Community energy lets local people invest in renewable generation, typically solar, wind or hydro, through bonds or shares offered by community organisations. It appeals to investors who want their money to support clean energy as well as earn a return. It also carries risks that are easy to overlook, and the regulation is different from mainstream investments. This guide explains how it works and what to check.

What is a community energy bond or share?

Most community energy projects are run by a community benefit society, a type of organisation registered under the Co-operative and Community Benefit Societies Act 2014 that exists for the benefit of a community rather than for private profit. To raise money, the society offers either:

  • Community shares, which are a withdrawable form of share capital in the society, often with modest minimum investments and interest paid out of profit; or
  • Bonds, which are loans to the society for a fixed term at a stated rate of interest.

The money funds an identified project, for example a rooftop solar array on a school or a community-owned wind turbine. The project earns income by selling the electricity it generates, and any surplus pays interest to investors and funds community benefit.

How returns are meant to work

Offers typically state a target rate of interest. That figure is a target, not a promise. Returns depend on how much power the project generates (weather matters), the price it receives for the electricity, the cost of running and maintaining the equipment and the money owed to other lenders, who usually rank ahead of community investors. A cloudy year, a broken inverter or a fall in power prices can reduce or delay payments.

How community energy offers are regulated

Community shares and bonds issued by community benefit societies sit in a different regulatory position from many other investments. The society itself is registered with the FCA as a mutual society, but this does not mean the FCA has vetted the offer or that investors are protected by the Financial Services Compensation Scheme. Offers must still follow financial promotion rules and usually include an offer document setting out the risks. Many reputable societies also follow the voluntary Community Shares Standard Mark, which signals adherence to good practice. Always read the offer document and check how the offer is being promoted.

The main risks

  • Capital at risk. You could lose some or all of your money, and the FSCS does not cover it.
  • Illiquidity. Shares are often withdrawable only after a fixed period, and then only if the society has the funds and the board agrees. Bonds usually cannot be sold before maturity.
  • Project concentration. Returns depend on one project, or a few, not a diversified portfolio.
  • Generation and price risk. Weather, equipment failure and falling power prices can all reduce income.
  • Policy risk. Changes to subsidies or regulation can alter project economics.
  • Governance risk. Small community organisations may lack depth of financial and technical expertise.

What to check before you invest

  • Read the offer document in full, particularly the risk section and how the money will be used.
  • Check how many other lenders rank ahead of you and what happens if the project underperforms.
  • Look at the technical evidence: generation forecasts, the contractor, and maintenance arrangements.
  • Understand any withdrawal terms, notice periods and conditions.
  • Confirm who is promoting the offer, and whether they are authorised or exempt.
  • Consider whether the investment is tied to a specific project or a pool.

Community energy compared with other green investments

Community offers are usually smaller, local and run by volunteers or small teams. Larger renewable bonds on investment platforms and project-level investments such as a solar farm have different structures and risks. Our wider green energy investment guide shows how they fit together.

Is it right for you?

Community energy suits investors who value local impact alongside return, understand that capital is at risk and can leave money untouched for several years. It is usually a poor fit for anyone needing predictable income or flexible access to their money. See our green energy investment hub for more, or compare green energy opportunities matched to your eligibility.

This article is general information only and does not constitute financial advice. Community shares and bonds are not covered by the FSCS and you could lose some or all of your money. Seek independent advice from an FCA-authorised financial adviser if you are unsure.