Financial Aspects of Community Energy Systems

Abstract

AbstractThis chapter analyses the process of financing community energy, emphasising delivering sustainable projects that do not add additional burdens for communities. Community energy depends on developing micro- and pico-systems, which have specific financial requirements due to their small size. A key challenge is ensuring the financial sustainability of projects once installed and when the initial capital runs out. The chapter advocates putting the community at the centre of a structured financial planning process, negotiating cost reductions and revenue models, and diversifying the revenue stream by looking beyond conventional sources of finance. The analysis of a case study of financing two micro-grids in Malawi demonstrates the obstacles faced by financing projects. These small projects face enormous challenges that drive up costs, including difficulties in accessing supply chains for solar equipment, inflation and foreign exchange fluctuations, and limited technical capacity to maintain the system. A sustainable energy transition should help reduce these costs to facilitate the expansion of the micro-grid model. Until such expansion takes place, the sustainability of micro-grids will depend on public support and external grants to top up the income from consumer tariffs.