Project Overview
The Repower One project involves construction and operation of a Behind the Meter 99kW solar power system on the roof of the Shoalhaven Heads Bowling and Recreation Club (SHBRC) on the South Coast of NSW. The project was developed by Repower Shoalhaven, a local not-for-profit community energy association which established Repower One as a company to build and operate the project. Funds required to construct the solar project were raised from individual investors from the community, referred to as ‘community shareholders’ and from volunteer and in-kind contributions, grants and donations.
The project has been successfully operating since October 2014 and has achieved forecast energy production estimates and paid dividends to community shareholders in line with the estimates provided in the offer information document.
Brief History of Repower Shoalhaven
Chris Cooper lead the development of Repower Shoalhaven following the success of Kangaroo Valley which involved a project to install solar panels on the roof of Kangaroo Valley Ambulance Station and funding for this project was sourced from donations from the local community, allowing the project to be completed rapidly and easily for a quick win.
Repower Shoalhaven was established in May 2013 when Chris Cooper organised a community event to gain support for the development of local CE projects and it was attended by 180 people. The success of the event lead to the development of a committee within a week of the event.
The timeline for development of the concept through to commercial operation of the Repower One project is summarised below:
Repower Shoalhaven is a not-for-profit organisation established to develop community renewable energy projects for the benefit of local people, groups and businesses. One of Repower Shoalhaven’s goals was to develop a financing model for community solar and then to deploy it in the Shoalhaven community. Repower One is the first deployment of this model and since then Repower Shoalhaven has implemented Repower Two, and Repower Three is in development.
Repower Shoalhaven is run by volunteers and, since the commencement of the Repower One project, some part-time staff.
Key lessons and tips
- The importance of strong leadership. Having a leader who is committed and able to spend significant volunteer time at the early stages of the project to drive the project was essential to the success of the organisation and its projects.
- The need to convert community support into momentum. Moving quickly when there is strong community support ensures positive momentum is established from the beginning of the project
- The importance of building the group’s knowledge and reputation. Delivering a ‘quick win’ donation-based project at Kangaroo Valley built knowledge and expertise within the group and raised the profile and reputation of Repower Shoalhaven in their region.
Funding Model Overview
The Repower One project was the culmination of an initiative within Repower Shoalhaven to develop and implement a model for community financing of renewable energy projects. The development of this model spanned the concept, prefeasibility and feasibility project development stages whereas the implementation of the model (Repower One) spanned the feasibility and final funding stages.
The Repower One solar installation is 20% owned by Shoalhaven Heads Bowling and Recreation Club and with the remaining 80% is financed and owned by 19 community shareholders. At the final funding stage, a total of $119,800 was raised from community shareholders who are the investors in a project entity. The project entity (also known as a special purpose vehicle or SPV) was incorporated as a private company with the name of Repower One Pty Ltd. The critical funding for the concept, prefeasibility and feasibility stages came from volunteer and in-kind time, donations and a grant. The development funding comprised $37,000 in grants and donations and many hours of in-kind time which, if assessed at $50 per hour, amounted to around $90,000 in value.
Funding Model Evolution
A lot was learnt in the process of developing Repower One and the funding model has now been refined. For example, in Repower Two, a high-net worth community investor agreed to underwrite the project by agreeing to fund up to a certain percentage of the required funding if there was a shortfall in the funds raised through the general funding offer. While the number of investors was still capped at 20, this meant Repower Shoalhaven were able to reduce the minimum share size from $6000 in Repower One to $600, thus opening up participation to community members with less disposable income.
Types and Sources of Funding
The types and sources of funding used for the project through each of the project development phases is summarised in the table below:
Funding Contribution Breakdown
In-kind
Volunteer effort was the (in-kind) funding workhorse that contributed to the completion of the project across all the project development stages. Assuming a community rate of $50/hour gives an in-kind value of approximately $90,000. These hundreds of hours were committed to get the organisation and the project up and running. Much of this time was spent in early stage fundraising, working with advisers on financial and legal aspects of the project (including developing a financial model and various legal documents), negotiating a site, developing a risk management plan, administration and project management.
The in-kind support was facilitated by being able to leverage the significant public support and goodwill demonstrated and embodied in the turnout of 180 people at the initial event held in May 2013. By rapidly converting this public support into a committee and subsequent incorporation into an association, Repower Shoalhaven was able to inspire volunteers to join and contribute their efforts to realise as a shared vision.
Securing skilled volunteers and maintaining public support and interest was not easy. People needed to be inspired and excited and see how they could contribute to realising a shared vision, and the wider support base needed to be regularly updated as to progress.
Individuals with key skills had a large impact on the success of the project. Chris Cooper has strong entrepreneurial skills and, as the lead organiser, was able to pull other talented individuals into the project. Solar installers, book keepers, business people and accountants all contributed vital professional skills to the project. Importantly, not all the skills were contributed on a purely voluntary basis. The accountant, for example, works on a 50% fee discount which has saved approximately $4,000 over the course of Repower Shoalhaven’s first two projects.
