A community is a group of individuals with something in common which may be geographical, such as the location where people live, or a common interest. Communities are formed when groups of people get together and work for a common aim.
- Setting up your group
- Organising your group
- Financial administration
- Skills and training
- Developing costs
- Insurance, risk and Health and safety
This guide is for communities interested in developing community biomass heating projects and/or managing local woodlands for the production of woodfuel.
There are many different ways in which people can work together as a community group and many different forms your project can take. You may be working as part of a parish council or charitable group seeking to either install or extend a biomass heat system possibly with the idea of selling some heat locally; or you are a community group bringing a local woodland back into management to produce logs for local use.
While your group may decide not to develop its own woodfuel supply chains, you may find local woodland owners, managers or contractors would be interested to establish a woodfuel supply to your community boiler. Members of your community probably know some of these people and you could invite them to discuss opportunities.
Whatever the scope of your project you need to understand what is required for the woodfuel supply element. Requirements are more complex if you are going to harvest, process and supply your own woodfuel as opposed to simply buying from a woodfuel supplier. Your project activities and funding requirements will determine how you set yourself up and work together. Whatever your woodfuel supply chain will look like, you will need to think about the following things from the start.
Community energy (GOV.UK)
An independent community energy support and advice resource will be launched shortly, seed-funded by DECC but run by the community sector. This will provide an information-sharing and social networking site to support community groups setting out to explore a potential project as well as those that are well established and needing further support and advice.
There are different options for working together. You may already be active as a community or parish and have a community legal structure e.g. with a bank account and legal status already set up and organised. If not and you wish to apply for funding streams, you will probably need to set up a legal incorporated structure such as a Community Interest Company or a Community Benefit Society (BenCom). If you do not want to apply for funding, sell fuel or take out insurance, you could possibly remain, at least at first, an unincorporated group.
Before you formalise your group, start by thinking about your community’s main aims and how those aims influence the tasks and activities you will need to undertake. You need to make sure that whatever structure you choose will allow you to do what you want to do. Things that will impact on your choice will include whether or not you want to:
- apply for funding
- secure and manage finance
- manage contracts with third party organisations
- be responsible for project liability and insurance
- generate revenue
Woodland and woodfuel related guidance on governance and structures for woodland initiatives.
Incorporated or unincorporated?
One of the fundamental questions you will need to answer is whether or not you want to be incorporated or unincorporated.
Unincorporated organisations are not legal entities in their own right and are characterised as:
- have no legal requirements to meet, to set up or operate
- groups don’t exist as separate units but merely as a group of individuals working together
- members have unlimited liability for the group
- assets cannot be held jointly by the group but by individuals
- the group cannot enter into third party contractual arrangements
Regardless of the fact that you are not legally obliged to provide any formal documentation about your group, it is advisable, if you chose this route, to agree some basic rules and aims and record them in some way so that everyone is clear about them. This written record would form your governing document. Unincorporated groups can apply for charitable status but would have to meet the criteria and responsibilities of being a charity.
Examples of unincorporated groups include, associations, clubs, friends of groups. This option may be appropriate for situations where wood is harvested locally for use by those harvesting, with no financial transactions involved.
It's important to note that if you intend to sell fuel, take out insurance, or apply for group funding then the unincorporated route is not suitable.
Incorporated organisations are legal entities in their own right and are characterized as follows:
- the group is a separate legal entity
- individual group members have limited liability
- groups can issue and manage contracts with third party organisations
- groups can manage income generated from projects
- groups can raise finance and applying for funding more easily
Incorporated groups can take many legal forms. Many funders will require that your group is incorporated in order to be eligible for funding.
Examples of incorporated groups
Mutual Societies: This includes both Co-operative Societies and Community Benefit Societies. Both are now legally recognized incorporated structures.
Both structures conform to the International Co-operative Alliance values and principles of self-help, self-responsibility, democracy, equality, equity and solidarity but there are crucial differences between the two forms
- Co-operative Societies: are set up to benefit their own members, and are not automatically restricted from distributing profits to members in the form of dividends, but they cannot be set up with the sole purpose of making a profit for their members, and there must be other benefits.
- Community Benefit Societies (Ben Coms): are set up to benefit the wider community. Members are not permitted to receive a dividend but can receive interest on share capital. Ben Coms have an asset lock which ensures that reserves and capital assets of the Ben Com can only be distributed to other organisations which benefit the community.
Community Shares Unit - information about different structures:
Community Interest Company (CIC): Set up along similar lines to a limited company, this is for groups wanting to further social objectives and use profits for good but who are not eligible for charitable status. Groups must pass a community interest test in order to qualify. CIC’s can be limited by shares or guarantee.
Setting up as a CIC
Charities: Set up for public benefit, charities pay reduced business rates, receive tax relief and can access certain types of funding. But, they do have complex reporting requirements and limitations on trading.
Limited company: Groups wanting to trade and generate profit from activities may choose to set up as a company. However there may be limitations on their ability to apply for grant funding for projects where community benefit or charitable aims are core to the funders objectives.
