What is the problem?
1. Political Engagement and Accountability. Far fewer community energy projects are coming to fruition due to the government scraping feed-in tariffs and hindering access to the energy market. To overcome these barriers, community energy will increasingly need to secure power purchase agreements and/or achieve scale to be viable in the short to medium term. With an accepted financial instrument, a Social Impact Power Purchase Agreement and a social and environmental impact metric we can overcome these roadblocks.
2. Lack of engagement from the financial community. The finance community is struggling to invest in the Environmental Social Governance space for projects that have low financial returns (sub 5%) but deliver high social and environmental returns. Innovative financial instruments need to be created and launched to move the investment sector to support a just transition. Furthermore, with a sub-5% return, these large corporates must have a clearly reported social and environmental return to justify investment. There are many organisations talking about agreeing a metric to qualitatively and quantitatively measure these non-financial returns, but they haven’t as of yet.
What will the project try to achieve?
To address the problems elaborated above, the sector needs:
1. a large, infrastructure- backed asset that delivers a triple bottom line that includes financial, social and environmental returns. Further, it needs
2. a metric that allows them to quantify the social and environmental additionality. Finally, it necessitates
3. a financial risk mitigant to ease the distance between the cooperative governance and corporate governance structures.
All stakeholders want scale and impact. Corporations in particular need to see clear impact to make it worth their while as the financial gains remain at 4%. This can be delivered via a metric that demonstrates clearly how the social and environmental returns increase the overall impact and thereby justify investment.
Energy Garden will create a replicable model that delivers on all the priorities touched on so far. This model includes the financial instrument, the Social Impact Purchase Power Agreement, and the metric for measuring environmental and social returns. As discussed above, Energy Garden has succeeded at developing a financial instrument of sufficient scale (up to £100 million). This instrument provides a simple payment option that includes environmental and social outcomes for the public and private sectors and will facilitate a strong buy in from civic and private society.
Energy Garden worked for four years to agree the first 13- year Power Purchase Agreement for social outcomes tied to the generation of millions of hours of energy. Renewable Energy Power Purchase Agreements have become more common and are backed by the Renewable Energy Guaranty Obligation (REGO). Energy Garden has built on this and can now share it with the community energy network nationally. Working closely with private-sector energy retailors, we have created a Social Impact Power Purchase Agreement’ (SIPPA) or Community Energy Guarantee Obligation (CEGO) that can now be packaged for other cities and B-Corps. This will be tested with corporate partners like Patagonia, Nike, Engie, Pioneer Point and Smartest Energy to assess, verify and deliver the product
Finally, Energy Garden will create an empirically robust, media friendly, visually stimulating social and environmental metric for the financial community to buy into. We are working with Imperial College, Rockefeller and Ashden to test and build an agreed social metric for the wider investment community. These partners are committed to identifying and agreeing a metric but need a test organisation with the scale and scope of a project like Energy Garden. Energy Garden is working closely with Ashden who built their Climate Action Co-Benefits Tool Kit for Cities in October 2019.
Who might be interested in this project?
Financial Community: Banks, Pensions, Institutional Investors, NGO’s and individual/ retail investors
Environmentally aware: Transport operators, Councils, Private sector, Community groups, Schools, Youth Organisations, Environmental Campaigners, Social Impact: Government, Corporates, Non-Governmental Organisations, Health professionals and individuals.