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About renewable energy cooperatives
Advantages of renewable energy
cooperatives
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A renewable energy cooperative is based on a concept
that allows a group of individuals to pool their resources in order to
meet their common economic, social, cultural needs and aspirations through
a jointly-owned and democratically-controlled enterprise. A renewable energy cooperative
promotes, generates or purchases energy from renewable sources while at the same
time encourages energy conservation. Although it
is most likely that such an enterprise will use renewable energy technologies to
generate electricity, in some cases it could be more economical to generate
other forms of energy. A renewable energy cooperative in Israel may take the form of an investment cooperative where members invest
for returns, or a services cooperative where the members themselves use the
generated electricity or enjoy the energy savings.
In any case, the exact structure and operational
concept of the cooperative will be decided upon by the members according to the
unique specifications of the enterprise and the legal requirements.
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Under this model, the required investment is divided
into shares which are then offered to the public. The number of shares to be
offered is calculated to balance between the anticipated number of members and
an affordable price per share. Whomever purchases a share becomes a member of the
cooperative which includes the right to vote. Decision-making is carried
according to the principal of one member – one vote, in order to maintain
democratic control and avoid the possibility of concentrated control in the hand
of few ‘large’ shareholders. Profit from selling the energy, or the savings, is divided between the
members according to the number of shares they own.
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Under this model the required investment is divided
between the potential members according to their relative energy consumption
needs or offered in blocks of generated energy or saved energy. The idea here is that members
invest in the enterprise to generate their own energy needs or save on their own
energy bill. The decision-making process is
according to the principal of one member – one vote, in order to maintain
democratic control and avoid the possibility of concentrated control in the hand
of few ‘large’ consumers.
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The main economic advantage of public / private
partnership is better economies of scale for both. However, such a partnership
offers the private sector an important added value, local interest in the
success of the enterprise. By partnering with a local renewable energy
cooperative the private sector has a better chance of no longer being perceived
as an external intruder but as a partner in pursuit of ‘bottom-up’
development of the local community. Such an approach can be very helpful when it
comes to approving a project with the appropriate planning authorities because
local concerns are better addressed.
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The
financing mechanisms of today’s energy sector were developed over the last 100
years to serve the needs of fossil fuels technologies and are not appropriate to
deal with the different needs of renewable energy projects. Furthermore, in some
respects these mechanisms discriminate against renewable energy because of their
adaptation to the needs of fossil fuel technologies.
Renewable
energy technologies usually do not have expenses relating to fuel and therefore
can not transfer the associated percentage of the electricity cost to be paid
over the life of the project. Therefore a much higher up-front investment is
needed and longer payback time. Because renewable energy technologies are
relatively new they are also regarded as higher risk investments.
The cooperative model enables entrepreneurs
to avoid, or reduce, the
need for loans from financial institution. By definition a cooperative raises
funds by pooling together resources from its members, usually in the form of
selling shares, so a loan is not needed at least in the initial stages. In such
case the risk is also divided among the many members due to relatively small
investments.
The problem with finding private investors for
renewable energy is that the potential return on their investment (ROI) is not
high enough for the perceived risk. This is another area where the cooperative
model can bridge the gap. As members usually join because of the added values,
even a relatively modest profit share can be attractive. Furthermore, because
the alternative investment routes available to the average cooperative member
are usually much less profitable than those available to institutional
investors, the expected profit needs to ‘compete’ against a much lower
ROI than the other routes. This has the potential to attract more members to the
cooperative and raise more funds.
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A
barrier that has derived form the history of electricity generation is the
regulators’ preference for centralized generation and transmission
infrastructure. Although the average size of installed generation units
continues to drop, regulatory bodies still prefer to see electricity generation
in the ‘proper’ zoning. The problem is that renewable energy is
radically different then fossil fuels in its environmental effects and therefore
should be judged according to a different set of parameters and not be limited
by regulations that were formed for fossil fuel technologies.
Here cooperatives can help on two levels; advocate on
behalf of their members for a different set of parameters for renewable energy
by using their public based support; where possible use the regulators’
tolerance for a bottom-up approach to development to stretch the regulatory
framework.
In markets where the electricity sector is still
controlled, or strongly influenced, by monopolies, cooperatives can play an
important role in diminishing the power of these monopolies. Because renewable
energy cooperatives that generate electricity usually are comprised of members
who are also electricity consumers, they have a very good starting point to
become vertically integrated and influence both the generation and consumption
patterns. By doing so they help open the market for more private renewable
energy generation.
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The
main social barrier to overcome is the public’s ignorance in relation to
renewable energy. This ignorance can be manifested through the NIMBY (Not In My
Back Yard) effect, total dismissal of the potential, belief that renewable
energy is not economic, and the fixation on specific environmental effects without
consideration for the overall environmental benefit.
Here again the wide membership base of cooperatives can be
of use. In order to achieve the wide-base membership in the first place, some
form of knowledge dissemination process will have to be carried out to highlight
the added values of the cooperative. After the cooperative is established, the
cooperative membership can be used effectively to disseminate the information
even further.
Another social barrier is the fact that public
disappointment from the establishment and demand for change was traditionally
channeled through different patterns of protest, and not to self-help and active
engagement in solutions development. The cooperative model is structured to deal
with this problem and offer an alternative route to channel public discontent.
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