About Nesta

Nesta is an innovation foundation. For us, innovation means turning bold ideas into reality and changing lives for the better. We use our expertise, skills and funding in areas where there are big challenges facing society.

In September 2022, a small village in Cornwall called Stithians echoed to the sounds of loud drilling.

But, unusually, the noise could well have been a welcome sound to those living nearby. It heralded the creation of boreholes designed to replace existing heating systems with efficient ground source heat pumps. Around 250 homes, many of which rely on expensive oil heating or electric storage heaters, are set to benefit from the scheme run by Kensa Utilities and funded by the European Regional Development Fund.

The need for cheaper, cleaner energy is more urgent than ever. Of the 630,000 excess winter deaths in England and Wales in 2020-21, cold homes are thought to have contributed to around 13,500 and fuel poverty around 6,300. With living costs and energy bills at a record high, the number is likely to be much higher this winter.

Most householders are likely to respond by turning down their thermostat and boiler flow temperature, improving insulation or switching off energy-guzzling appliances. But, as in Stithians, there are a growing number of local initiatives where neighbours are pooling resources, skills or knowledge with their wider community.

In many cases, these initiatives are building on ideas that have been tested elsewhere. There are more than 300 community energy organisations in the UK that provide community-led renewable energy or run local energy projects, and collectively they saved consumers £3.3 million off their energy bills in 2021. It is an approach growing in popularity as households search for cheaper, more resilient and sustainable options for heat and power this winter. Last year saw a 38% increase in the delivery of community-led energy efficiency and energy-saving services.

This wave of community energy and heating initiatives spans a diverse spectrum. It includes peer-to-peer trading models (where energy or heat is traded between individual households or communities), group purchasing schemes (that reduce the cost to the individual through leveraging economies of scale) and community energy generation (where a community owns or controls the means to produce renewable energy locally). These approaches vary in size and ambition, from providing heat networks for a whole community (as in Stithians) to disrupter companies building energy production on a national scale, but they are all based on the principle of communities sharing resources and knowledge.

What do these models look like in action? Nonprofits such as Energy Local are enabling peer-to-peer trading where households with energy generation capabilities can club together and exchange local, clean energy for an agreed price. Solar Together is an example of group purchasing in London, responsible for installing solar panels in more than 2,100 homes in London and securing bulk-buying discounts for residents.

Other communities have taken energy generation into their own hands. Bristol Energy Cooperative generates solar energy for its local community and, thanks to solar roofs, has facilitated more than £350,000 of community benefit payments since being established in 2011. Meanwhile, Ripple Energy runs a large-scale scheme where people anywhere in the country can buy shares in cooperatively-owned wind farms in order to reduce their energy bills. It’s been so successful that it’s now oversubscribed and seeking to increase the number of wind farms it owns.

Forging closer community links has some other, less obvious, positive outcomes. Social feedback can have a powerful effect on people’s choices about energy consumption. There is evidence that giving households information about how much energy they spend compared to their neighbours can lead to small but enduring energy savings. Neighbours are also well-positioned to help those who are harder to reach by supporting each other to increase the energy efficiency of their homes and providing advice and referrals for vulnerable residents at risk of fuel poverty.

Despite the benefits local energy and heating initiatives bring to residents, it has generally been difficult for some of these initiatives (such as community energy projects) to make a case for investment, particularly given the lack of tax relief. There is also minimal government support for community and home energy generation, illustrated by the removal of energy generation incentives such as the feed-in tariff. However, some of these emerging projects have the potential to overcome the challenges around scale and sustainability that have prevented community energy projects from scaling to date. For example, the district heating project in Stithians acts as a proof of concept when it comes to bringing together the private sector and community actors.

The scale of the energy and climate challenges we face demands a multi-pronged approach. We anticipate that in coming years this will give rise to a variety of new business models facilitating collective action on heating and energy. These could serve as important tools in the effort to decarbonise homes at scale and reduce energy bills.