Fantastic News !
Scottish Government’s Community and Renewable Energy Scheme (CARES)
will fund us through their Enablement grant and Capital grant awards.
This will help us to progress through the next steps with the proposal to put Solar PV panels on a building or land on Arran.
It will cover all the front end professional services work like legal, technical, planning, financial, community engagement and share offer preparation.
The capital costs of installation will be part funded by shares that will be sold to the community and the capital grant. This all has conditions and break points that we will need to confirm during the enablement stage.
To learn more please scroll down to our 15 FAQ’s or drop us an email. Contact details are at the bottom of this page.
There is a huge amount of work to do but the ball has started rolling …..
How did we get here ?
The steering group has been working towards a renewable project for some time and identified options.
We recently held a virtual meeting where we discussed work done so far and held a Q & A session.
The presentation was recorded before we knew we had funding so you can watch it anytime.
What types of renewable energy will work for Arran and how can we make sure they benefit our community?
We ran a short questionnaire where the community let us know their views
We very much hope that whatever initial scheme is successful, it will foster a series of projects that collectively will make a considerable impact for the benefit of the whole Arran community.
Now that we have received funding, one part of the work will be to create a ‘share offer document’.
When this is launched it will contain all the details of the project & final offer.
Meanwhile, here are some FAQs
- Q: What exactly is it that you have asked for funding for?
A: We have applied to the Scottish Government’s Community and Renewable Energy Scheme (CARES) for a Solar PV project. This will enable technical, commercial and legal support to take the project from where we are now through to construction. Although we have a good idea of how the project will run, it is important for us to get external input to stress test our assumptions based on similar projects. We also need to cover both ourselves and future shareholders against possible risks, such as changing electricity prices. We also need professional support to negotiate with SSEN on the design and cost of the electricity grid connection and to set up a new legal entity to run the project so that the governance is clear and cash flows are guaranteed to flow back to the community. This request is for a CARES ‘Enablement Grant’ – we have also applied separately for a capital grant towards the construction costs of the project.
2. Q: When will this all take place?
A: We are currently working with Community Shares Scotland on possible details of a share offer and expect this to carry on until spring. We will undertake all outstanding technical, commercial, permitting and legal work as well as gaining feedback from yourselves on anything else we should be considering for the project. If there is sufficient community buy-in we will look to launch a community share offer in the spring and if we raise sufficient local capital, look to start construction in Spring/Summer 2021. The construction period is short and so all being well the project will be live in summer 2021. By virtue of being a community project, if there is insufficient local interest and therefore insufficient community investment, the project will not go ahead.
3.Q: How will the project be in the best interests of the wider community?
A: The primary objective of this scheme is to provide benefits to the community through the community benefit fund and the return to the shareholders. The aim is to Stop Climate Change by enabling investment in renewable energy. We can’t all have solar panels on our roofs, but supporting community projects will continue further work towards stopping climate change. By setting up a Community Benefit Society we will keep all investment in the local community, allowing the benefits to flow back to a community green fund for important environmental island projects.
4. Q: What is a Community Benefit Society ?
A: Community benefit societies or Ben Coms, are owned by the people that live and work or support the community it is set up to benefit. This is a not for profit legal form for organisations that wish to operate for purposes that benefit the community as a whole. Members hold at least one share in the organisation and have one vote. Unlike in a limited company, the number of votes a member has does not increase with the number of shares they hold, making them a democratic model that works well for social economy organisations. This type of organisation is set up to have a Social Purpose and to re-invest any profits made back into the society rather than existing to maximise financial returns for members.
5. Q: Why Community Shares ?
A: Community Shares are a way for people to invest in what matters to them. To raise the additional funds we hope to launch a share offer to allow the community to invest and become members. This will result in the Ben Com owning the solar panels and the electricity they generate will be sold. This income will allow interest to be paid to shareholders and a community fund to be set up, if the society is able to afford to do so.
Community Share Scotland is helping us to develop the business plan and shares offer document. Other community groups have been running similar projects very successfully paying a similar level of interest, typically between 3% and 4%. We will be eligible for support and funding from sources that commercial companies can not access. This puts us in a position to lead the way and help our wider community reduce carbon and inject profits back into other environmentally important island projects.
6. Q: What will this scheme support ?
A: . The intention is that the community benefit fund will be green and support the continuation and progression of the environmental work on Arran. Funds will be available annually to support both Arran Eco Savvy and other local community projects that meet with the society’s objectives.
Arran Eco Savvy (AES) is a long established environmental charity based on the island and the aim of Arran Community Renewables (ACR), the new Community Benefit Society, is to support the continuation of this charitable work. The intention is to use these funds to support AES in line with ACR’s ‘Objectives’ and AES’s charitable “Purposes”. Both of which are the accomplishment of environmental projects that reduce carbon and benefit the community of Arran.
Most recent projects undertaken have been:
Food Share, saving over £135,000 worth of food from landfill.
Enabling around 25% of Arran homes to receive Energy Efficiency Audits supporting over 50 instals of renewable energy systems.
Eco Savvy’s volunteer run shop that saw 1.1 tons saved from landfill in Jan/Feb 2019 alone.
Ebike loans have replaced more than 13179 miles of car travel with ebike miles.
Supporting staff and over 100 volunteers to deliver these projects and reduce Arran’s carbon footprint by over 555t CO2e, a lifetime saving of over 2,277t CO2e.
Continuation of these projects will be directly reducing Arran’s carbon and giving practical support to the residents to engage in successful environmentally sustainable lifestyles.
7. Q: Who pays for the solar panels?
A: The solar panels will be paid for by a capital grant from CARES and by the local community buying shares in the Community Benefit Society. We could go to a bank and pay interest on a loan, but borrowing through community finance means that if you share our vision we can invest together, keeping investment local and sharing the profits with the community rather than a commercial bank.
