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The UK is committed to reaching net zero by 2050. Future societal norms and behaviours will have a significant impact on how emissions are reduced, but they are also highly uncertain. Society in 2050 is likely to be very different from today. Testing against a wider set of assumptions about how society could look should make the UK’s net zero strategy more resilient and ready to address risks and opportunities as they arise. This report shows that if society changed in ways that reduce demand for energy, the energy system costs of a scenario meeting net zero could be lower by 2% of GDP than a baseline case where the UK fails to meet net zero. There are also risks and costs associated with scenarios with higher levels of energy demand, which should be planned for.

Curbing emissions to avoid the worst impacts of climate change is likely to lead to a significant increase in electricity demand due to the electrification of heating and transportation, and a decrease in the balancing reserve due to a decrease in the number of gas turbines. To alleviate the significant network investment costs and the fall in balancing resources, both distribution network operators and the system operator in Great Britain have created markets for behind-the-meter flexibility. For domestic battery storage to play a meaningful role in flexibility markets, it must be beneficial to the households who choose to finance and install it. In this paper we examine the value of domestic battery storage systems, both with and without associated PV installations. We show quantitatively, for the first time, that domestic battery storage is a financially worthwhile investment for households, and that participating in network operator and system operator flexibility markets can be lucrative. Finally, we show that domestic PV installations have a negative value when accounting for the capital investment. However, if a household wanted to install PV for non-financial reasons, investing in a battery alongside the PV gives the installed system a positive value.

This report presents the second of four case studies of UK community energy organisations conducted during 2018/19. These will later be included as part of a synthesis briefing alongside a series of sector-level interviews. The case study makes use of a combination of qualitative (e.g. interviews, organisation reports) and quantitative (e.g. financial reports) data. Summary of key lessons: Government subsidy is the cornerstone to securing both community and private finance. By providing a substantial long-term guaranteed revenue stream, the FiT allowed GEM to raise community investment and further investment from commercial and state-backed lenders. Even with the FiT in place, sourcing commercial finance was challenging. In its absence, it is unlikely that commercial lenders will lend. The ability to raise community finance is dependent on the affluence and population density of a locality. Unable to raise all the finance it needed from the community of Mull, the organisation was forced to access more expensive loan finance. Communities present important test beds for innovation, but direct long-term benefits may not be forthcoming. In its role as a trusted local organisation, GEM demonstrated an important role for community energy in facilitating innovation, but the extent to which it has been able to benefit from this is questionable. Partnerships with public landowners are critical to project delivery. Forestry and Land Scotland made land available for use by GEM, which was critical to their hydro scheme. Without this the project could not have taken place.

This report presents the first of four case studies of UK community energy organisations conducted during 2018/19. These will later be included as part of a synthesis briefing alongside findings from a series of sectoral-level interviews. The case study makes use of a combination of qualitative (e.g. interviews, organisation reports) and quantitative (e.g. financial reports) data. Key summary lessons include: The ability of community energy organisations to raise community finance is underpinned by government subsidies (e.g. feed-in-tariff). By providing a long-term guaranteed revenue stream, they de-risk the energy project. Their removal presents investors with a less attractive proposition, potentially closing down an important stream of finance. Local authorities are a key facilitator of community energy projects. For example, they may purchase power from community energy organisations, as well as provide space for power generation. The latter is highly dependent on the extent to which the procurement process and council leadership values locally supplied, low-carbon energy from not-for-profit organisations. Intermediaries are a key provider of economic, technical, social and political capital to community energy organisations. A key example are project developers such as Energy4All. Choices around legal structure have an important bearing on the financing and governance of a community energy organisation, including the: * Extent to which 'community benefit' is incorporated into the legal entity. * Level and type of finance it can raise. * Degree of risk it exposes its investors to. * Way in which control is exerted over the organisation's strategic direction and who wields this power

