Citizen finance for a just energy transition? Analysing UK experience, and exploring potential for smart local energy systems

The UK energy transition is projected to require billions of pounds of investment, not only in renewable supply, but also in demand-side technologies and system management. While this investment is expected to come from large scale commercial finance, both citizen finance and smart local energy systems (SLES) are suggested as alternatives with potential to enhance energy justice. We conducted a mixed-methods UK case study to examine whether citizen finance can support a more just energy transition, and whether it can contribute to financing future SLES. Comparing data from a unique Cooperatives UK survey of citizen investors with London Stock Exchange data on commercial energy investors, we find that citizen finance widens participation in energy investment to some extent, and involves fewer intermediaries and greater transparency than commercial finance. However, citizen finance has limited potential to directly redistribute the financial benefits of energy projects: returns remain proportional to the amount invested, and citizen investment is still skewed toward older and higher-income people with the capacity to make long-term financial commitments. Drawing on interviews with professionals in citizen finance and low carbon energy development, we further find that citizen finance could facilitate funding relatively low-risk, low-return elements of SLES, and might also support more complex place-based SLES that commercial investors find challenging. With policy and practice measures to lower the risks of participation for the less wealthy, citizen finance could play a role in funding future SLES.