Thursday, 10 March 2022

I'm Hedging My Future Energy Costs

In 2019, I flagged up a new project from Ripple Energy which offered an opportunity to buy into a new wind farm co-operative. I looked into it at the time but it went on the back burner and then along came the Covid pandemic and everything was placed on hold.

However, with the current energy crunch, the cost of my electricity almost doubling and the prospect of more to come later in the year, I decided to take another look.

Next month the energy price cap will rise by 54% to £1,971 and some are speculating that it could rise to £3,000 by October. Buying into a wind farm is a way for everyone to protect themselves from rising energy costs.

The Offer

The UK’s first consumer owned wind farm at Graig Fatha in Wales is now fully sold out and now generating clean green electricity for its members. A typical household will save around £275 on their bills in the first full year due to the current high price of wholesale energy.

The next project is the Kirk Hill site in SW Scotland. Planning permission was granted in October 2020 and should become operational in late 2023. In less than 10 minutes, the site will generate enough electricity to power the average home for a whole year.

So basically, you buy shares in the wind farm based on your average annual electricity consumption. When the wind farm starts generating power, your electricity provider – eg Octopus – buys your share from the wind farm and pays the operator a low amount to cover operating costs and passes on the rest to you via a reduction in your bill.

The initial purchase (min £25) is a one-off payment...typically £1,700 which would buy enough electricity for the average house. This can be spread over 12 months. At current high prices, this would mean a saving of around £300 per year and therefore a payback period of under 6 years. Of course, energy prices could go higher which would mean even more saving but could go lower but then energy bills should come down.

Of course only a proportion of our bills are for the actual energy consumed and you still have to pay the daily standing charges, VAT, green levies etc. which can account for over 50% of the average bill.

Environment and Climate Change

In addition to the savings on our energy bills, there are significant benefits to the climate. These are new wind farms which would not otherwise have been built. So the more consumers who join up means Ripple have more confidence they have a good model and can plan ahead with new wind farms in the future.

Onshore wind is one of the lowest CO2 source of power in the UK. The model is much cheaper than individuals installing their own rooftop solar PV. (Reference material)

The Kirk Hill site is estimated to save 12 million Kg of CO2 every year which is equivalent to taking 8,200 petrol/diesel cars off the road.

But also, the invasion of Ukraine has brought into sharp focus the need to reduce our dependence on Russian oil and gas and become far more self reliant.


So, I have taken the plunge and signed up for my small share of the Kirk Hill wind farm (the offer officially closes end March but this could be extended) and will pay by monthly instalments over the coming year. I am already with Co-op Energy via Octopus so will not have to change supplier.

I look forward to getting my regular monthly discount off my bills next year and also following progress of the construction which is due to begin this Summer. It would be good to visit the site when operational...hopefully they will have regular open days for co-op members.

Here's a link to the Ripple website for those interested in this model.

As ever, this article is merely a record of my personal investment decisions and should not be regarded as an endorsement or recommendation - always DYOR!


  1. Great post - I am in the process of writing one myself with the opposite conclusion (no investment from me).
    It's an interesting model to finance a windfarm but I found it a bit too gimmicky and the expected rate of return is not well presented and when you read that it's around 5%, it seems like a poor investment.
    For comparison, large wind investment trusts have a forward IRR of around 8% based on their existing projects that are all up and running.
    Yes it's a nice idea but the returns are just not good enough and you can do better elsewhere.
    DYOR and I might be wrong

    1. I look forward to reading your post GFF. I think that 5% figure is based on out-of-date government projections from 2020. The figure based on current energy prices is around 15%...and could easily go higher.

      But yes, I also hold the renewable energy infrastructure trusts - TRIG, UKW, GSF and GRID.

  2. Do you know if the income is treated as interest, dividend or not for tax purposes?
    The prospectus was not very clear

    1. No, don't know the answer but you don't actually receive any income directly, it's just a reduction in your energy bills.

  3. Interesting. It's not unlike the old Abundance Investment model of financing new projects - except you can't trade your "shares" in a secondary market and unlike most of those, you'll benefit from any price rises. I agree it is a bit gimicky, but using it as insurance against rising bills is tempting. I was considering another solar array to help through the difficult winter months, but this is lower hassle.

    1. Yes, I think it should provide a nice cushion against any potential rising costs of energy...the more they rise, the more your bills increase but then the more credit you receive from the wind farm. With a current payback period of around 4 to 5 years, it could be argued that the pricing for shares in the wind farm is currently too low...

