The ALI ESCo will provide services in consultation, feasibility studies and implementation of renewable energy technologies from an agroecological perspective and pioneer an action research project into the viability of such an approach to evaluating and managing renewable energy initiatives as a means of contributing to regenerative rural development.

In establishing the most sustainable and regenerative woodland management strategies for Red Pig Farm we want to explore innovations in biomass production and processing within the context of the principles of our agroecological land management practices.

To enhance the market conditions that would favour a localised biomass production model we will work with local community groups to establish a model of Energy Services Company (ESCo), to supply and distribute woodfuel products from Red Pig Farm and other local woodlands thereby maximising the benefits for the local economy.

What is an Energy Services Company (ESCo)?

An ESCo refers to an innovative form of company that has the purpose of selling energy services to end customers. Generally, an ESCo sells ‘heat’ itself, rather than selling equipment (e.g. a boiler) and/or supplying fuel, which differentiates an ESCo from a typical energy supplier. For example, an ESCo can arrange the installation, maintenance and operation of a heat generating technology such as a biomass boiler that is rented by the end customer. The ESCo would cover the upfront capital costs of the project, leaving the customer to simply pay for the metered heat that they consume at an agreed rate. This rate would factor in the cost of the installation, operation and maintenance of the generating technology, as well as the management, delivery and storage of the fuel supply (e.g. wood chip or pellets). There is considerable scope in the UK for community groups and businesses to produce locally generated heat from wood or waste resources. Doing this via an ESCo could have the added selling point for customers that they do not have to find large amounts of capital to purchase a new boiler or heating system. Therefore ESCos could be effective for promoting the uptake of renewable heating systems in new businesses, in low-income areas and to tackle fuel poverty, especially in offgas areas. Energy Services Companies can be developed and owned by a public authority, or they can be privately owned businesses. Public ESCos are usually set up by public sector organisations for the purpose of delivering energy savings in publicly owned buildings. An example of a public ESCo would be an entity set up by a local authority to generate and sell heat within a social housing complex, or to heat public authority buildings or leisure centres. Public ESCos are often run through separate trading companies to the authority behind the venture. Private ESCos are profit driven enterprises. They hold energy services contracts with different clients (which could be private individuals, organisations or public sector entities), and sometimes guarantee or underwrite energy savings or emissions reductions (known as ‘energy performance contracts’). Private ESCos may outsource some or all of their operations to subsidiary companies. Very often, ESCos are not strictly public or private but have joint public-private ownership shared between a local authority and a private company. The involvement of a local authority means that social and environmental aims can remain central to a project and finance may be easier to access. At the same time a private company can plan for a good economic return on their investments whilst minimising their own risk by spreading it between the actors involved.

Why develop a community ESCo to sell renewable heat?

ESCos that are either led by a community organisation or exist for the purpose of community benefit are not currently widespread in the UK but represent an innovative use of an ESCo business model. Community ESCos are small scale organisations set up by groups that want to generate and sell renewable heat to local residents or businesses. Any profits derived from these businesses tend to be ploughed into the regeneration of the local area for the benefit of the community. Centre for Sustainable Energy 6 Community run ESCos are currently more common in the Scandinavian countries, although there is no reason this cannot be replicated in the UK, especially with the introduction of the Renewable Heat Incentive which makes renewable heating ventures more financially attractive and increasingly competitive in off-gas areas.

There are several benefits for a community group wanting to generate and sell their own local renewable heat supply through an Energy Services Company:

• This model addresses one of the main barriers that dissuades customers from switching their heating to a renewable source: finding the upfront capital for a new boiler and ensuring that there is a good value, quality assured, sustainable and secure fuel supply to feed it. By using an ESCo, the cost and hassle of buying the boiler and managing fuel deliveries is taken out of the consumers hands, making them more likely to make the switch.

• A local energy project guarantees a certain amount of local resilience in the face of rising fuel prices. Stimulating local woodfuel supply chains could result in potentially cheaper fuel bills (for example for homes currently using oil or electric heating), and this may mean a reduction in the prevalence of local fuel poverty.

• A community ESCo ensures that the large amounts of revenue that are generated from energy bills will be retained within the local economy rather than leaching out to energy companies and paying for fuel imported from overseas.

• Any profits made from an ESCo can be ploughed back into local improvement projects, thus an ESCo can be used as a vehicle for local regeneration by locking in economic, social and environmental benefits into an area and unlocking potential for additional enterprise.

• The use of renewable energy for space heating will reduce carbon dioxide emissions from the local building stock substantially – heating currently accounts for 66% of CO2 emissions from the UK housing stock alone.

• Stimulating new supply chains will increase local employment and bring under-utilised natural resources (e.g. woodlands, or waste streams from local farms) into good management practices, closing local resource loops to ensure that waste is minimised.

• As a social enterprise, a community ESCo could take on a co-operative structure. Cooperatives belong to their members and are run in an open and democratic manner, which could provide a sense of local shared purpose and cohesion. If it is not set up as a co-op, there may be community benefit written into the ESCo’s constitution.