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Co-operative renewable energy in the UK: a guide to this growing sector (report)

From the website:

Co-operatively-owned energy generation is a vibrant and growing sector in the UK. The first co‑operatively-owned wind turbines, Baywind in Cumbria, started turning in 1997. Since then, over 7,000 individual investors have ploughed over £16 million into community-owned renewable energy.

This report summarises insights gained from visits to five co-operatively owned energy projects during the summer of 2011.

It will be of interest to:

  • anyone thinking of starting a community or co-operative energy initiative;
  • intermediaries such as business and energy advisers;
  • policy and decision makers with an interest in renewable energy and community ownership;
  • members of existing energy co-operatives; and,
  • anyone wanting to find out more about this growing sector.

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From the report:

Introduction

Co-operatively-owned energy generation is a vibrant and growing sector in the UK. The first co‑operatively-owned wind turbines, Baywind in Cumbria, started turning in 1997. Since then, over 7,000 individual investors have ploughed over £16 million into community-owned wind turbines.

With the advent of feed-in tariffs (FITs), smaller schemes have grown in number too, though the FITs reviews in April and November 2011 have posed significant challenges, with some new plans now on hold.

This report summarises insights gained from visits to five co-operatively owned energy projects during the summer of 2011. The research and report writing were carried out before the November 2011 FITs review. Ongoing work by the Co-operative Group and Co-operatives UK will examine the implications.

The co-operatives are:

  • Cwm Arian Renewable Energy (CARE)
    A proposed 2.4MW wind development in West Wales.
  • Green Energy Nayland (GEN)
    A 15kW solar photovoltaic installation on the roof of a primary school in Nayland, Suffolk.
  • Ouse Valley Energy Company (OVESCo)
    A 98kW solar photovoltaic installation on the roof of a local brewery warehouse in Lewes, East Sussex.
  • River Bain Hydro
    A 45 kW hydro scheme in Bainbridge, North Yorkshire.
  • Valley Wind
    A proposed 6MW wind development in the Colne Valley, West Yorkshire.

In this report we take a look at what makes a successful energy co-operative, what the groups have achieved and the impact of co-operative models for energy. This report is intended as a learning tool, so we also run through the challenges of setting up and running such an enterprise.

Renewable energy co-operatives in the UK

Scotland

  • 4 trading
  • 1 pre-launch

England

  • 14 trading
  • 8 launch
  • 14 pre-launch

The basics

What is a co-operative?
Co-operative businesses are owned and run by and for their members, whether they are customers, employees or residents. As well as giving members an equal say and share of the profits, co-operatives act together to build a better world.

Co-operatives are a flexible alternative business model. They can be set up in different ways, using different legal structures, depending on what works for the members. The definition of a co-operative business is that they are owned and run by the members - the people who benefit from the co-operative’s services.

Although they carry out all kinds of business, all co-operative businesses have core things in common.

Co-operatives share their profits
Co-operatives want to trade successfully – they are businesses, not charities, after all. Members, such as farmers or freelancers, tenants or taxi drivers, can often do better by working together. And sharing the profit is a way to keep it fair and make it worthwhile. Rather than rewarding outside investors, a co-operative shares its profits amongst the members and/or the local community.

Co-operatives are owned by people like you
A co-operative is an alternative business model that exists to serve its members, whether they are the customers, the employees, or the local community. The members are the owners, with an equal say in what the co-operative does. As well as getting the products and services they need, members help shape the decisions their co-operative makes.

Across the UK, co-operatives are owned by nearly 13 million people – and these numbers keep on growing. The mix of self-help and mutual aid has made co-operative business an international force for good. 100 million people around the world are employed by co-operatives, whilst around one billion are members.

How do energy co-operatives work?

Although all energy co-operatives are different, they operate along similar lines:

A core group establishes the feasibility of a project, often helped by grant funding and advice from other co-ops or not-for-profit agencies.

The group formally establishes and publishes a share prospectus, explaining the business plan, intended return on investment and plans for community benefit. The scheme is marketed, often locally. All investors become members of the co-operative.

For larger schemes, income from individual investors is supplemented by a bank loan, or co-operation with a commercial developer. When the funds are raised, the scheme is constructed. Members receive a return, which depends on profitability, and the amount spent on community benefit or ploughed into future schemes. Members themselves decide how profits are allocated. Although this process seems straightforward, each stage is a significant challenge for groups largely comprised of volunteers.

What makes a successful energy co-operative?
The co-operatives in this report generally emerged from existing community initiatives such as Transition Town groups (OVESCo and Nayland), or community projects (Cwm Arian). The schemes benefited from existing networks and sense of community: “We’ve discovered how important the local connection is in raising funds and raising enthusiasm” (OVESCo). Groups were motivated both by wanting to benefit the community and by the environmental benefits of generating clean energy.

