Co-operatives

Description of the model

A co-operative is an organization that is collectively owned and democratically controlled by its members. All members, regardless of their shareholdings, have a say in decision-making processes on the basis of a one-member, one-vote principle. There are several different activities related to renewable energy that co-operatives can be involved in:

  • Generating electricity and/or heat from renewable energy (RE) sources (RE Generation co-ops)
  • Distributing electricity generated from RE and possibly other sources (Distribution co-ops – sometimes also known as supplier or utility co-ops)
  • Heat generation and distribution from renewable energy sources (District heating co-ops)
  • Mobility and/or heating fuels generation and supply (Renewable fuels co-ops)
  • Service provision related to RE and conservation (RE Service co-ops)

In Canada, the majority of co-operatives involved in the energy sector have their primary mandate as producing electricity (Generation co-ops), therefore this article focuses on Generation co-ops. It should also be noted that Ontario is home to almost 95% of Generation co-ops across Canada, due to policy-related reasons that will be discussed in Section B.

The prevalence of RE generation co-ops has been led internationally for the past 25 years, by Germany and Denmark. The REScoop.eu network reports that as of early 2014, approximately 3,000 RE co-ops were estimated across Europe with almost 80 per cent of these located in Germany and Denmark. In Germany alone, 772 RE co-ops have been established between 2006 and 2014. Similar to the case in Ontario, Germany and Denmark’s success in fostering RE generation co-ops is tied to a long history of supportive legislation and programs that will be highlighted in Section B.

Enabling policies and application of the model across Canada

The experiences of Denmark, Germany and Ontario demonstrate that the feed-in tariff (FIT) is the single most effective policy in cultivating RE generation co-ops. A FIT is a rate per kilowatt-hour that power producers are guaranteed for a defined period of time (usually 20 years) for every kWh of electricity that their contracted project feeds into the grid. Since the introduction of the first FIT law in 1991 in Germany, 130,000 members have invested almost of 1.7 billion Euros in Generation co-ops across the country.

In Ontario, 83 RE generation co-ops incorporated since the introduction of the first FIT program in 2009, while about 30 of these are estimated to be actively pursuing projects. To date, 75 MW of FIT contracts have been awarded to these co-operatives, and they have raised almost $27 million in community capital through shares, bonds, and debentures. The majority of this development took place during the Small FIT 2.1 and 3.0 rounds, which improved on FIT 1.0 by creating a 25 MW capacity set-aside for RE generation co-ops.

RE Co-op Jurisdiction Technology
SolarShare Ontario Solar
ZooShare Toronto, Ontario Biogas
OREC – Ottawa Renewable Energy Co-op Ottawa, Ontario Solar
Oxford Community Energy Co-operative Oxford County, Ontario Wind

Many projects initiated by RE generation co-ops in Ontario are still under development and the scope of the sector continues to grow. For many co-ops, project scale and access to up front project financing is challenging, while for others, completely priced, long term debt is needed to optimize the business case of the co-op over its life. Constraints in accessing the electricity grid have also been a challenge in certain parts of the province. Finally, declining contract prices make the economics of RE generation co-ops an increasing challenge. The margins built into the FIT rates often don’t account for the higher transaction costs associated with raising money from the community. The experiences of Denmark and Germany, which have better established RE generation co-op sectors and a longer history of supportive legislation compared to Ontario, point out the necessity of additional support mechanisms to FITs for RE generation co-ops to develop successful projects. These mechanisms include:

  • State-insured loans
  • Streamlining FIT application processes
  • Supportive securities and taxing legislation for co-operatives
  • Ensuring grid connection

As their numbers increased over the past few years, RE generation co-ops in Ontario established the Federation of Community Power Co-operatives (FCPC) in order to unite their voices in the face of financing and policy-related development challenges. In line with its mission, FCPC advocates for the above listed support mechanisms to be implemented in Ontario.

For more co-operative RE project examples from across the world, you can visit The Community Power Report.

Summary

  • Co-operatives are collectively owned and controlled organizations that are increasing their presence in the global renewable energy sector through various activities;
  • The most common application of the co-operative model in Canada’s energy sector is in renewable energy generation (RE generation co-ops);
  • In Canada, almost all of RE generation co-ops are incorporated in Ontario, where the FIT legislation established a 25 MW capacity set-aside specifically for co-operatives;
  • The majority of RE generation co-op projects in Ontario are still in the development phase due to financing and project development-related barriers;
  • The experiences of Germany and Denmark show that additional support mechanisms to FITs (such as state-insured loans and supportive securities and taxing legislations) are effective in enabling RE generation co-ops’ successful project development.
Go back to top