As we celebrate this year’s Community Energy Fortnight, it is fitting to remember that the sector has just reached its 18th birthday.
The first community energy share offer was issued in 1996 by Baywind. As well as holding the title for the first wind energy co-operative, Baywind is also the first co-op formed by a community share issue.
It wasn’t until 12 years later that the term ‘community shares’ was coined by the Development Trust Association (now Locality) in its 2008 publication Community Share and Bond Issues.
Ahead of its time, Baywind raised almost £2m from 1,334 members between 1996-1998 to build two turbines at Harlock Hill, and another at Haverigg. Focus of the share offer was on the community, and 35% of shareholders live in the Cumbria region, with a wider number from across the north west of England.
Originally intended as a 20-year project, the co-operative is now planning its next steps to focus on another double-decade.
Annette Heslop is the company secretary of Energy4All, the co-operative that came out of Baywind to set up co-operative windfarms across the UK.
“We are now in our 18th year of Baywind,” she says. “It was only destined to run for 20 years, so when the landowner opposite the current site was interested in turbines on his land we felt it was a good opportunity to take the five old ones down and replace them.”
The plan is for a new co-operative, High Winds Co-operative, to be formed in the coming months to take over from Baywind. It will partner with a private renewable energy developer, Infinergy, and together build five wind turbines. Each will generate 2.3MW of electricity – enough to power 1,300 homes, four times as much as the existing Baywind turbines.
Infinergy will own three of the turbines; the co-operative the other two. They will be formed as two separate companies, says Ms Heslop, “so that we’re completely independent,” allowing the co-op to decide how to raise finance, use profits and direct its supply.
In order to build the two turbines, the co-operative needs to raise £7.5m. It envisions more than half coming from individuals investing through another share scheme, with the remainder secured through a loan.
A proportion of the member investment, says Richard Scott, vice-chair of Baywind, will come from “existing Baywind shareholders who roll over their existing investment” into the new co-op, which could amount to nearly £2m.
In addition, the co-operative will canvas new members from the local area. Ms Heslop stresses that this should be easier than the first time around. “Back in 1982 it was very new,” she said. “Today, people are aware of Baywind.”
To broaden the profile of its investors, especially locally, the co-op has reduced its minimum investment from £250 to £100 and also plans a savings scheme through the local Furness Building Society in an effort to help people with less money invest.
“We would like to change the demographic profile of members,” adds Mr Scott. “It will be great to get more young people involved.” Ms Heslop is confident the co-op can raise enough from members, pointing out that, for Energy4All, “most offers are oversubscribed”, with other offers raising similar amounts. Westmill Windfarm in Oxfordshire raised over £4m and
a current offer from Four Winds Co-operative in South Yorkshire stands at £3.3m.
The co-op has a definite advantage in recruiting investors – it offers the high rates of returns. “Baywind,” says Ms Heslop, “has paid out between 3% and 9% – about 9% last year.” For the new co-op, “on average you’d be looking at between 6-8%,” with the return increasing over time as the co-op’s debt repayments drop.
But, she warns, there is an element of risk to the scheme. “The turbines need to work and the wind must blow,” she says, “and as such this is not an investment vehicle. The vast majority do this because they want to make an environmental investment.”
The co-operative is keen to get started, aiming to launch the share offer next year and be generating power by 2016. But there are obstacles to overcome.
It has taken six years to get planning permission, which was only granted this year, after appeal. And, in the meantime, the co-op is facing a new challenge.
As reported previously, the Financial Conduct Authority is blocking new community energy projects registering as co-operatives on the basis that their members do not participate in the co-op as buyers or sellers – a situation which arises only because legislation stops them selling direct to customers in the first place. Working with other organisations, Energy4All is lobbying government to rectify this.
While that issue plays out, the co-operative has also been challenged by a local estate. Although it does not own the land on which the new turbines will be built, the estate owns the mineral rights, for which it is demanding 4% of the co-op’s revenue. Says Mr Scott: “The mineral rights lie with the Pennington estate, who have won legal cases in the past for disputes not necessarily relating to minerals. Discussions are on-going.”
Despite the hurdles it still faces, Baywind is looking forward. Having set up the first co-operative windfarm, it is ready to notch up another pioneering achievement – becoming the first co-op to build next-generation wind turbines.
The first energy community share projects
1996 Baywind Energy Co-operative. Raised £1,994,067 from 1,334 members.
2004 Fenland Green Power Co-operative. Raised £2,660,000 from 1,100 members.
2004 Westmill Wind Farm Co-operative. Raised £4,400,000 from 2,304 members.
2005 Boyndie Wind Farm Co-operative. Raised £730,000 from 715 members.
2007 Torrs Hydro New Mills. The community benefit society raised £100,000 from 200 members.
2007 Isle of Skye Renewables Co-operative. Raised £812,000 from 570 members.
Source: Community Investment Using Industrial and Provident Society (IPS) Legislation, published by Co-operatives UK (2008)