Warrington Borough Council: Investing in Renewable Energy with Community Municipal Bonds

Generating sufficient funding to complete the desired amount of climate change work can be challenging, so innovative ways of dealing with this financial challenge are needed.

Warrington Borough Council used community municipal bonds to create more funds. Bonds were issued by the council to members of the public, who could invest as little as £5 and get regular return payments on this investment. This was done via an online crowdfunding platform. Once enough was invested, the council can began giving back to the community by using these funds to deliver low carbon infrastructure and projects.

Warrington Borough Council announced their pilot bond scheme in May 2020. The bond was issued three months later, available to Warrington residents and others across the UK. It involved a collaboration with the ethical investment company Abundance, who administered the bond on behalf of the council. Abundance structured the bond to make it as low-maintenance as possible for the authority. The bond was closed in November 2020, reaching its £1m target three days before the set deadline.

As the minimum investment was only £5, these bonds are very socially inclusive (although smaller investment equals smaller returns). They also offer an alternative channel to democratic public forums like climate assemblies, which some residents may feel reluctant to participate in. Such bond schemes allow a wider range of people to contribute to local climate action.

More than 500 investors contributed to the bond, with an average overall investment of £1,921. The bond was structured as a five-year investment with a 1.2 per cent return rate, making it competitive with high street savings and investment opportunities. Return payments are made to investors every six months, with the option for these interest payments to be donated back to the council – 11 per cent of Warrington investors did so with their first payment.

Emissions impact

Warrington Borough Council has used the funds raised to build and acquire a 23 megawatt solar farm and 46 MWh battery storage facility in Cirencester. Construction on the solar farm began in March 2021 and was completed in July 2022. The farm will supply clean electricity to the grid and generate an income revenue for the council.

The Cirencester farm has been a key pillar of Warrington’s successful bid to the Department for Transport’s Zero Emission Bus Regional Areas (ZEBRA) scheme, which awarded the council £21m towards the replacement of the entire diesel bus fleet with 120 new electric buses and accompanying infrastructure. A new bus depot is currently in construction to house the new electric fleet, where 100 per cent of its power will be purchased from the electricity generated at the Cirencester solar farm.

Social impacts

Surplus income generated from the solar farm will be returned to Warrington council to support essential public services. Battery technologies help to maximise revenues by enabling electricity to be sold at times of higher demand, not just during day light hours.

Standard investment products available at banks are often hard to understand – people don’t always know where their money is going. By contrast, community municipal bonds are very transparent, as residents can see the result of their investment, whether a solar farm or new electric buses. Investing in bonds offers people clear benefits for themselves and their local community.

The scheme has raised the council’s profile and improved its reputation among members of the public – investors reported that the scheme gave them a more favourable view of the authority. Through their investment, more residents are now engaged in efforts to address the climate crisis. The council has therefore cultivated a pool of residents more likely to participate in its other net zero projects, and who may also be relied upon as future investors. On this foundation, there is potential for Warrington to issue more bonds that provide a regular stream of income over the next five to ten years.

Investment in the development of a solar farm supports national and local net-zero targets by supplying clean electricity to the grid and contributing to other low carbon initiatives in Warrington. The zero-emission bus scheme will reap benefits in addition to saving carbon, such as improving air quality and increasing accessibility of public transport for local residents.

The solar asset is held by a special purpose vehicle, a 100 per cent council-owned company. To de-risk the investment, the solar assets were created and commissioned by GRIDSERVE prior to transfer of ownership to the council as a working asset. Warrington Borough Council has pioneered a commercially viable model through the development of two previous solar farms in York and Hull. These farms are already exceeding expectations for their performance and financial returns, showcasing the financial viability of renewable investments.

By taking a commercial approach the council has created assets that deliver a return on initial investments. Ongoing operation and maintenance is handled through the special purpose companies arrangements with GRIDSERVE. 

Build consensus early on

Setting up and implementing the bond ran smoothly with few hurdles. Early on, there was some doubt from opposition councillors. Warrington is a Labour-held council with a healthy Liberal Democrat and Conservative opposition. The wisdom of launching a bond when the council was focused on fighting the Covid-19 pandemic was questioned. However, once the financial details were fully explained, councillors became supportive. Warrington’s example proves that a community municipal bond can be a tool for a just, fair and green recovery. Moreover, even during the hardship of the pandemic the target of £1m was comfortably reached, testifying to the importance local people give to taking on the climate emergency.

Emphasise the local benefits

The council is considering more bonds to finance future projects. But it would like more local buy-in and to grow the number of residents contributing. Abundance handled the communications for the first bond, but more council involvement in communication and media strategy could push the local green benefits of the bond, ideally getting more people on-board at an earlier stage.

Be aware of any financial risk to the council

Funding struggles are one reason why these bonds may appeal to stretched local authorities. But for investors, risk is tied to the continued existence and financial strength of the council. Any councils at risk of a Section 114 notice being issued due to failure to balance budgets – a legal order that restricts their spending – will be unable to implement a community municipal bond. Abundance credit checks councils to ensure that investors aren’t lending to authorities at risk.

For financially sound councils there is still risk to consider. If there are serious project complications or setbacks, they will carry the risk as opposed to investors.

The Council identified how to de-risk the investments and explore a commercial approach through the use of special purpose vehicle.

Can this be replicated by other councils?

The success of the pilot in Warrington led the Green Finance Institute and Abundance to launch a national campaign in July 2021 to help local authorities set up community municipal bonds. The Institute is targeting all 404 local authorities in the UK. In September 2021 five councils signed the Local Climate Bond Pledge, committing to issuing a bond by Summer 2023.

Spending possibilities for community municipal bonds include making homes more energy efficient, installing charging points for electric vehicles or rewilding and tree-planting projects.

Bonds could be used to engage and protect vulnerable communities or boost green skills and jobs – they are flexible and can be moulded to specific council objectives.

Authorities might feel they lack the knowledge and experience to launch a similar bond, but the concept is simple and straightforward. The University of Leeds team have produced a local authority crowdfunding decision-making flowchart to help councils determine whether a CMB is right for them.

A bond like this is easier than you might think. Abundance really do know what they’re doing. It's a way of trying to get local buy-in for residents to understand what the Council is doing and for residents to be able to invest back into their own services. It really is about that mutual benefit.

Lynton Green, Deputy Chief Executive and Director of Corporate Services at Warrington Borough Council

• Information in this case study was sourced from the report Community Municipal Investments: Accelerating the Potential of Local Net Zero Strategies authored by Mark Davis. Read a further report by PCAN, Community Municipal Bonds: Turning words into action
• Warrington Borough Council’s Green Energy Strategy: www.warrington.gov.uk/sites/default/files/2020-02/green_energy_strategy.pdf
• Previous LGA case study by Warrington Borough Council ‘a commercial approach to public sector clean energy investment’, regarding the development and acquiring of two large solar farms near York and Hull: www.local.gov.uk/case-studies/warrington-borough-council-commercial-approach-public-sector-clean-energy-investment

Danny Mather, Head of Corporate Finance: [email protected]