Renewable EnergyResearchers looked at the renewable energy co-operative sector and the policy environment in Canada.
MCDRN Research Summary
The Measuring the Co-operative Difference Research Network research helped to paint a more accurate picture of renewable energy activity in Canada, opportunities and challenges in the sector, and helped to strengthen resources and support for renewable energy co-ops. It was also the foundational research for the launch of the People-Power-Planet Partnership.
This research is summarized below.
Renewable Energy in Canada
Renewable Energy (RE) is energy obtained from resources that can be naturally replenished within a human lifespan. Some natural resources (e.g. wind, running water, sunshine), are not at risk of depletion. Other resources (e.g. biomass) may only be considered ‘renewable’ if their rate of consumption does not exceed their rate of regeneration.
Renewable Energy is also sometimes referred to as Sustainable Energy or Alternative Energy, however the latter term is inaccurate given the growing prevalence of renewable energy technologies – it accounts for over 16.9% of Canada’s primary energy supply.
Renewable Energy Co-ops Background
Renewable energy co-ops are typically involved in some or all of the following activities:
- Generating electricity from renewable energy sources (RE generation co-ops);
- Distributing electricity generated from RE and possibly other sources (Distribution or supplier co-ops);
- Generating and distributing heat from renewable energy sources (District heating co-ops);
- Generating and distributing fuels for mobility and/or heating (Renewable fuels co-ops);
- Providing service related to RE and conservation (RE Service Co-ops);
- Other green energy-related activities, such as providing technical advice, managing member investments, providing co-op administrative services, promoting energy conservation, doing energy retrofits, and installing solar panels.
The most prevalent form of RE co-op in Canada is the RE generation co-op – and further reference to RE co-op in our research refers to co-ops whose main business is generating electricity from RE sources and feeding that power into provincial power grids.
Typical Features of RE Co-ops
- Like any co-op, an RE co-op is democratically controlled by its members (1 member, 1 vote);
- Members of an RE co-op ideally live close to where the co-op operates, but often members also join from farther afield because they support the co-op’s work towards a greener energy future. Sometimes the co-op must recruit members from further afield to meet its capital investment requirements;
- RE co-ops may be full or only partial owners of the renewable energy projects they initiate. Because most renewable energy projects involve large capital costs, private partners may be required to secure the necessary financing;
- RE co-op projects may generate energy for local use by members, but more often they generate power for sale to the provincial electricity grid;
- RE co-ops may be for-profit, in which case they distribute all surplus earnings to their member-shareholders —or they may be non-profit, in which case members receive a fixed rate of return on their investment, and then decide together how surplus earnings should be used to benefit the community;
- RE co-ops work to fulfill their members’ desire to contribute to a healthy and sustainable energy future.
In some jurisdictions the definition of a RE co-op is strictly defined. In Ontario, the definition is legislated in the Ontario Co-operative Corporations Act (CCA).
Renewable Energy Co-ops in Canada
- There are 30 active RE co-ops in Ontario and only 1-3 known in each of the following provinces: British Columbia, Alberta, Saskatchewan, Quebec, New Brunswick and Nova Scotia. The total number operating across Canada is estimated at 45.
- There are an estimated 60-65 RE generation co-ops incorporated across the country, but not all are active;
- WindShare Co-op in Toronto, Ontario is the oldest RE co-op in Canada, operating since 2002.
Ontario Sector Facts
- Many RE generation co-ops are in Ontario. Ontario also has the greatest number of incorporated but non-active co-ops. In 2012-13, when the Ontario government changed the FIT rules to favour the co-operativemodel, there was a flurry of new incorporations and more RE co-ops were incorporated in one year than all other types of co-ops combined in the same period;
- According to the Financial Services Commission of Ontario (FSCO) website, there are over 80 energy co-ops incorporated in the province, but energy co-ops extends beyond RE generation co-op. This list includes co-ops offering services to the RE co-op sector such as TREC, CP Fund, and Community Power Capital; transportation fuel co-ops producing ethanol and bio-diesel; and non-active/dormant co-ops.
- The most common types of RE generation co-ops in Canada are wind and solar, followed by biofuels;
- The average development time for an RE co-op in Canada is 3-7 years depending on the technology and policy environment;
- Ontario is the leader in the number of RE co-ops under development, which can largely be attributed to the more favourable policy environment in this province.
Renewable Energy Co-ops are part of a larger global Community Energy (CE) movement.
There is no single agreed-upon definition for Community Energy (CE), however some or all of the following features are generally present:
- The community owns all or part of an energy generating project;
- The community participates in the planning and coordination of the project;
- Community members share in the benefits that come from the project.
Aside from co-operatives, CE projects may also be initiated by non-profits; charities; First Nations, Metis and Inuit; educational or health institutions; municipalities,; small or large collectives of individuals that have pooled their resources; and other community-based groups.
