Community energy in the UK is at a crossroads. While it holds immense potential for delivering cleaner, cheaper, and fairer energy, there are still major structural, financial, and policy hurdles preventing the sector from scaling.
A recent Select Committee meeting for the Department of Energy Security and Net Zero explored key themes around community energy and how to build a more enabling environment. Here’s a breakdown of the key takeaways.
Speakers included Alistair Macpherson (Chief Executive Officer, Plymouth Energy Community) Pete Capener MBE (Interim Chair, Community Energy England) and Afsheen Kabir Rashid MBE (Chief Executive Officer and Co-Founder, Repowering London).
Theme 1: Community energy and local authority procurement: A missed opportunity?
A recurring challenge for community energy groups is the need for stronger partnerships with local authorities. While Afsheen Rashid from Repowering London pointed to examples like the Greater London Authority’s Greener Schools programme that show what’s possible — where collaboration with community energy groups was favoured within the procurement process — this is the exception, not the rule.
Local authorities are often under-resourced and hesitant to partner with groups that may seem ‘less professional’ than large contractors. But community energy delivers more than just power generation — it brings social value, community engagement, and long-term resilience.
Some suggestions from the panel that could enable closer partnerships with Councils included:
• Local authorities receiving funding specifically to engage community groups.
• Procurement frameworks that consider the additional social value offered by community-led initiatives.
• Financial support for the sector to professionalise — practitioners cannot continue offering their expert services for free based upon goodwill.
Some councils, like Bristol and Plymouth, are already leading the way. What’s needed is a broader, replicable framework — perhaps through a dedicated community energy unit within GB Energy — to help embed this good practice nationally.
Theme 2: The case for a ‘Community Energy Smart Export Guarantee’
Pete Capener from Community Energy England explained that the current Smart Export Guarantee (SEG) system doesn’t work well for many community-scale projects. It’s complex and lacks the long-term price security that project developers need to make a viable business case for potential project beneficiaries.
For example, solar panels installed on a school can’t generate significant revenue during school holidays when buildings are largely empty, which impacts the economic attractiveness of developing the project.
A community-specific SEG—with a guaranteed minimum price and simplified terms— could change everything. It would:
• Provide revenue certainty for new projects.
• Help community groups design tailored local deals.
• Encourage investment without locking local authorities into risky long-term contracts, to which they are adverse.
If the UK is serious about hitting the 8 gigawatts of new generation set out in the Local Power Plan, it needs financial models that accommodate and amplify community-led initiatives.
Theme 3: Incentivising Local Authorities – The need for carrots not sticks
Should local authorities be obligated to procure services from community groups? The consensus from the panels is no.
Partnerships work best when both sides are engaged and enthusiastic. Encouraging, educating, and incentivising local authorities creates more durable relationships than mandates ever could.
Alistair Macpherson of Plymouth Community Energy highlighted their positive relationship with Plymouth Council, where collaboration has flourished precisely because it was built on trust and shared values — not regulation.
Theme 4: Local energy generation and access to energy flexibility markets: Not a silver bullet, but could still be valuable
There’s growing interest in local energy supply and flexibility markets — where consumers are rewarded for using locally generated power.
Matching local generation with local consumption will alleviate stress on the electricity transmission network and foster a more efficient use of the electricity distribution system.
Ms Rashid provided a standout example of the Brixton Energy Club. By connecting residents with locally generated electricity and engaging them over time, participants were able to save up to 25% on energy bills.
However, access to these markets is still limited for community energy groups, as flexibility contracts lengths are too short (typically 3 years) to support long-term project development.
The panel noted that whilst greater access to flexibility markets could deliver value to the sector, it’s not seen as the critical catalyst to exponential growth.
Theme 5: The Law Commission review into Co-operatives and Community Benefit Societies: Threat averted, but questions remain
The Law Commission’s review of co-operatives and community benefit societies initially sparked alarm — Community Energy England had called the proposals a “catastrophic threat.” Thankfully, the final recommendations have addressed many of those concerns.
Still, questions remain. In particular, how will the Financial Conduct Authority (FCA) respond to the recommendations of the Law Commission review?
One area of concern that remains is a proposed requirement for a community shares standard mark. At present, this is voluntary. Mandating such accreditation could impose costly compliance burdens on mostly voluntary groups.
The balance must be struck between modernising regulation and keeping community energy accessible and democratic.
Theme 6: The electricity distribution network is unfit for purpose, but who pays for upgrades?
Finally, discussions turned to the UK’s overwhelmed electricity distribution infrastructure, which requires significant expansion in order to accommodate the transition to a decarbonised, distributed network.
One issue raised was, if community energy groups and other micro-generators are given a reprieve from high connection costs, then the cost will have to be picked up somewhere.
As National Grid has put it: “If you’re not paying for transmission costs, someone else is.” This highlights a broader challenge — how to fairly distribute the costs of transitioning to a more decentralised energy system whilst still keeping keeping-led project accessible?
Where next for community energy?
The first sessions concluded with the observations that just a few small concessions from government could unlock the vast potential of community energy.
The energy transition doesn’t need to be dominated by big players. Community energy groups offer a compelling model that combines climate action with local empowerment. But without policy changes — like a community SEG, fairer procurement, and funding for partnership development — the sector is at risk of continued inertia.
It’s time to share the opportunities, share the benefits, and unlock the full power of communities.
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