Key lessons and tips
- Focus on the next bottleneck only. Repower Shoalhaven realised that, while it was important to have a long-term goal and plan that everybody was able to understand, it was vital to draw the volunteer’s focus to the most immediate challenge that needed to be addressed, By doing this, volunteers are kept focused and given the satisfaction of regular ‘wins’
- Keep the group action orientated and focused on key deliverables and outcomes. Often there can be great debates about the policy and regulatory requirements but this is often not useful in the success of delivering the project. It is important to have a strong chairman to ensure that the key issues are discussed and volunteers’ time is valued and used efficiently
- Request pro-bono or discounted rates from professionals. A lead organiser with entrepreneurial skills is a good starting point. Where volunteers with the key skills required cannot be found , consider requesting pro-bono or discounted rates from professionals in the field’
- Get a good accountant. Repower Shoalhaven identified financial literacy and accounting skills as being the most critical skills required for developing their project.
Grants and donations
Grants and donations were received by Repower Shoalhaven at various stages, to help cover the costs of establishing and maintaining an incorporated association, and the project development costs and examples of these are provided below:
- Member fees, one-off donations and fundraising events, such as sponsored movie nights, raised approximately $12,000 for the organisation
- A $10,000 sponsorship from the NSW Government, specifically provided for the purpose of paying financial, legal and other contractors
- The group benefitted indirectly from a $15,000 donation from the McKinnon Family Foundation. The donation was used to develop the legal templates designed and used specifically for the Repower One project.
Key lessons and tips
- Leverage your supporter base. A large supporter base, once developed, can be leveraged for significant funding contributions
- Choose a host site that has a positive profile in the community. This helps with fundraising via its membership and/or customer base
- Think outside the box in relation to grants Not all government funding is provided via published grant rounds so it is important to be aware of Government objectives and processes
- Demonstrating good governance is important when applying for grants
- Donation funders such as philanthropists are often interested in contributing funds to the development of resources, particularly when they can be used many times over by multiple groups.
Retail and Wholesale Investors from the Local Community (Community Investors)
Financing an energy project using investment funds from community members was the goal of the initiative that delivered the Repower One project. The project construction was successfully funded using 100% community investment funds. These investors were all members of the Repower Shoalhaven Association and were invited to participate in the project via direct invitation. The project depends on the “20/12” small-scale offering exemption ruling. This ruling allows private companies to offer investments to individuals with whom they have a direct relationship. There are limits to this ruling, such as shares being issued to no more than 20 investors and a maximum of $2 million in funds being raised, in any 12 month period. An offer information document was provided to prospective investors but this didn’t need to be lodged with ASIC which resulted in reduced costs.
Community investors contributed $119,800 to the project over the course of a financing campaign that was fully subscribed in just 10 days. Repower Shoalhaven used a combination of emails and newsletters to their members, website updates and social media activity to achieve this result.
The table below summarises the community investor contributions:
Key lessons and tips
Build trust. People need to have trust to invest. Repower Shoalhaven were able to build this up over time through good corporate governance and a democratic decision-making process whereby members could vote on key aspect of the project development
Inspire and motivate – tell the story. Repower Shoalhaven have shown it is as important to appeal to people’s emotions as it is to their intellect. Below is a link to an article by Chris Cooper that demonstrates the importance of leadership and key messages: https://citizenpowerblog. wordpress.com/2015/12/03/how-to-make-energy-sexy-the-6-golden-rules-pt-1/
Business Structure
The business structure that underpins a funding model is essential to the success of raising funds for the project. There needs to be a strong governance structure to operate to ensure that costs are managed to secure the required level of returns for the community investors.
The Repower One project is a special purpose vehicle (SPV), an incorporated private company and is the legal entity that is collectively owned by the community shareholders and enters into various legal agreements required to support the operation of the project. The relationships and the legal agreements between the different participants are summarised in the figure below:
The shareholders in Repower One Pty Ltd have one vote per share. Repower Shoalhaven, as the project administrator, has a single share in the SPV (Repower One Pty Ltd) with special voting powers. Repower Shoalhaven has two board directors responsible for the day-to-day running of the project. A volunteer shareholder director is elected from the shareholders to serve as an independent contact point for shareholders. The shareholder director can remove Repower Shoalhaven as the administrator at any time.
Repower One Pty Ltd collects investments and owns the solar equipment. Repower Shoalhaven provides services as well as acting as the governing body for the SPV (Repower One) and is paid an administration fee for its services. These services include selling the electricity to the host site and administration for the SPV. Dividends are paid to the shareholders annually and a general meeting is held each year.
Once the term of the project has concluded and the investors have had their money returned to them, ownership of the solar equipment is transferred over to the recreation club at no charge under the conditions set out in the power purchase agreement.
Key lessons and tips
- Consider the use of a special purpose vehicle (SPV). There are several benefits in using an SPV as the project entity, including: Setup and ongoing administration costs can be minimised on a per-project basis
- The community organisation can be isolated from the project risks and the community investors can be isolated from the complexity of the broader, longer-term aims of the community organisation
- Investor limits can be adhered to for each project (e.g., small-scale ruling with 20 investors maximum).
- Securing the customer is a key barrier. This can only be done with a solid financial model and supported by a strong project and customer management.
- Build trusting partnerships with solar companies. This will enable these third parties to generate leads for CE projects. It is important for solar PV companies to understand that the CE group is complementary and can assist in securing a project for them.
Project Element Development and Management Approaches
The table below sets out how Repower Shoalhaven has managed the 16 project elements set out in this Behind the Meter Guidebook together with the lessons they learnt and the challenges they faced along the way.
Downloads and links
Repower Shoalhaven website
Check out the whole Behind the meter Toolkit or the Funding and Finance Toolkit.