8. Q: How does the project generate money?
A: Solar panels generate free electricity but are expensive to buy. The panels generate electricity and therefore a modest income from day one. The electricity sales are generated from selling power to the building owner – the panels on the roof will be fully owned by the community. We will set the price of the power so that everyone wins; in return for letting us lease their roof we will make sure the building owner gets (100% renewable) energy cheaper than they would buy normally from the grid. We will also endeavour to make sure all community investors get a return at least equivalent to a typical savings account.
9. Q: What site?
A: We would like to find a building that would allow us to give the greatest benefit back to the community. Our first choice was the care home Montrose House but unfortunately NAC did not want to pursue that option due to the pandemic but it is on the list of future places. The sheltered housing was considered but ruled out at this stage due to covid also. The new affordable housing development was the next option but the construction for that has been stalled due to funding but if it goes ahead then we have had discussions with them. The community halls have been considered but they do not use much electricity and at inconsistent times. The primary schools are potentially an option and are on the list but they are empty at the height of summer when the solar panels will be generating the most energy so not top of the list. The high school is complicated as it is NAC who is responsible for energy bills but a private company who owns the building. We are working with NAC and they are keen to find a site that will work for them. The new hospital is due to be built in the next few years so the current building would not be an option for us now and the doctors’ surgeries are on the list and could be options but they are all ruled out for this stage due to the pandemic.
One of the main factors is the building must have a very high energy use; we need to know that the chosen building will use all the energy we produce otherwise we will have to export to the grid which would not generate sufficient return to create a community benefit fund. Since the end of the feed in tariff it is not financially viable to have a fairly small solar array that mainly sends electricity to the grid. The numbers just don’t add up as we only get around 5p per kWh. By putting the panels on the roof or ground where a building is using all the electricity then we can sell the power to that building. A proposal offering around 10 – 20 % reduction on unit price for the business owner is what we are aiming for.
The other considerations are that if we choose a business that supports jobs and the wider economy on Arran there are benefits to the whole island. Green tourism and the global green recovery are the best way out of this current crisis not to mention vital in our fight against climate change. Energy use in commercial business contributes huge emissions and is a considerable consideration in the race to reducing carbon emissions. The benefit to the community from this model of project is in generating funds that Arran Eco Savvy can use to continue its important work and fund continuing and new, environmentally focused initiatives.
To ensure that a solar project will always make economic sense, we need an easily accessed roof or field and an energy user close-by who will always need the power we generate – at the time we generate it. Some buildings have a high demand but this is focussed on the morning or evening when the sun is less likely to shine. Although we hope to take on more projects with different characteristics and community links it is important that our first project carries the minimum financial risk.
10. Q: Why doesn’t the business owner just buy the solar panels themselves?
A: The simple answer is that they can – solar panels provide a good payback, however this is only realised over a long timeframe; often investors do not want to invest in projects that do not payback within a set period. By financing the project through the community, we can take a longer term view – individual community investors may come and go, but the new community organisation that owns the solar panels will be around for up to 25 years. We will look to lease the roof or land with all infrastructure belonging to the community.
11. Q: What are the main project risks?
A: The largest long term risks are that we do not secure enough investment from the community. These risks are heavily mitigated by the financial return of the project, plus we will maintain the ability to sell electricity directly to the grid as a backup. By offering competitive prices to both shareholders and the business owner, we can be confident that the project will attract interest on both sides and have modelled a’ Covid’ scenario to ensure that the project is sufficiently robust to resist such unexpected events. In a case where there is a shortfall in community investment, we also have the possibility of topping up equity shortfall with a small commercial loan, or not taking the project forward. At the moment, one risk is the potential cost to connect into the electricity grid, which has come back higher than expected. We are hopeful that we can reduce this cost either through redesigning aspects of the scheme or through the additional grant support requested from CARES. Either way, this is a risk which we know we can address prior to deciding to push go on the project.
12. Q: Why solar rather than other renewables?
A: We are actively considering other technologies and other sites, but this is primarily about risk. Roof mounted or ground mounted solar is extremely well proven and easy to predict generation and income into the future. It is also more straightforward in terms of planning permission than other technologies and so gives us the chance to deliver a project within the short to medium term and establish a foundation from which to explore other projects.
13. Q: How much money will the community green fund, business owner and community shareholders make?
A: We have modelled a number of scenarios to make sure that the project makes commercial sense for all involved, but the exact payments are yet to be negotiated and will depend on final costs for the grid connection, construction, and the prevailing cost of electricity. What we can say for definite is that we are committed to only launching the share offer once we have confidence that we can give a substantial contribution to the green fund annually and pay the community shareholders a rate of interest at least competitive with a typical savings account, whilst also providing the business owner with an energy bill saving.
14. Q: What is the risk of investing, could I lose my money?
A: As with any investment, money would be invested at risk. We are busy modelling all possible scenarios so that we can be fully transparent with the effect of any risk on the project and will set these out clearly in the share offer, alongside offering independent advice in partnership with Community Shares Scotland. We will also factor in whether we should restrict payments to shareholders for the first few years– this is so that we can build up a pot of money to see the project through any unforeseen consequences and make sure share interest is always paid in full. As well as making the share offer open to small investments, it should be possible to withdraw your money at any allocated time, subject to standard conditions. The full details of any such arrangements will be set out in the share offer document and discussed extensively before we look to raise any capital.
15. Q: I don’t want to take part in this project, but I would be interested in similar projects, will there be other opportunities?
A: We hope so. At the moment we have no idea if there is sufficient interest in the community to invest in one or 100 projects, but so long as there is interest, we will look for further opportunities, and hope that we can do this succinctly once the first project is up and running.