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Idea Exchange: Swindon’s solar farms involved peer finance firsts

Swindon
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The creation of Swindon BC’s solar farm was funded through unique forms of investment.

Steve cains

Steve cains

Steve Cains

Swindon’s wholly owned company Public Power Solutions developed the solar farm scheme from inception, securing planning permission, agreeing a grid connection and engaging with the local community.

When it came to funding the set-up of the farm, PPS worked with Abundance Investment, a specialist in ethical, peer-to-peer investments, to structure and market a bond that any ordinary person could buy with a minimum investment of just £5. It was the UK’s first council solar bond, launched in spring 2016, and the offer was so successful it closed a month early. The bond raised £1.8m from the public, while Swindon BC invested £3m itself.

Sixty-five per cent of profits from the solar farm now go towards funding local community initiatives, with the remaining 35% directed to the council.

Such was the success of the initiative that Swindon BC launched a second solar bond in November 2016 to finance a 5MW solar farm on a former landfill site near Blunsdon.

This time, Swindon achieved another financial first. The second bond can be held in the UK’s first green energy individual savings account, which Abundance launched at the same time for this purpose. The green energy ISA is an Innovative Finance ISA, created under new legislation last year, allow people to lend money through the peer-to-peer market while receiving tax-free interest and capital gains.

It has really caught on with the public. Ten days after launch, the second Swindon solar bond had achieved more than £1m in investment and closed six weeks early. Both bonds offered investors an average annual return of 6% over 20 years. While all investments carry an element of risk, this has proved highly attractive especially while interest rates are at record lows.

Revenues are raised from selling the electricity generated, as well as support from the Renewable Obligation subsidy. The new solar farm is expected to make a contribution from profits towards community initiatives, and its revenues will help fund a new noise barrier along the A419. Construction began earlier this month and is due to be completed in March. Importantly, it has helped Swindon towards its goal to install 200MW of renewable capacity by 2020, enough to meet the equivalent electricity requirements of every home in the borough.

All councils need to find new and innovative ways to fund the vital work that they do for their communities, and Swindon now has a template other local authorities can follow. As well as the direct return on its investment, Swindon will earn an additional £1m in business rates and rent by 2020 through its ownership of these renewable energy-generating schemes.

We have already been approached by other local authorities looking to replicate Swindon’s innovative solar bond and ISA model for funding green infrastructure. PPS can now also offer a package of support, comprising development, funding and management expertise, to other authorities looking to take a similar route. We think it is infrastructure finance fit for the future.

Steve Cains, head of power solutions, Public Power Solutions

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