Community energy puts people at the heart of the energy system. It brings communities together to tackle climate change in a practical and democratic way by understanding, generating, owning, using and saving energy.

In England, Scotland and Wales there are over 420 community energy organisations, who have raised over a quarter of a billion pounds of investment through share offers and matched funding for low carbon projects and initiatives. Community-owned energy capacity in the UK currently totals 319 MW (2021 State of the Sector report).

However, following the recent withdrawal of renewable energy subsidies the community energy sector needs a new business model.

Schools are at the heart of our local communities and represent a quarter of public sector carbon emissions, yet despite around 80% of local authorities having declared a Climate Emergency, many do not have plans in place to tackle schools’ emissions.

Schools therefore present a powerful opportunity to develop a new business model for the community energy sector.

Leicester-based Green Fox Community Energy Co-operative (Green Fox) has been at the forefront of decarbonising heat in the community energy sector and has also launched successful projects at schools. Together with experts from Energy Systems Catapult , Loughborough University, Leicester City Council, and the newly formed Attenborough Learning Trust (ALT), a multi-academy trust with four primary schools in the heart of Leicester – they developed a new business model for completely decarbonising the energy used by schools.

The project was supported by the Next Generation Programme, funded by Power to Change.

Key points

Previous community energy models in schools mainly focused on solar PV; our new Base Model takes this a step further to include energy efficiency and lower energy tariffs. These provide further financial value for both the school and the community energy  organisation and greater carbon reduction.

The Net Zero Schools model is a two-stage approach:

1. Base Model measures the schools’ energy consumption and costs, then implements energy efficiency and proven low-carbon technologies to reduce these, including generation through solar PV.

Implementing energy efficiency measures and installing solar PV reduced CO2 emissions by 21% ; switching to a new renewable energy tariff reduced these by a  further 16%. Overall, the Base Model saved the four schools a combined total of 88  tonnes CO2 per year equating to a cost of £115 per tonne of carbon saved over 20 years.

The Base Model enabled a 42% saving on the energy bill of the academy trust schools  involved in the pilot (total annual saving of £40,000 or £800,000 over 20 years). This represents a simple payback period of just over 6 years. For a community energy group raising funds through a share offer the model provides a 3% return on investment over 20 years with capital repayments of 5% every year.

The capital cost to implement the Base Model across the four primary schools (ten buildings) within the ALT was £215,000, equating to approximately £54,000 per school. Scaling up to all 80 primary schools in Leicester would cost £4.3 million and throughout England with 16,800 primary schools, it would cost £907 million.

The higher the electricity price in the market the more financially attractive the Base Model becomes. There is real scope for developing a national renewable energy tariff  specifically tailored to decarbonising schools.

2. Base Model Plus achieves full electrification of the energy demand, which totally  decarbonises the schools by adding air-source heat pump (ASHP) technology and newer products and emerging markets for additional value. The Community ESCo is responsible  for all aspects of delivery including identifying the right measures, raising finance,  installation and managing energy bills.

The Base Model Plus reduced CO2 emissions by a further 63% and together with the Base Model totally decarbonises the ALT schools. The four zero-carbon schools would have a combined CO2 reduction of 4,800 tonnes over 20 years. This equates to a cost of £193 per tonne of carbon saved over 20 years.

Installing the maximum solar PV at each school would reduce the running costs of the ASHPs. At the ALT, the model calculated a 20% increase in self-consumption of  electricity generated by PV which helped with the overall finances of the Base Model  Plus.

To upgrade and decarbonise the heating system using ASHPs would cost an estimated £710,000. In addition to the £215,000 for the Base Model this equates to a total  capital cost of £925,000 across four schools. With a simple payback of 18 years this  effectively makes the community energy business model unviable.

Adding a capital grant of £525,000 (just over half the capital required) would improve the simple payback to 9 years. With the above average heat price at the ALT,  the Base Model Plus community energy business model could work at primary  schools that are off the mains gas network or those with better building fabric and  where existing radiators and pipework can be utilised which would have a lower  capital cost.

Replacing the Smart Export Guarantee (SEG) with a Power Purchase Agreement  (PPA) would add a further £2,000 per year. This could improve the simple payback to just over 5 years.

The average cost to transform an ALT primary school to zero-carbon equates to £230,000 per school. To implement the Base Model Plus in all 80 primary schools in  Leicester would cost over £18 million; throughout England with 16,800 primary  schools it would cost £3.9 billion. The community energy sector could contribute  significantly to the equity required but would need government support to make the  Base Model Plus model work financially.