Low Carbon Hub

Leading Community Energy in Oxfordshire, England

The Story

Low Carbon Hub is a social enterprise in Oxfordshire, England that launched in 2011. They are ‘out to prove that it is possible to meet our energy needs in a way that’s good for people and planet.’

Low Carbon Hub prioritises building community energy systems that are fair. Their view is that we will not achieve the technical transition to zero-carbon without transforming energy system models to make them work better for all people. The Low Carbon Hub therefore delivers and manages innovative community energy projects and assets that accelerate the transition to a fair and zero-carbon energy system in Oxfordshire.

We want to make Oxfordshire an example for the world. To show how the right investment, used in the right way, can help meet our energy needs in a way that’s good for people, and good for the planet.

- Dr Barbara Hammond, CEO at Low Carbon Hub

Firstly, Low Carbon Hub is building and managing renewable energy installations — what they call ‘powering up’. Low Carbon Hub already manages 47 renewable energy assets with a total production of 4.4 GWh per year (in 2021).

Low Carbon Hub started with multiple roof-mounted solar PV systems on schools and businesses across Oxfordshire, worked up to a small hydro project at Sandford and recently completed a large, grid-connected solar farm.

In 2022 Low carbon Hub commissioned the UKs largest community-owned solar installation — Ray Valley Solar. A 19 MW solar park near Arncott in Oxfordshire generating enough power for over 6,000 homes annually. Ray Valley Solar is expected to generate £10–13 million of community revenue over its lifetime. Ray Valley Solar is also a key trial site for the Local Energy Oxfordshire (LEO) project — a £40 million investment in real-world trials of using local generation, storage, and demand balancing at the grid edge closest to homes and businesses.

Ray Valley Solar

Income from Low Carbon Hub’s renewable energy generation assets is then reinvested in ‘powering down’ actions — carbon cutting projects that help local organisations to become more energy efficient, along with innovation and other community energy projects. Low Carbon Hub leverages in additional funding, including grants and donations, to support these actions. For example:

• Cosy Homes Oxfordshire is a home eco-retrofit partnership project that launched in early 2019 to help make homes across Oxfordshire more energy efficient — reducing their energy demand while improving comfort and health of residents. The trial phase of this project highlighted that homeowners are actually happy to engage with the whole-house retrofit approach, and that delivering only isolated, simpler energy efficiency interventions is not as attractive, nor financially viable.
• OxFutures is a collaborative partnership between the Low Carbon Hub and local stakeholders, providing free energy audits to SMEs in Oxfordshire to identify energy saving opportunities, reduce energy bills and cut carbon emissions; plus grants to part-fund implementation of recommended measures. It also provides grant support for new low-carbon start-ups, products and technologies.

Sandford Hydro

Success Factors

Collaboration and Business Models

The Low Carbon Hub grew out of successful volunteer-driven community energy developments in West Oxford from around 2001. Today, the Low Carbon Hub model is comprised of four aligned legal organisations:

1. The Low Carbon Hub Industrial and Provident Society (Low Carbon Hub IPS)
2. Sandford Hydro Ltd, a wholly owned subsidiary of the Low Carbon Hub IPS
3. Ray Valley Solar Ltd, a wholly owned subsidiary of the Low Carbon Hub IPS
4. The Low Carbon Hub Community Interest Company (Low Carbon Hub CIC).

The purpose of the Low Carbon Hub IPS is to develop decentralised, locally owned renewable energy infrastructure for Oxfordshire by developing a portfolio of renewable energy projects with businesses, schools and public sector partners. The Low Carbon Hub IPS Limited was set up as an Industrial Provident Society, for community benefit, a legal form that can be used for businesses that are run for the benefit of the wider community and that are reinvesting profits in the community. The Low Carbon Hub IPS raises investment for projects and owns and operates renewable energy generation assets. Sandford Hydro Ltd and Ray Valley Solar Ltd were set up as separate subsidiaries due to their different risk profiles.

Part of the surpluses from Low Carbon Hub IPS are passed to the Low Carbon Hub CIC to fund work on community energy projects, in line with the IPS’s community benefit purpose. Community Interest Companies are a UK model for social enterprises committed to using their revenues and assets for public good. Low Carbon Hub CIC delivers community benefit and innovation projects and provides practical support to communities to develop their own renewable energy assets and initiatives. Low Carbon Hub staff are employed by the CIC entity, and work through a service agreement with the IPS.