Some projects have been far more straightforward than others, with solar photovoltaic (solar PV) developments easier and quicker to develop – Green Energy Nayland’s project took seven months from start to finish, whereas Valley Wind were formed five years ago and have struggled to find a suitable site, though plans are now progressing well. The groups showed remarkable persistence in the face of significant obstacles.

All groups had access to considerable expertise from volunteers, who serve as Directors or advisers to the project. Green Energy Nayland benefited from the help of a school governor, a county councillor and an investment banker. The Cwm Arian group had expertise in community development and grant fundraising.

All groups had institutional support and funding, mostly grants, to cover the difficult early phase of the project. For example, the River Bain hydro project emerged from an unrestricted Carnegie UK grant for improvements to the local environment. OVESCo employed a member of staff funded by the local authority to run an energy efficiency contract:

A very important thing is seedcorn funding to cover the initial risky phase of projects like these.

In-kind support from local authorities, National Park authorities and charitable trusts also proved crucial...

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From the Ecologist article The communities taking renewable energy into their own hands:

by Ed Mayo

A new report by Co-operatives UK and The Co-operative Group examines those investing time and money in installing solar panels, wind turbines or hydro-electric power for their local communities

Late last year we - Co-operatives UK and The Co-operative Group - published a new report which reveals the growing number of people who are choosing to start renewable energy co-operatives in their communities, against all the odds.

What is exciting about the report is that it is the first and most comprehensive guide to what amounts to a new movement of communities who are taking action for greener energy into their own hands.

In a time of doom – when all talk is of cuts, unemployment and rising prices – this report highlights a different story. Despite, or maybe even because, of the wider economic woes, people across the UK are creating a co-operative movement for green energy.

There are now 43 communities who are in the process of or already producing renewable energy through co-operative structures. They are set up and run by everyday people – local residents mostly – who are investing their time and money and together installing solar panels, large wind turbines or hydro-electric power for their local communities.

The report highlights a series of examples. Like Ouse Valley Energy Service Company, which is owned by 250 people who have installed solar panels on a local brewery. Or River Bain Hydro, which installed a hydro electric power generator in its local river with investment of £200,000 from around 200 people.

The report also shows that together across the UK local residents have invested over £16 million in these co-operatives. These range from over £4 million which has been invested by over 2,700 people in Westmill Wind Farm in Oxfordshire, right through to around £38,000 which has been invested by around 34 local residents to install solar panels on a local primary school in Nayland, Suffolk.

Overall, Co-operative renewable energy in the UK is a testimony to the fact that green economy co-operatives are the fastest growing part of the UK co-operative sector, having grown by an astonishing 24 per cent since 2008.

What amazes me about this growing movement is that it is emerging against all the odds. This government’s rhetoric about supporting community owned renewable energy has not yet been backed up by an integrated plan to make it a reality. As many of the people in renewables co-operatives in the report say, there’s a lot stacked against communities on this – changing legislation and red tape, not to mention hard economic times.

For a start, government legislation keeps shifting, and there’s no better example of this than the government’s recent slashing of the solar Feed in Tariff. Whilst we recognise that the solar tariff was generous, the early and dramatic nature of the cut means several energy co-operatives have been put on hold.

Like many, Co-operatives UK and The Co-operative Group are campaigning on this in the hope that government will introduce the planned premium community tariff that encourages communities to create green energy together. But the fact that it was cut at such short notice has been a serious set back for many co-operatives.

Planning hurdles and bureaucracy are also a major problem for small community renewable schemes. With complex planning regulations and a wide range of organisations to deal with – the Environment Agency, Distribution Network Operators, local authorities, funders and so on – it is hard for small community renewable schemes, often set up and run by local volunteers, to get things set up.

River Bain Hydro, for example, has successfully set up a hydro electric scheme in North Yorkshire, despite spending a large proportion of its limited time negotiating with power companies because of a lack of co-ordination. As they explain: “Between the power house and the grid, a distance of a hundred yards, we ended up with five different organisations involved in delivery.”

With a financial crisis, cuts and difficult environment, perhaps we shouldn’t be surprised that people across the UK are coming together to create green energy themselves. The co-operative sector, which has always been there to support people trying to make a difference, is doing all it can to help – whether through schemes to support community shares or through The Co-operative Bank’s commitment to invest £1 billion in renewable energy by 2013, and its broader support for new co-operative enterprises.

As we all know now, we have built an economy based on a financial house of cards of banks, bonds and bail-outs. When you strip away the hype and hope, the only feasible alternative strategy is one that is based on bootstrap development of local enterprises such as these, making use of the three unlimited sources of wealth we have – people, ingenuity and renewable energy.

Ed Mayo is Secretary General of Co-operatives UK, the trade association for co-operative enterprises.

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