In Canada, CE projects are typically regulated at the provincial level through provincial co-operative acts (or their equivalent). Because the electricity sector is also a provincial responsibility, each province has a slightly different regulatory regime which also applies to co-operatives involved in energy generation.
How can RE co-ops benefit Canadians?
J.J. McMurtry partnered with Judith Lipp to study the status of the RE co-op sector in Canada and internationally, with a focus on regulatory processes related to grid-connected electricity generation from low-impact renewable sources including solar, wind, biogas and small hydro. As part of their research, McMurtry and Lipp conducted a literature review on the positive impacts that RE Co-ops can bring to communities.
Some of the impacts included in the review are included in the following research brief.
Policy Environment for RE Co-ops in Canada
Research by the MCDRN and others shows that a supportive legislative, regulatory and policy environment is one of the key factors for enabling the development of successful RE Co-ops in Canada. There are a number of tools that can be used by governments to create this enabling environment, including:
It’s important to note that feed-in tariffs (FITs) are the single most effective policy measure for enabling RE co-ops and other community-based groups to be able to participate in the sector. There have been instances where set-asides or co-op participation has been encouraged under a competitive procurement process (Quebec is an example) but it has not resulted in much co-op success. FITs are the most equitable and accessible way for co-ops to apply for a power purchase agreement.
What are Feed-in Tariff (FIT) Programs and how can they Promote RE Co-op Development?
A feed-in tariff is a type of power procurement mechanism that governments and private players can use to procure (purchase) new power generation. (In some instances FITs have also been applied to procuring heat – e.g. for district heating – but this has not been the case in Canada).
A FIT is a rate per kilowatt hour that power producers are guaranteed for a defined period of time for every kWh of electricity their contracted project feeds into the grid. This price per kWh provides the necessary economic information for project proponents to determine project feasibility: it provides certainty over the long term regarding the rate of return on project investments. Most FITs are set at a rate that covers both the cost of development of a project plus a reasonable return on investment, and are usually offered for 15-20 years. Developers that can achieve greater economies of scale with their projects and processes tend to earn a higher return than others and it is up to each developer to decide whether the returns meet their expectations.
FIT rates may vary according to the type of energy source and size of the project (e.g. the feed-in tariff in NS for small wind projects was 50 cents per kWh in acknowledgement of the high capital costs relative to operating output, while large wind projects were guaranteed only 13 cents per kWh).
FIT programs can be implemented by national, provincial/regional or municipal governments to encourage the development of renewable energy sources for electricity generation. Depending on the FIT program design, they can be used to encourage participation of particular groups like communities, First Nations, charities, co-ops, educational institutions and others (such as has been done in Nova Scotia). Typically however, FITs are created to facilitate participation in the power generation sector by any proponent and given the high capital costs involved in developing RE projects, FIT programs can often be dominated by commercial players, to the exclusion of community-groups, unless some kind of set-aside or contract hold-back is established. Commercial players are quicker off the mark and so in some places they have been able to access available contracts before community groups and co-ops can get organized.
Over 60 jurisdictions around the world have some-kind of FIT program. The design of these can vary tremendously and the MCDRN research looked only at some differences between the two jurisdictions in Canada that have a FIT, namely Ontario and Nova Scotia. Click below to read a more detailed overview of FIT and related programs in ON and NS, including information on set-asides for community groups.
Ingredients for a Successful RE Co-op
Through the Measuring the Co-operative Difference Research on renewable energy, a number of key elements were identified in successful renewable energy projects including:
- Supportive local, regional and national policies (including feed-in tariffs, and set-asides explicitly for co-operatives);
- Clear processes and affordable access to the electricity grid;
- Streamlined applications and approvals;
- An acceptable selling price for renewable electricity which covers costs along with a moderate return;
- A regulatory environment that is conducive to raising the capital for the project, using both equity and debt financing (e.g. government loan guarantees, CEDIF programs);
- Access to cost-effective technologies.
A fuller list and more details on these ingredients can be found in the MCDRN’s 2012 briefing note.
- People Power Planet – a pan-Canadian research partnership that aims to foster a broad ranging dialogue about the important role of community/citizen participation in a sustainable energy future. PPP’s activities will include conducting academic research and analysis, providing policy recommendations for various levels of government, producing capacity building tools for practitioners, generating educational materials for popular understanding and uptake of this form of energy production.
- Ontario COMFIT program – The Feed-In Tariff (FIT) Program was developed to encourage and promote greater use of renewable energy sources including on-shore wind, waterpower, renewable biomass, biogas, landfill gas and solar photovoltaic (PV) for electricity generating projects in Ontario.
- Nova Scotia COMFIT program – The Nova Scotia Community Feed-in Tariff (COMFIT) Program encourages community-based, local renewable energy projects by guaranteeing a rate per kilowatt-hour for the energy the project feeds into the province’s distribution electrical grid.