A study on renewable energy cooperatives conducted by Mumtaz Derya Tarhan, from the University of Ontario (excerpts). The full study is available here, under a CC Attribution 3.0 licence.
Energy sectors of most industrialized countries are marked by a long history of state and corporate-owned and highly centralized energy generation (mostly from fossil-based sources) and distribution. Although technological developments and pressures from social/ecological movements resulted in an increased uptake of renewable energy (RE) technologies since the early 1990s, the application of these technologies have since predominantly taken place through large-scale projects owned by corporate actors. In response, an increasing number of individuals and community groups have been forming renewable energy cooperatives (RE co-ops) in recent years
to provide bottom-up and collective solutions to their local needs and global environmental issues.
With the introduction of neoliberal policies in the early 1990s, many national energy markets in Europe, North America, and elsewhere were deregulated and privatized to allow for the involvement of corporate actors (van der Horst, 2008). It was also during this period that, through technological developments and pressures from social-ecological movements, policies supporting the uptake of renewable energy (RE) technologies were being introduced in numerous industrialized countries. Since then, energy markets have been mostly dominated by corporate actors that possess the necessary financial capacity and experience in developing large-scale RE projects (Mori 2013;Huybrechts and Mertens, 2014). However, the transition away from fossil-based fuels towards a sustainable energy sector requires not only a technological and political transformation, but also a social and behavioural one (Murphy, 2008).
This multi-dimensional transition would be accelerated through the direct participation of individuals in the electricity sector as proactive agents of change rather than “end-of-wire” recipients of electricity from a centralized system (Devine-Wright, 2007). Towards this end, an increasing number of individuals and community groups have been forming renewable energy cooperatives (RE co-ops) to provide bottom-up and collective solutions to their local needs and global environmental issues. In Germany alone, 656 RE co-ops have been established between 2005 and 2013 (DGRV, 2013a), while citizens in the UK established over 30 of their own between 2008 and 2012 (Willis and Willis, 2012). The REScoop.eu1 network reports that as of early 2014, approximately 3,000 RE co-ops were estimated across Europe while almost 80 per cent of these being located in Germany and Denmark (Huybrechts and Mertens, 2014). That being said, the proportion of RE generated by renewable energy cooperatives in industrialized countries still remains minimal due to various financial and perceptual barriers (Lipp, Lapierre-Fortin and McMurtry,2012; Huybrechts and Mertens, 2014).
Renewable energy cooperatives are considered to be part of the broader field of “community energy” (CE), for which there is a growing interest from the academia, public sector and civil society. CE is a diverse and dynamic field that lacks an unequivocal definition (Walker and Devine-Wright, 2008; Seyfang, Park and Smith, 2012). CE projects are developed under various legal structures such as community trusts, not-for-profit organizations, charities, and RE co-ops (Walker, 2008; Hoggett, 2010; Seyfang, Park and Smith, 2012).
Walker and Devine-Wright (2008) argue that RE projects that are only developed and run through an open and participatory process and that entail local and collective outcomes can be legitimately classified as community-owned. In this regard, with participatory decision-making processes and collective outcomes embedded in their business model, RE co-ops epitomize “community” ownership of RE projects.
Economic impact on shareholders
The cooperative business structure enables individuals to share the costs, risks and responsibilities of capital-intensive RE projects that they may be individually unable to undertake (Cato et al.,2008). Once these RE projects become operational, members also share the economic rewards of generated electricity and/or heat.
Firstly, economic rewards can be in the form of a stream of revenue if the generated electricity is sold on the market. This type of revenue generation is especially significant for RE co-ops injurisdictions where feed-in-tariffs (FITs), or long-term electricity sales contracts for renewable energy, are in effect.
Secondly, literature points out that numerous RE co-ops have been established by communities of-
location in responding to their own electricity and/or heat consumption needs (DTI, 2004; DGRV, 2013b). For instance, combined heat and power (CHP) plants have been installed by RE co-ops in Denmark, Sweden (DTI, 2004) and Germany (DGRV, 2013b) to simultaneously provide electricity and heat for the use of the local community.
Thirdly, several RE co-ops from Germany (DGRV, 2013b) and Denmark (MacArthur, 2010) enabled their members to simultaneously realize revenues and cost savings through involvement in both energy sales and local consumption.
The fourth type of economic reward realized by RE co-ops is the generation of additional income for their members. For instance, besides generating heat and electricity for local consumption, farmer-led RE cooperatives in Germany (DGRV, 2013b), Austria (Schreuer and Weismeier-Sammer, 2010), Finland (Peltola, 2007) and Sweden (DTI, 2004) generated additional income for farmer members through buying their manure, livestock and other biological sources for energy generation purposes. Furthermore, farmer members received the processed manure back as an improved fertilizer (DTI, 2004; ILO, 2013). It is important to note however that the above-listed economic benefits of RE co-ops are only available to those who are willing and financially able to invest in them (Walker, 2008).
While some policy reports and case studies of the use of RE in low-income communities have been produced (Agyeman and Evans, 2003; Center for Social Inclusion, 2010; Toroitich, 2012; World Resources Institute, 2013; Clean Energy Group,2014), further in-depth research is required to identify strategies that could enable low-income communities and community members to participate in RE generation through cooperatives.
