Session 8Mainstream and alternative forms of financing
One of the biggest challenges when thinking about the energy transition is how to finance it. There is a direct relationship between ownership and financing. Here at mPower, we feel it is important not to lean too heavily on the private sector to deliver the energy transition as an over reliance on providing profit for shareholders can lead to compromise on key energy transition goals (reducing energy use, tackling energy poverty, reducing emissions, increasing local and renewable energy generation). The climate crisis and the energy transition provides an opportunity for greater democratic and citizen involvement in energy; innovative finance can be one of those ways through which the privatized energy system can become more democratic.
As a project, our main focus was not finance, but below you will find some definitions and resources that will help you to understand what opportunities you have to fund your project.
Financing options available include equity finance, crowdfunding, public-public or public-private partnerships and grants and subsidies.
Equity finance: Equity financing is providing your investor, which could be a citizen or a business, the ownership right over your organisation. This is the most basic and stable form of financing, however it is also a risk for both the organisation and the financing party. In equity financing, the investment does not necessarily produce profits and can be lost in case of bankruptcy of the structure. Community share offers are a common example of equity finance.
Crowdfunding: Crowdfunding enables projects to collect money from a large number of people via online platforms. Projects may choose to repay the funds with interest (this is very similar to traditional borrowing from a bank), or through energy savings. The ‘investors’ could be businesses or citizens or a combination.
Public-public, public-common/civic, public-private partnerships: Public-public, public-common/civic and public-private are a type of funding model that is generated from collaboration between different partners. Public indicates the municipality/local authority, common/civic indicates a local group, cooperative and community and private indicates local private companies. Such partnerships can take place in different structures - and we explore these more in session 9.
Public-Public Partnerships (P2Ps) are a pragmatic response to the Public Private Partnerships (PPPs). The latter focuses on making a profit, often at the expense of the local government and wider public. While the former can be described as a “peer relationship forged around common values and objectives, which exclude profit-seeking”.
These public partnerships are based on common values, such as solidarity, equality and democracy. They have the potential to bring together public officials, workers and communities to support them to accelerate a fair, clean and democratic energy transition that is in the broader public and environmental interest. You can read more about these in the next section.
Grants and subsidies: Grants are support financing that are offered by governmental and charity organizations with a specific impact goal in mind. There are a very wide range of grants and donations that can be mobilized while building a community-led project. There are grants available from the EU, from local and national governments and from private foundations. Rescoop’s financing guide gives a brief overview of some of the grants available. This is not a comprehensive list so do google searches to map what grant opportunities are available in your region.
Check out the podcast below to get some ideas from Croatia on how to use crowdinvesting to fund renewables.