Setting up a limited company
More information about initial set up of your group:
• Co-operatives UK – Simply Legal - legal forms and organizational types for community enterprises
• Plan LoCaL
Depending on the scale of your project and your group’s structure, it may be worth setting up working groups for specific tasks. If you do have working groups for different elements of your project, it would be worth setting up a woodfuel supply group which can look at the options and report back to other groups to ensure that woodfuel supply is incorporated into other team discussions, such as project and business planning.
PlanLoCaL provides guidance and video on organizing and running a community group.
If you chose to be an incorporated group, you will need to ensure that you have set up the appropriate financial systems. You will need to research the individual financial requirements associated with the structure you have chosen to use.
Whatever your structure, you will need to set up a bank account for your group to manage and process financial transactions associated with your activities.
This could include:
- grant and funding administration
- third party contracts and payment for services
- income from sale of heat
- submission of annual accounts
- distribution of any profits made as a result of activities of the group
Financial administration for community groups
If your group is considering harvesting, processing and supplying your own woodfuel, you will need to review what skills exist within your group and identify any additional skills and expertise that you will need. You can choose to learn these skills yourself by attending training courses, or you may choose to use third party contractors for elements of work.
The skills you will need to develop a successful woodfuel supply chain include:
- Woodland management and planning skills: You will need to develop a management plan for your woodland to assess the volume of woodfuel that you can sustainably extract for use. To qualify for Forestry Commission grants and for your heating system (using woodfuel from your woodland/s) to qualify for the Renewable Heat Incentive (RHI), your woodland management plan must comply with the UK Forestry Standard
- Preparing a management plan for a woodland is a skilled activity; there are many training courses and online management resources that can help. We recommended that you work with a qualified forester to put this together (or pay them to develop the plan based on your agreed vision). The Forestry Commission’s woodland planning grant can help contribute to the cost of producing a plan.
Training courses and resources
Online woodland management tools and resources:
Rural Development Initiative - Ignite: Woodfuel production and supply
Wood harvesting: The scale of your harvesting activities within your woodland depend on the size of your energy system. For example, small domestic log stoves may need small scale felling activities that can be done without the use of heavy or specialist machinery.
Larger biomass boilers and district heating projects need significant volumes of woodfuel and therefore significant harvesting operations, potentially across a number of woodlands. It is unlikely that you will be able or willing to take on this type of activity yourselves so you would need to use a forestry contractor.
Woodfuel processing: Your biomass heating system will be specified to use particular type of woodfuel.Woodchip processing is a skilled activity needing specialist equipment. Chippers can be hired or indeed purchased by communities keen on processing their own wood. Co-owning equipment is an option in areas where there are multiple community woodfuel groups operating.
When you are preparing your business plan for your community energy project, don’t forget to include the costs of your woodfuel supply.
If you are considering getting involved in woodland management, fuel production or supply, you need to assess the cost of developing your woodfuel supply for the project to assess its long-term sustainability. You can then prepare a detailed plan outlining costs in relation to your project plans, taking into consideration your requirements at each stage of the supply chain.
The cost of activities will depend upon the scale of your operation. Developing a large woodfuel processing operation to supply all the woodfuel for a district heating system will be more costly than developing a small scale woodfuel supply chain supplying local domestic stoves.
Although there are some other benefits in managing local woodland, such as local job creation and increased biodiversity, you cannot guarantee or assume that producing your own woodfuel supply will be cheaper than buying woodfuel directly from an existing woodfuel supplier. The production of woodfuel includes costs associated including some, if not all, of the following:
- developing a management plan: costs of third party specialist advice and help or training
- harvesting activities: machinery, labour, third party contractor costs
- infrastructure requirements: storage of wood and woodfuel, access routes to woodland, hard standing for processing activities, site for processing
- Woodfuel processing: machinery, labour, preparing the woodfuel for market e.g. bagging, stacking, third party contractor costs
- woodfuel supply: transport out of woodland, transport to boiler, cost of additional supply if needed
As well as assessing the costs of developing your woodfuel supply chain, don’t forget to include potential funding streams that you can bring into this stage of your project to help offset those costs.
If a consultant is preparing your business plan as part of a Rural Community Energy Fund grant, you should ensure they include appropriate costings for your woodfuel supply, rather than assuming a standard fuel cost from a local woodfuel supplier.
Depending on how involved you are with your woodfuel supply chain, you may have additional liabilities that need to be covered, on top of those associated with running a community energy system. Woodland management and timber harvesting, wood processing and fuel delivery all have associated health & safety implications and operational risks that should be considered as part of your project planning phase.
Insurance will be essential for any community group working in woodlands. If your community group is unincorporated, remember that you will have personal liability for damage and injury caused as a result of your activities.
If you are sourcing woodfuel from a local supplier, the risk around woodfuel and heating system operations will be managed by your suppliers and through your contracts with them. If you are considering producing your own woodfuel or using a combination of your own woodfuel and some from a woodfuel supplier, you will need to discuss this with your system supplier and woodfuel supplier to ensure liability is clear.