Local economic impacts
Existing research points out that successful RE projects owned by communities-of-location have the potential to help keep the economic benefits of renewable energy generation in the local economy. A study conducted in Iowa, US (Galluzzo, 2005) revealed that financial resources that remain in the host community are five-fold for small-scale wind projects owned by the local community compared to large-scale wind projects owned by out-of-state companies.
The democratic ownership and management structures of cooperatives have been linked to fostering social cohesion among its members (MacPherson, 2003; Fairbairn, 2006). The literature on RE co-ops reveals that this positive social outcome has also been generated by RE co-ops in various jurisdictions (Duguid, 2007; Willis and Willis, 2012; DGRV, 2013b).
Existing research points out that RE co-ops can also increase communities’ confidence, interest
and capacity to take collective positive action.
However, RE co-ops, despite their democratic ownership and governance structure, do not automatically entail the generation of positive social outcomes. The nature of the process and outcome of community-owned energy projects seem to be a significant determinant of their social impact (Gross, 2007; Walker et al., 2010). Walker et al. (2010) compared the experiences of Moel Maelogan in Wales and Gamblesby in England, two rural communities of similar economic backgrounds that developed RE projects labelled as “community-owned.” The wind project in
Moel Maelogan was owned cooperatively by three local farmers that did not show an effort to involve other members of the local community in decision-making processes, and later expanded the project and sold it to an out-of-community electricity company.
The result was diminished trust and increased social friction among the residents of Moel Maelogan. Differently, residents of Gamblesby planned, fundraised for and installed a ground source heat pump for their previously unusable village hall. The planning process was open to all residents and encouraged their participation, and the revival of the village hall generated shared positive outcomes for the
entire community. Consequently, residents of Gamblesby mentioned experiencing an increased trust and connection to other residents, and enhanced confidence in developing community owned projects.
Cultivating a culture of conservation
Perhaps the most widely acknowledged environmental benefit of renewable energy technologies is their minimal greenhouse gas emissions throughout their life cycle in comparison to fossil fuels (World Energy Council, 2004).
Furthermore, Huybrechts and Mertens (2014) argue that RE co-ops distinguish themselves from mainstream electricity corporations through directly promoting energy conservation. They point out that several RE co-ops from various parts of the world included in their missions and implemented methods to help their members reduce their consumption. That being said, the qualitative and quantitative impacts of RE co-ops on their members’ energy consumption behaviours deserve further attention and inquiry through research.
Public perception of renewable energy
A significant obstacle in the way of the expansion of clean power supply is the negative public perception towards certain renewable energy projects. Mostly over-simplified as the not-in-my-backyard (NIMBY) movement, community members worldwide are opposing renewable—mostly wind energy developments—not only due to the resulting noise and negative visual impacts on the landscape, but also a lack of community consultation process by project developers and perceived economic injustices.
If decisions regarding a project are made through closed and mostly institutional processes, and the outcomes of the project benefit a limited number of individuals and/or organizations that are distant to the host community, community members may feel that the project is being imposed upon them and that its disadvantages outweigh the advantages (Gross 2007; Pahl 2007; van der Horst 2008). In contrast, RE co-ops from various jurisdictions have shown that public acceptance of RE projects is enhanced and the public can become supportive of renewable energy initiatives when included in the deliberation process.
Factors affecting RE co-ops’ impacts on communities
Barriers to RE co-ops’ emergence
In order for RE co-ops to realize the economic, social and environmental outcomes mentioned in Sections 3.1, 3.2 and 3.3, they first need to overcome various barriers to their market entry. One of the most significant barriers faced by RE co-ops is access to capital, especially during their startup phase (Huybrechts and Mertens, 2014: 206). The lack of sufficient resources in initial phases translates into limited access to paid services from staff and professional consultants (Seyfang, Park and Smith, 2012), and reliance on the work of a dedicated group of volunteers with key financial, legal and technical skills (van der Horst, 2008; Walker, 2008; Willis and Willis, 2012; Community Power Fund, 2013; DGRV, 2013b). Furthermore, RE co-ops may seem less attractive to financial
lenders and investors that are primarily looking for profit maximization (Huybrechts and Mertens,2014).
Furthermore, other factors that have been identified as preventing RE co-ops from entering the energy market include: limited access to locations for RE facilities (Schreuer and Weismeier-Sammer,2010; Huybrechts and Mertens, 2014), limited access to the electricity grid (Lipp, Lapierre-Fortin and McMurtry, 2012; Huybrechts and Mertens, 2014) and lack of available support mechanisms for project development and financing (DTI, 2004; Walker, 2008; Seyfang et al., 2012; Community Power Fund, 2013). Consequently, a supportive political landscape is considered by an extensive body of literature to be a deciding factor in the successful development of RE co-ops (DTI, 2004;Walker, 2008; Walker and Devine-Wright, 2008; Lipp, Lapierre-Fortin and McMurtry, 2012; Seyfang, Park and Smith, 2012; Willis and Willis, 2012).