Funding from external sources
Funding from external institutions and organisations can provide one-off or long-term streams of income to help to finance your project through its stages of development. Not only can external funding help to progress your project and citizen engagement activities, but you are more likely to secure external funding in the first place if you can show that your project has a high level of community involvement and local support – the benefits are two way!
Click on the ideas below for practical suggestions and detailed case studies.
Grants and subsidies exist to provide support for particular types of activities or outcomes, and so what support is available to you through these channels depends on the nature of your project. While subsidies are generally something you are entitled to if you fulfil certain eligibility criteria, grants usually need to be applied for as part of a competitive process.
In the UK, subsidies are available for community energy generation projects from the Feed-in Tariff (FiT) scheme (and possibly also small additional amounts from Renewable Obligation Certificates and Renewable Energy of Guaranteed Origin). The FiT scheme involves payment of a set rate for every unit of electricity produced and for every unit of electricity exported to the national grid from certain renewable energy technologies for up to 20 years. The rate you receive is based on the amount of electricity generated, which will vary depending on technology, system set up and location.
To qualify for the subsidy, both your project and the installer of your renewable energy technology need to be certified under the Microgeneration Certification Scheme, unless it is a hydroelectric or anaerobic digestion project, in which case you must go through the ROO-FIT process. You will need to choose an energy company to act as your FiT supplier and register with them by sending an application form along with your Microgeneration Certification Scheme certificate. Once your project is operational and registered under the scheme, the FiT rate you receive will remain fixed for the full term, subject only to inflation adjustments, providing you with a guaranteed income for up to 20 years! However, until this point is reached, be aware that subsidy rates can change, meaning it is sensible to build safeguards against this into your financial model.
Grants are available periodically from a variety of different funding sources. Good sources to check include schemes run by national government, local government, the Big Lottery Fund and a range of charitable trusts and foundations. Some grant-funding bodies, such as UnLtd, also exist specifically to support social enterprise start-ups.
While grants are a popular and common source of funding for community projects, this support is by no means guaranteed, so you should try to avoid reliance on grants in the long run. Not only are grant schemes time-limited and subject to eligibility criteria, but they also tend to be highly contested, involving time-consuming and sometimes complicated application processes. There can be restrictions on when and how you can spend the money, as well as reporting requirements to ensure you provide evidence of the impact of the funding awarded.
Here are some golden rules for applying for grants from the Community-Led Transport Initiatives action pack:
- Don't waste time applying for grants that are not suitable. Most grants have very clear aims and eligibility criteria - read them thoroughly and don’t be tempted to try either changing your project to fit the grant or describing your project in a misleading way to fit the grant criteria!
- Prioritise it! Grant applications are not something you can do by candlelight a couple of hours before the deadline.
- Don't think you have to fill the word limit. It is a maximum, not a target!
- Think positive. If you believe in it, others will too!
- Avoid 'hoping', e.g. "it is hoped", "we hope". It sounds a bit hopeful, doesn't it?!
- Keep answers succinct and to the point. Assessors don't have much time for each application and don't like waffle.
- Be specific. If the question is “what is your vision”, don't just list a load of things you would like to see. Say "our vision is for X group of people to do Y and achieve Z".
- Always go the extra mile with an answer. If the question is "who is going to be responsible for project delivery?" make sure you include in your answer the individual's name, job title, qualifications, experience, brief, who they have worked for and why they were chosen as the lead person for project delivery.
- Think about what other grant applicants are going to say and try and make yours stand out. If the grant is for getting people back into work, don't simply say that your potential client group is largely from low income backgrounds with few opportunities. This may be true and is definitely worth pointing out, but many other applicants are going to be saying this too. What makes your group stand out? Why is your project better?
- Proof-read! Or better still, ask someone else to proof-read. You are unlikely to lose marks for poor English, but poor spelling and grammar give a bad impression and you want to make a good impression, right?!
Brighton Energy Co-operative were forced to revise their funding model just three days before they were due to launch their first share offer, following a sudden announcement by the government that they were cutting Feed-in Tariff rates by 50%. At a tense meeting the team reviewed their position, and ironically the printed share offer documents arrived during this meeting. With heavy hearts the team agreed to postpone the share launch until an unspecified date. While this was a major blow, it is a harsh truth about community renewables: even with the best planning in the world things can go wrong. For the team it meant a degree of soul-searching: could they continue doing this? They chose not to give up and kept going in the face of these setbacks, although they were relieved to have other sources of income to sustain them through this difficult period. Over time the price of solar panels fell dramatically, and by May 2012 the price of UK solar had fallen a staggering 60% compared to six months previously. This outweighed the 50% cut in FiTs and meant they were back where they had been six months previously. With another FiT change looming, they hurriedly re-scheduled the share offer. With all the materials and legal agreements in place from the previous November, the team re-activated the marketing plan for the share launch. The share offer was a great success - they raised £180,000 in the month period allocated.
