Building new business models for the coming renewable energy transition

Can cooperatives become a major player in the renewable energy transition? Non-Profit Energy Cooperatives as the Catalyst of the Movement of People to Renewable Electricity, a webinar hosted by the Environment, Energy and Natural Resources Center at the University of Houston Law School, sets out this ambitious mission:

The renewable energy revolution poses a once in a lifetime opportunity for co-benefits of democracy, bringing electricity to those who lack it, and equity. This transition has the potential for widely shared prosperity, not just a decrease in suffering. To unlock that potential, however, we also need to disrupt business as usual in the dominant business model. The co-benefits are more likely if the institutions that lead the way are democratically owned and managed with the explicit goal of bringing the benefits of ownership to those who have been traditionally marginalized by the current economic and energy system.

Panelists Melissa Scanlan, who has blogged about her research on cooperatives in Spain as a Fulbright Scholar, and Gabe Pacyniak provided background on energy cooperatives, case studies in the US and Spain, and perspectives on what is needed to scale them up to fuel the needed transition to clean sources of energy.

Cooperatives have a long history as a business form for selling goods and services. Driven by values as well as profit, coops are owned by their members, not shareholders. They are governed democratically, meaning 1 vote per member (not per $ of investment, as with shares); reinvest profits in the coop or its members through dividends; and tend to keep economic and social benefits in the communities where they are established. In the US, food, farmer/agriculture, water, and electricity coops are the most common. Melissa observed that there are more coop members in the US than there are corporate shareholders.

Renewable energy (RE) coops are electricity coops that are acting on their shared values to address their environmental impact, both on climate change and local air pollution. To understand how they function requires understanding the 4 steps for moving electricity from the point of production to you. They are:

  1. generation (of wholesale electricity)
  2. transmission (of wholesale electricity via a grid)
  3. distribution (from grid substations to consumers on lower level wires, where 800 coops currently account for 13% of all electricity sales), and
  4. consumption (getting it to consumers and billing them).

Gabe has studied New Mexico’s 19 rural electricity coops, some of which are looking to transition to renewables. He described how the New Deal fostered the creation of US electricity coops, and planted the seeds of both success and current constraints. By 1930, only 10% of rural households were electrified, and the for-profits that furnished urban electricity were hobbled by the Depression. With the creation of the federal Rural Electrification Administration (REA), $2.7 billion was funneled to coops (most in distribution, but some in transmission). A decade later, the US had achieved 90% electrification. These coops were fit for purpose in the 1930s, when relatively little was known about fossil fuels and climate change, and the goal was to bring electricity to the rural poor as inexpensively as possible. But now, in our carbon-constrained world, their origins in 90% coal-fired electricity generation make transitioning to renewables a challenge.

Melissa provided case studies from Spain, which per EU legislation, achieved 29% of electric generation from renewable sources by 2010 with a combination of generous subsidies and legal reforms. Those reforms opened electricity generation, transmission, and distribution to new entities and established national laws for certifying electricity origins, which fostered growth and commercialization. (STAY TUNED for the publication of her book in progress.) Both subsidies and policy support created the conditions for coops to act on their values to fuel the renewable energy transition.

But her case study from Georgia, Cobb EMC, merits more attention. Cobb EMC is the third largest electricity coop in the US with 200,000 members. It installed one of first utility scale solar installation in eastern US and produces the most megawatts of any energy coop – all within a state that has taken no policy and legal steps to incentivize green energy. It provokes the question: Can coop values alone propel this renewable transition?

Gabe would say no. Coops comprise a limited proportion of the current RE market, with for-profit energy companies dominating this sector. He sees power coops struggling to shift from their coal-fired roots, in part because they cannot take advantage of federal tax incentives. He also points to light federal oversight and exemption from clean energy regulations (like state Renewable Portfolio Standards) having led to relatively unrigorous resource planning. Potential solutions are policy support for stranded assets (to retire those old coal-fired plants), more oversight of coop planning, and new wholesale rate models akin to those happening in the private sector.

For renewable energy coops to have a larger scale impact in the US, both panelists see the need for a modern new deal to fuel energy coops. The potential for post-pandemic infrastructure investments by the US government seems high, and harkens back to the Depression era solutions that created electricity coops in the first place. These case studies provide timely, persuasive examples of the kinds of policies needed to promote the economic, environmental, and social benefits of RE coops.

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