The Boards of Directors for the Low Carbon Hub CIC and Low Carbon Hub IPS are comprised of the same people — with the addition of at least one independent Director on each, to ensure each company’s interests are safeguarded. A number of community partner groups with a low carbon or community energy focus have a shareholding in the CIC, to ensure transparency and that the CIC is guided by those it is set up to serve. A special Community Director is elected to the CIC Board by these community group shareholders every three years. Shareholders in the CIC do not receive any dividend, as CIC assets are locked for social purposes. Investors in the Low Carbon Hub IPS automatically become members and owners of the society by virtue of their investment, and they elect the Board of Directors.

Partnerships and collaboration are critical to the Low Carbon Hub’s success. Every programme that the Low Carbon Hub delivers is in collaboration with at least one other partner.

Financing Approaches

Low Carbon Hub excels in collective financing. After initially being set up with support from a grant, CAPEX funding for renewable projects was first raised through a small equity raise from a handful of pioneer investors. This was then followed by a series of community share offers to raise funds for specific portfolios of projects.

Community shares in the UK are a distinct type of ‘withdrawable’ share capital that behaves differently to conventional transferable shares used by most companies, and they are unique to co-operatives and community benefit societies. Community shares cannot be transferred between people, and instead shareholders can apply to withdraw their share capital, subject to approval. Financial returns can be paid on withdrawable community shares, and they cannot go up in value but can go down. In effect they work more like long-term loans and they are designed primarily as a social investment tool.

In 2018, Low Carbon Hub created a Community Energy Fund as a way of creating more flexible investment funding for their pipeline of projects. To date over £8 million has been raised for the Community Energy Fund through a number of community share offers — from more than 1,400 individual investors. The community share offer process is currently hosted by the UK community investment platform Ethex. Investors are attracted to the fund for the moderate financial returns and the social and environmental returns — the fund is promoted as an investment opportunity that puts money to work delivering local projects to tackle climate change. Returns are targeted at 4-5%.

For the Ray Valley Solar investment, Triodos Bank UK also provided a loan, together with lending from Oxford City Council and grant funding from Project LEO.

Impacts

Low Carbon Hub’s renewable energy assets already generated around 4.5 GWh of electricity per year in 2021. The Ray Valley Solar project then added an additional 18 GWh of clean electricity each year.

Low Carbon Hub’s activities and energy assets have attracted more than £8.3m of investment and generate significant economic benefits for the Oxfordshire community, including:

• £1.7m lifetime anticipated savings on electricity bills by solar hosts
• £2.6m anticipated community benefit investment into Oxfordshire communities
• £3.9m of interest paid to investors

The Ray Valley Solar project is expected to generate a further £10–13 million of revenue over its lifetime that will be reinvested into other community energy initiatives.

‘Powering down’ programmes like Cosy Homes Oxfordshire have important social and health benefits, as they target holistic improvements of housing and Oxfordshire residents gain warmer, drier and more liveable homes as a result.

Lessons for Others

Generally transferrable lessons from the Low Carbon Hub case include:

• Communities all over Europe have an opportunity to secure sustained revenues from developing local renewable energy projects.
• Raising community investment into a fund model, that has a social priority together with reasonable financial returns for investors, offers greater strategic flexibility for development of renewable energy assets than capital-raises that are tied to specific projects. Though crowd investment for specific projects is still a good place to start.
• It is important to have a clear plan from the beginning to reinvest profits into the community and more complex energy efficiency and innovations projects with social benefits. This makes it clear when raising capital for renewable projects that it is a social investment opportunity.
• Separating operations into different legal entities helps with risk management and transparency. Low Carbon Hub has one entity, with subsidiaries, for investing in renewable assets and one for wider community innovation work that can be riskier.
• It is a (social) business, so focussing on getting the right professional skills and experience is important, along with succession planning for when the people inevitably decide to move on. At the same time, don’t underestimate the skills available to be tapped in your community, and many people can successfully bring experience from other industries into community energy work.
• The Cosy Homes Oxfordshire programme shows that working on home retrofit is an essential part of integrated local energy action, but that it requires significant resource and commitment to the ‘long-haul’. Low Carbon Hub was better positioned to embark into this space once they established a good platform and track-record with simpler renewable generation projects.

The research for this case study was originally undertaken as part of an assignment under the Care4ClimateLife project (published in Slovenian). This revised version of the case study was produced with support of the Interreg Danube project ‘Danube Energy Communities Accelerator’ (DECA).