Source: Community-Led Photovoltaic Initiatives action pack
A major source of funding for Plaine Sud Energies’ solar panel project came from the citizen investment fund for renewable energy of Energie Partagée (http://energie-partagee.org/). To access this form of financing, the project had to be approved regarding the charter of the citizen investment fund. In this framework, the local citizens’ participation was essential, as the fund only supports citizens’ projects matching the following criteria: local anchorage, non-speculative goals, democratic and transparent governance and ecological engagement. In standing by Plaine Sud Energies, Energie Partagée, besides completing the financial needs for the implementation, gave a real legitimacy to the project regarding citizen and environmental engagement.
Loenen Energie Neutraal (Loenen Energy Neutral) helps civilians to make energy saving adjustments by providing loans to support investments by householders. The loans are funded by a grant from the local municipality and the European Regional Development Fund through the INTERREG IVB programme. The village won the funding through the Dutch “Energetic Villages” competition, which required them to demonstrate a plan for how the village would use the funding to invest in renewable energy with the aim of becoming energy neutral. Part of their plan involves bulk purchasing of solar panels and insulation materials to reduce the costs of investment for the community. 55% of the price of purchase must be paid at the start of the project by the civilian, and 40% of this amount must be paid back over the years to Loenen Energy Neutral, allowing further loans to be made to other members of the community. Reducing the upfront costs required makes it easier for the community to invest in energy saving measures. Read more about Loenen Energie Neutraal here.
Stroud Community Agriculture needed more members to ensure they remained viable after increasing the land area of their community supported farming project. To support a drive to recruit new members, they secured a one year grant from the National Lottery Seed Programme 'Growing Home'. This paid for someone to actively promote membership to a wider circle and to produce promotional materials, as well as helping to fund much needed capital equipment. This proved very successful and before the year's end membership had risen to 100, such that they had to start a waiting list that soon rose to 30 families.
A major stumbling block for many community projects is the 'at risk' money: the money required to get a good idea off the ground when the success of the project cannot be guaranteed or easily demonstrated. Loans can provide an important source of funding during this start-up phase. While the downside is that the money must be repaid, loan funding can often be the key enabler that makes a project happen.
Borrowing money from conventional high street banks may not be possible for your project, especially in the current economic climate. However, other specialist lenders exist who regularly assist community organisations through provision of loans and advisory support. Examples of possible sources include ethical banks (e.g. Charity Bank), funds such as the Community Generation Fund, and programmes like the Government-backed School for Start-ups’ Launcher scheme, which offers start-up finance alongside access to their one-day bootcamp, online community and mentoring at no extra cost.
Bath and West Community Energy raised £1 million of debt finance from SSE, which included £200,000 as a contingent loan (at the time a SSE one-off trial), to invest in at risk pre-planning work associated with their renewable energy project development. They found that while the scale of their project initially made it very difficult to get bank finance for, once their projects were established through the SSE loan, banks were likely to be more interested in re-financing the projects, thereby enabling BWCE to re-invest the funds freed up in further projects. The loan therefore played a crucial enabling role in helping to establish BWCE as a financially viable, locally owned community enterprise. Debt funding was deemed appropriate given the stable long term income streams and enhancement to the returns for investors. The debt is secured on the assets of BWCE, so ultimately the loan provider could seize the assets in the event of default. However, individual members have no liability to the debt provider, other than the financial risk to their invested capital. The loan is fixed interest; the cost of servicing is known and built into the financial projections. The loan is repayable only if the project is successful, with repayment taking place over a 15 year period or sooner if BWCE so chooses. Following their share issue they had a strong equity base which could, if required, enable them to repay the majority of the loan. SSE is also investing £20,000 as equity in BWCE, showing the confidence they have in the business.
Given the total cost of Plaine Sud Energies’ solar panel project (more than 200 000€), the group sought different sources of funding to implement the project. A significant proportion was contributed by a loan taken out with a cooperative bank. The support of the public authorities was particularly important for securing this funding, as it brought recognition of the project and in turn a bank guarantee.