Community energy has long been hailed as a vital component in the UK’s transition to net zero—but despite its potential, the sector remains underpowered and underfunded.
A recent Select Committee meeting in Westminster brought together community energy industry experts and policymakers to explore how government intervention could unlock longer-term contracts and boost community-led energy projects across the UK.
Speakers on the panel included Steve Shaw, Director of Power for People; Dr Mary Gillie, Founder and Director of Energy Local; Benedict Ferguson, Co-Executive Director of Community Energy Wales, and Stephen Harris, VP of Energy Markets and Optimisation at OVO Energy.
The challenge of long-term contracts
Stephen Harris from OVO Energy opened the conversation by pointing out a key issue: most domestic energy tariffs are short-term—typically one to three years. This makes it almost impossible for suppliers like OVO to offer the kind of long-term Power Purchase Agreements (PPAs) that community energy groups need to plan and invest with confidence.
Harris suggested that government-backed funding could enable energy suppliers to offer longer PPAs to community initiatives, reducing risk and encouraging growth.
Building secure local energy markets
The idea of secure local energy markets came up repeatedly. These markets, built around the potential savings from balancing local electricity networks, could help community energy schemes thrive.
Steve Shaw of Power for People emphasised that his proposed Local Electricity Bill would give small-scale generators access to an energy export guarantee scheme —something he sees as vital for supporting community projects.
Shaw also highlighted the disproportionate costs small generators face when trying to export electricity — costs that are much easier for large-scale generators to absorb. Levelling this playing field could remove a significant barrier for community energy providers.
Principles for a sustainable community energy model
Mary Gillie of Energy Local laid out several foundational principles for a successful community energy sector. Among them:
• Balance electricity supply and demand locally
• Encourage behaviours that reduce overall consumption
• Co-operation with licensed suppliers in operating effectively on a national level
Gillie acknowledged that the Energy Local model has yet to address the needs of heat and transport but said local energy clubs can play a pivotal role. These clubs incentivise smart meter adoption and give consumers more agency in their energy use.
However, the scalability of this model remains in question, especially due to technical limitations — such as the need for all participants to be connected under the same primary substation — and the complex billing systems of traditional suppliers.
Old systems, new problems
Outdated supplier billing systems, combined with the high costs of additional billing mechanisms, are deterring suppliers from getting involved in more complex local energy club models. As Gillie put it, the current system simply isn’t built for the kind of agile, community-based energy trading that’s needed.
Wera Hobhouse MP raised an important concern: the inherent complexity of local energy clubs could limit their future growth unless systemic reforms are introduced. Without scalable solutions, the impact of these grassroots efforts may remain localised and limited.
Market reform, not just funding
Subsidies have worked before — the Feed-In Tariff (FIT) scheme led to a boom in community energy projects, which quickly tapered off once subsidies were withdrawn. The consensus from the roundtable was clear: structural reform is needed.
Two main routes were suggested:
1. Restructure the energy licensing model – Introduce a local supply licence and make cost structures proportional, enabling community groups to sell power directly to local customers.
2. Integrate into the existing supplier framework – Licensed suppliers could offer billing, export, and metering services for community groups, with government incentives to support innovation.
Shaw pointed out that unlocking community energy doesn’t require vast resources — it requires regulatory change. He compared it to the retail market, where supermarkets and corner shops coexist under a system that recognises their differences and offers consumers both convenience and choice. The energy market, he argued, needs similar proportionality and flexibility.
Learning from Europe
Denmark offers a compelling case study: 52% of the country’s wind energy is community-owned. Because the benefits are so tangible, communities actively compete to host new wind projects. This level of public buy-in is a stark contrast to the UK, where scepticism about the energy transition is growing.
Benedict Ferguson of Community Energy Wales echoed the call for reform, noting that the sector is “really, really suppressed.” He emphasised that community energy groups are already delivering tangible benefits — like the Lawrence Weston wind project near Bristol, which offers residents half-price electricity on windy days — but these benefits are not being properly credited or scaled.
The role of Government
Both Ferguson and Shaw argued that government mandates requiring suppliers to collaborate with community groups could eliminate much of the uncertainty currently facing the sector.
Innovation funding, adjustments to export costs, and even the redirection of revenue from schemes like the Renewable Energy Guarantees of Origin (REGOs) — which generate around £200 million annually — could all play a role in revitalising community energy.
The bottom line? There’s no shortage of passion, innovation, or local engagement. What’s missing is a clear and supportive regulatory framework. If the UK is serious about reaching net zero and ensuring public support along the way, empowering community energy must become a national priority.
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