    2. I went for it, DIY investor. Thanks for highlighting the project.

  4. Thanks for this DIY - very interesting.

    Like @GFF however, I won't be investing as I've vowed to only stick with what I know, that is bog standard stocks and shares and as you mention, there are renewables to choose from, such as TRIG, etc. Good luck to you however.

    1. Hi weenie,

      Sticking with what you know is a good policy. I am not regarding this as an investment but more as a way to get more control over my rising energy bills. This week I received the increased prices from Octopus...from April gas unit up 83%, electric up 36% and daily standing charges up 101%. Next October we could well see similar increases and you can't shop around for a better deal.

      So this seems like a good option when the wind farm starts generation next year. In the meantime, some of the dividends from my renewable energy holdings can go towards the increased bills! Also there's the £150 council tax reduction this year which helps but I am not counting the £200 loan in October.

  5. I'm writing a post and I think that overall, it's got some appeal and it's largely hassle free.
    Downsides for me include:
    The full rate of return only comes after 25 years. Selling early after 5 years might mean only a 3% return.
    Your choice of electricity suppliers may be limited and/or cost you more.
    If you plan to leave the UK within the next 25 years, you'll have to surrender your shares. And the longer you hold the shares, the more they are worth since part of the capital is repaid. Loan parts like this on Abundance trade at a premium to their face value for this exact reason (£1000 initially invested, return £80 a year, have paid off £500 so the remaining £500 gives a 16% return year on year - fair value may be 150% (£750) meaning to sell at par is a loss).

    On the bright side, the money received falls under the obscure "Tax-free allowances on property and trading income" where you get £1000 as an annual allowance. That pushes the 4.9% return to an equivalent 8.8% for a higher rate tax payer and maybe as high as 14.5% for a high electricity scenario.

    I have money invested in different green type investments and I'm trying to do my best to make the investment case to encourage others (as is DIYInvUK) - so this Ripple is interesting, has appeal but it won't get my money.
    I do wish them well though.

    1. Some interesting points here and thanks for clearing up the question on tax treatment of 'income'.

      I know the site is still using the old 4.9% figure but currently I think it is nearer to 15% and may well go higher over the coming year or two. Longer term...who knows?

      It seems to me there needs to be a radical re-think on energy policy as we move away from fossil fuels...I'm not convinced the current administration is up to the job!

    2. My calculations give the return as 4.9% over the 25 years.
      Or in other words, if you invest £1,000 you will get about around £1,900 over 25 years.
      they have sneaked in the capital with the interest to boost the return. I have some other investments which operate on a similar model ( - one small difference is that the £32,000 I invested back in the day was eligible for 30% EIS tax rebate (and even 50% SEIS on part of one).

    3. That's interesting. Of course we cannot know the future prices of energy, inflation or interest rates over a 25 year period. My calculations show an average of just over 6% but the main benefit for me is that this is supporting a new wind farm that without this initiative would not come into existence and will speed up the transition away from fossil more of an ethical decision rather than just financial.

    4. That's one of the key things, isn't it? They even say this should not be treated like an investment (that's why you can't just dump £30K into it) - but if you want help a new windfarm get built, get a bit of a hedge against energy costs and save a bit on your bill then it's worth taking a look.

  6. I don't know the legislation but I suspect that it's not classes as an "investment" so escapes the FCA red tape.
    Abundance have told me that they don't do offers above £10m as the admin burden is too high to make it worthwhile.

    I do agree that it will help a new windfarm to be built. That's what we need.
    However £24m or so at £1000 or so per investors means 24,000 people are needed.
    The Abundance offers tend to have 1,000-2,000 investors, so Ripple Energy need to work hard to get the money in.

  7. On the taxation of income issue, Ripple don't actually know the answer, despite what's suggested in their share offer documents for both of their projects. That's straight from the FD. They are keen to engage in dialogue with HMRC.....

    1. For the average share holder, the returns are likely to be somewhere between £100 to £300 p.a. and this comes in the form of a reduction in their energy bills. As someone mentioned yesterday, this could well be covered by the £1,000 tax-free allowances on property & trading income...

    2. Yes, could well be covered by either the trading allowance or the personal savings allowance. But they don't know. If it's the former and to be treated as trading income, the £1k won't be any use to someone who's already self employed.