This report presents the third of four case studies of UK community energy organisations conducted during 2018/19. These will later be included as part of a synthesis briefing alongside a series of sector-level interviews. The case study makes use of a combination of qualitative (e.g. interviews, organisation reports) and quantitative (e.g. financial reports) data. Summary of key lessons: The withdrawal of the FiT has made business model innovation necessary, whilst legacy revenues from the FiT have made experimentation possible. The withdrawal of the FiT has meant that the CIC is unable to employ its existing revenue model for future projects, forcing it towards a more service-oriented approach. Interestingly, the 20-25 year long guaranteed revenue the FiT provides has also provided the CiC with the necessary capital and security for them to experiment with their business model. Community loans and bonds can be a viable alternative to community shares for delivering community energy projects. Instead of crowd-sourcing share finance from hundreds of shareholders, Gwent Energy has shown how raising community loans and bonds through a members-only Investor Club presents a different means of raising capital. Challenges of CIC legal structure have been overcome by an innovative finance model and a cooperative ethos. Whilst it has some advantages, the CIC legal structure suffers from the inability to raise community shares and the lack of an automatic democratic "one shareholder, one vote" system. These shortcomings have been overcome by legally incorporating these voting rights and raising finance through loans and bonds from community members only. In turn, these investors are invited to sit on committees to shape the CIC’s future. Heating business models present key challenges for community groups. Gwent Energy have thus far been unable to expand the heating side of its business, because of a combination of the poor rate of return from some low-carbon heating technologies (e.g. heat pumps), the rising cost of feedstock (e.g. biomass) and the difficulty of getting users to sign up for district heating. High dependency on individuals with appropriate levels of time, skill and commitment to generate social and environmental benefits. The establishment of the CIC would not have been possible without the involvement of one key individual. However, steps are being taken to overcome the dependency on the company’s chief architect.

This report presents the final of four case studies of UK community energy organisations conducted during 2018/19, which will later be included as part of a synthesis briefing alongside a series of sector-level interviews. The case study makes use of a combination of qualitative (e.g. interviews, organisation reports) and quantitative (e.g. financial reports) data. Summary of key lessons includes: Energy efficiency and heating services can constitute a core offering of community groups. Unlike many other community organisations, BHESCo has been able to develop a compelling value proposition, centred on delivering affordable comfort and warmth, through a combination of efficiency and generation measures. By employing a Pay As You Save model, it has unlocked a previously untapped revenue stream for communities, which importantly is less reliant on generation subsidies such as the Feed-in-Tariff (FiT). However, we find the model is limited in its ability to assist the fuel poor, who cannot be expected to share any cost savings generated, and tenants of rented properties where landlords are uninterested in investing in energy savings. Financing a serviced based model presents uncommon challenges in the community energy sector. Compared with other community energy groups, BHESCo’s investors must consider higher operating costs, on-going capital needs and a more complex offering, based on its business model rather than a singular asset. However, BHESCo has negotiated these challenges deftly and is open to alternative approaches, involving blended finance and working in consortia, as it explores potential larger scale projects. The complexity of BHESCo’s business model presents both advantages and disadvantages. On the one hand, its relative complexity makes the venture less dependent on any single technology, customer, revenue stream or subsidy (such as the FiT), versus most other community energy groups. This helps to insulate the organisation from market and policy shocks. On the other hand, the complexity of BHESCo’s business model and the novelty of its proposition mean it has taken time to mature as a venture. For a time, it relied strongly on grants and the commitment of its key founder and CEO. The adoption of the bona fide co-operative legal structure stems from both financial and ethical considerations. A co-operative model was adopted largely as a means of raising relatively low cost community shares. This was largely a reaction to a lack of affordable finance being offered to community-led energy efficiency oriented businesses like BHESCo, even from ethical investors. Beyond finance, the co-op model was also selected on ethical grounds. Specifically, the cooperative model's 'one shareholder-one vote' model provides a broader distribution of power versus the 'one share-one vote' model employed by companies limited by shares. Furthermore, the absence of an asset lock provides its citizen investors with the option that assets can be liquidated to pay back their investment.

