I’ve spent years covering energy transitions and working with neighbourhood groups, and one thing keeps coming up: community energy tariffs are a practical, often-underused tool that can both lower household bills and channel revenue into local renewables. In this piece I’ll walk you through what community energy tariffs are, how they work in practice, what you need to set one up, and the common pitfalls to avoid.
What is a community energy tariff?
A community energy tariff is a retail electricity product offered either by a community energy company or by a licensed supplier in partnership with a local group. The defining feature is that a portion of the tariff revenue is ring-fenced to support community projects — usually renewable generation, energy efficiency measures, or local fuel-poverty support.
In plain terms: households sign up to a tariff that offers competitive or preferential pricing, and in return a share of their payments funds local renewables or energy projects. That funding can be delivered as a fixed payment per customer, a percentage of revenue, or matched funding for specific capital projects.
Why neighbourhood groups should consider them
- Lower bills for local residents: Tariffs can use group bargaining power or partnerships with agile suppliers to secure discounts or better rates for members.
- Local ownership of benefits: Money circulates within the community rather than leaving to national companies.
- Funding for renewable projects: Tariff proceeds can provide seed funding for solar, small wind, battery storage, or heat networks.
- Stronger community buy-in: When people see direct, local benefits, projects face less resistance and have higher participation.
- Behavioural influence: Bundling education and energy-saving support with tariffs can amplify demand reduction.
How community tariffs actually work — the mechanics
There are a few common models. I’ll summarise three practical approaches I’ve seen work well:
- Partnership tariff: A licensed supplier creates a co-branded tariff with your community group. The supplier bills customers and pays an agreed percentage or fixed fee to the group monthly.
- Community supplier: Your group forms a licensed supplier (or partners with a community energy company that already is one) and supplies electricity directly, offering a tariff where surplus funds go to community projects.
- White-label green tariff: A mainstream supplier offers a white-label product to your group where customers get a green-themed tariff and the group receives income for local projects.
Each model differs in regulatory complexity and setup time. Partnerships with existing suppliers are the quickest route; creating a supplier or energy services company (ESCO) gives the greatest control but requires regulatory approvals, insurance, and commercial capability.
Step-by-step: launching a community energy tariff
- Assess local appetite: Run a simple survey and host a drop-in session. I’ve found that if you can recruit 100-200 committed households you have a strong starting point.
- Choose a model: Decide between partnership, supplier formation, or white-label product based on resources and timeline.
- Identify a partner supplier: For partnerships, approach suppliers that already work with community groups — examples in the UK include Octopus Energy (through community initiatives), Good Energy, and smaller regional suppliers. Ask for case studies and proposed revenue shares.
- Draft a funding model: Define how funds will be collected and used. Common approaches are 1-3% of revenue to a community fund or a fixed monthly fee per customer (e.g., £1-£3/month).
- Set governance: Establish transparent governance for the fund—who decides projects, how are decisions recorded, and what reporting will look like.
- Design marketing and onboarding: Create simple collateral explaining benefits, data privacy, and how the money is used. Local trust matters more than slick branding.
- Pilot and scale: Start with a pilot cohort, learn, tweak pricing and messaging, then expand across the neighbourhood.
Examples of how funds have been used
From my reporting and involvement, common and effective uses include:
- Installing rooftop solar on community buildings (halls, schools, churches).
- Buying energy efficiency retrofits for low-income homes.
- Buying or co-funding community battery storage to increase self-consumption.
- Creating emergency energy grants for vulnerable households.
Pricing and impact — a simple comparison table
| Tariff type | Customer saving | Community fund | Complexity |
|---|---|---|---|
| Supplier partnership | Small to moderate (2–8%) | 1–3% of revenue or fixed fee | Low–Medium |
| Community supplier | Potentially higher (8–15%) | All surplus after costs | High |
| White-label green tariff | Variable | Fixed fee per customer | Low |
Legal, regulatory and technical points to watch
- Licensing: Retail supply in the UK is regulated. If you create a supplier, you’ll need an electricity supply licence or work with an existing licensed partner.
- Data privacy: Billing and customer data must be handled securely under GDPR. Suppliers typically manage this if you partner with them.
- Ofgem rules and consumer protection: Any tariff must comply with price transparency and vulnerable-customer protections.
- Accounting and audit: Agree on independent auditing of funds to build trust in your community.
- Grid connection and generation: If the fund finances generation, check export rules, feed-in tariffs (where applicable), and grid connection costs.
Common questions neighbourhood groups ask
“Will my neighbours switch?”
From practical experience, switching rates depend on trust and simplicity. If your group is known locally and the tariff messaging is clear — “you save money and support the community” — conversion rates can be strong. Combine door-knocking, social media, and community events.
“How much can we realistically raise?”
A conservative estimate: with 500 households contributing a £1/month fixed fee you raise £6,000/year. With performance-based tariffs or revenue shares, sums can be larger, but always model costs and churn.
“Can we prioritise vulnerable households?”
Yes. You can use funds for targeted support programs. Make sure eligibility criteria are fair and transparent and coordinate with local authorities or charities.
Practical tips I’ve learned
- Start small and prove impact. A successful first project builds momentum and trust faster than grand promises.
- Keep governance simple and transparent. Publish quarterly reports and case studies.
- Partner with trusted local institutions (schools, parish councils) to boost credibility.
- Use smart meters and data to demonstrate real savings and to monitor project performance.
- Be realistic about timelines — supplier negotiations and onboarding can take months.
If you’re part of a neighbourhood group thinking about a community tariff, I’m happy to share templates and examples I’ve collected from successful projects. Building a local tariff is not just about money — it’s about creating a visible, local pathway to clean energy that people can touch, understand and benefit from.
