has a £5 million share offer on Triodos Bank’s crowdfunding platform (closing end of July 2025), which will help to raise the capital needed to support its ambition of doubling the amount of clean energy capacity it funds by 2028.

If we are to sustain and scale community energy in the UK – catalysing the creation of high-quality jobs, reducing fuel poverty and revitalising regions – finance must be carefully blended, so that public support helps to facilitate community investment.

GB Energy’s initial commitment is a positive step towards enabling projects to become viable, but only by addressing the biggest barriers communities face in setting up and maintaining these projects, can the UK government unlock the full, transformative potential of community energy.