Report from the 'Visions for the Future of Community Energy' workshops organised by the UK Energy Research Centre (UKERC) Financing Community Energy project.

This UKERC Working Paper seeks to understand the factors contributing to the emergence, growth and nature of community energy in the UK. It is based on a review of existing data and literature, and focuses on investigating the role of financing mechanisms and business models in the evolution of the community energy sector. It argues that, since its emergence in the UK in the late 1990s, community energy has grown through finding opportunities for smaller scale, decentralised energy activities in the UK's highly centralised energy system. The combination of development of renewable energy technologies, and the launch of the government's Feed-In Tariff Scheme (FITS) in 2010, produced a boom in the sector, especially around solar electricity generation. Recent cuts to FITS rates and other policy changes place community energy at a crossroads. Some renewables activity will continue, but groups are exploring a wide range of activities, partnerships, and business models. We are engaging with the sector around outputs from our research, which include a survey and case studies, to co-develop recommendations and pathways for the future.

The Paris Agreement, which entered into force in 2016, sets the ambitious climate change mitigation goal of limiting the global temperature increase to below 2°C and ideally 1.5°C. This puts a severe constraint on the remaining global GHG emissions budget. While international shipping is also a contributor to anthropogenic GHG emissions, and CO2 in particular, it is not included in the Paris Agreement. This article discusses how a share of a global CO2 budget over the twenty-first century could be apportioned to international shipping, and, using a range of future trade scenarios, explores the requisite cuts to the CO2 intensity of shipping. The results demonstrate that, under a wide range of assumptions, existing short-term levers of efficiency must be urgently exploited to achieve mitigation commensurate with that required from the rest of the economy, with virtually full decarbonization of international shipping required as early as before mid-century.

A cumulative emissions approach is increasingly used to inform mitigation policy. However, there are different interpretations of what ‘2°C’ implies. Here it is argued that cost-optimization models, commonly used to inform policy, typically underplay the urgency of 2°C mitigation. The alignment within many scenarios of optimistic assumptions on negative emissions technologies (NETs), with implausibly early peak emission dates and incremental short-term mitigation, delivers outcomes commensurate with 2°C commitments. In contrast, considering equity and socio-technical barriers to change, suggests a more challenging short-term agenda. To understand these different interpretations, short-term CO2 trends of the largest CO2 emitters, are assessed in relation to a constrained CO2 budget, coupled with a ‘what if’ assumption that negative emissions technologies fail at scale. The outcomes raise profound questions around high-level framings of mitigation policy. The article concludes that applying even weak equity criteria, challenges the feasibility of maintaining a 50% chance of avoiding 2°C without urgent mitigation efforts in the short-term. This highlights a need for greater engagement with: (1) the equity dimension of the Paris Agreement, (2) the sensitivity of constrained carbon budgets to short-term trends and (3) the climate risks for society posed by an almost ubiquitous inclusion of NETs within 2°C scenarios. POLICY RELEVANCE Since the Paris meeting, there is increased awareness that most policy ‘solutions’ commensurate with 2°C include widespread deployment of negative emissions technologies (NETs). Yet much less is understood about that option’s feasibility, compared with near-term efforts to curb energy demand. Moreover, the many different ways in which key information is synthesized for policy makers, clouds the ability of policy makers to make informed decisions. This article presents an alternative approach to consider what the Paris Agreement implies, if NETs are unable to deliver more carbon sinks than sources. It illustrates the scale of the climate challenge for policy makers, particularly if the Agreement’s aim to address ‘equity’ is accounted for. Here it is argued that much more attention needs to be paid to what CO2 reductions can be achieved in the short-term, rather than taking a risk that could render the Paris Agreement’s policy goals unachievable.