Training course. Energy cooperatives: advantages, prospects and real income indicators.

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What is an energy cooperative?

The definition of an energy cooperative is very simple. This is a cooperative that allows citizens to provide their needs (both individual and general) related to energy consumption. 

Energy cooperatives can perform the following tasks:

  1. General procurement of energy raw materials (purchase of firewood, pellets; production of briquettes / pellets from straw and wood, growing energy vines).
  2. Wholesale purchase of services related to energy efficiency (energy audit services, thermal modernization of residential and industrial or office facilities).
  3. Financing the acquisition by members of a cooperative of power plants (boilers, batteries, solar panels, etc.).
  4. The production of electricity from alternative energy sources (in particular, the installation of solar and wind power plants, bio-thermal power plants on straw and wood chips).
  5. Heat production (both for members of a cooperative and for heating entire streets or areas in villages and cities): in a village, plants for the extraction of biogas from animal waste, in the city – solid fuel boilers.
  6. Autonomous heating and hot water supply from solar collectors.
  7. Cooling and centralized air conditioning (for example, as in Barcelona).

It is worth noting that these are just the simplest examples of models of energy cooperatives. In fact, there are many more. For example, in Germany there is a Friends of Prokon cooperative that manages development projects in the field of renewable energy sources. In the USA, hundreds of cooperatives provide electricity to rural areas and have significant distribution networks and generating capacities. However, let us return to our local capabilities.

A simple example in our conditions, an energy cooperative consists of several owners who have come together to buy a wood chip crusher together. This simple device costs about $1000, but not every owner can afford it, and an individual owner will have to stand an idle crusher 90% of time.

However, the combination of financial efforts of a small microcommunity provides tangible benefits to all its members. Chips beautifully lit in the boilers, and each of the members of the cooperative may use a wood crusher to provide themselves with chips for the heating season. In addition, a wood crusher allows to turn into the fuel almost any remnants of the tree that would previously become garbage. With the ever-increasing price of gas and other energy carriers, such a joint investment by members of the cooperative in a wood crusher is more than justified and pays off in just one season.

Such a model is only the beginning. Energy cooperatives can produce briquettes / pellets, grow energy willow, build biogas and solar power plants. Our legislation has a number of problems that create restrictions on the development of energy cooperatives, but today the opportunities for using the cooperative model in the energy sector are impressive.

Why do we need energy cooperatives?

Friedrich Wilhelm Raffeisen, is one of the founders of the cooperative movement in Germany. He argued that the cooperative allows you to consolidate resources and direct them to solving common energy problems. They allow you to solve problems that are beyond the power of one person, because he has few resources. However, bring together the resources of at least 10 such people – and you will see that together they can solve problems that are significantly larger in scale than before.

Energy cooperatives can provide a large number of their own needs related to energy without interacting with the state, without waiting for the next government decree or the goodwill of the monopolists. Trust and joint action allow you to provide yourself with fuel, receive wholesale discounts on insulation or power equipment, and establish joint production of energy or energy resources (for example, pellets or briquettes).

In general, the work model of energy cooperatives is limited only by the imagination of those who create them and by law. Despite the problems with the latter, their creation already has the potential to remove hundreds of thousands of communities from the state of energy poverty and provide reliable supply of local energy resources.

World practices of energy cooperatives 

An energy cooperative is an important participant in the energy markets of developed countries. One of the first examples is Germany. In a country that is rapidly moving from fossil and nuclear energy to the increasing use of renewable energy sources, more than 700 active energy cooperatives operate here. They are created for a wide variety of purposes. Probably the most among them are those who combine the financial resources of citizens in order to seize the opportunity to earn money on a “green tariff”. This created a situation in which in 2012 private households and energy cooperatives owned 47% of the installed renewable energy capacities in Germany.

Energy cooperatives became one of the driving forces of the German energy revolution (Energiewende) and allowed attracting billions of euros from ordinary German citizens to the green economy even when the German energy giants were very ambivalent about the prospects of abandoning fossil fuels.

Energy cooperatives in Germany are working on very different models. In addition to selling energy by ‘green tariff” from solar, there are hundreds of energy cooperatives that provide local residents with heat, electricity, and network services. Many of them were created by residents of one street in order to arrange centralized heating on it using local raw materials. However, there are quite large cooperatives that operate with significant electricity generation capacities.

Energy cooperatives have also gained considerable popularity in Denmark, the Netherlands, Sweden, Australia, and Great Britain. And the movement of energy cooperatives gained special power in the United States. According to the Touchstone Energy Cooperatives Association, which has 750 members, energy cooperatives are located in 46 states. Together they form the largest energy network in the United States, providing energy to millions of Americans who are their co-owners. Most of them have no idea that somewhere in our country the only option to get electricity is to join the regional power network. The history of some energy cooperatives stretches from the 40s, 30s, or even 20s of the XX century.

What opportunities do energy cooperatives offer for us?

Energy cooperatives certainly cannot solve all the problems of the energy sector in our country. However, they can be an important decision for a huge number of people and communities, large and small communities, which can, without hope for the state, provide themselves and other energy resources and create a new quality of life.

Energy cooperatives are a good mechanism for transforming trust in each other into an effective mechanism for the transition from a too centralized post-Soviet model of energy to a more localized one, which is assigned primarily to local resources and creates jobs, new economic models and opportunities for residents of the communities.

Energy cooperatives in Ukraine

In Ukraine, the first simplest energy cooperatives are just beginning to be created. The simplest and most promising model of an energy cooperative in the conditions of a Ukrainian village is the joint procurement by several farms of raw materials for the production of straw fuel briquettes / pellets. Indeed, it is expensive to buy such an installation for one owner, and he may not have enough raw materials to load equipment. In the western regions, owners are joining together to buy wood shredders.

For example, several farms specializing in raspberry cultivation created the Yagіdniy Krai cooperative in the village of Losyatin, Ternopil Region, and bought refrigerators for storing berries together. For their own energy supply, they bought a plant for the manufacture of fuel briquettes from raspberry stalks, and they use it together.

Energy communes: energetical independenca for communes

Near Kharkov, 12 farms united into a cooperative for the production of biofuel from rapeseed, which they themselves grow. The necessary equipment was purchased for a grant.

One farmer could not get much funding from the grant program, and the energy cooperative, combining assets, could. The farmers use the biodiesel produced to fuel their own agricultural machinery (which allowed them to reduce production costs), as well as for a school bus and ambulance.

Another example is from the Kharkov region: three private households created an energy cooperative and got a cheap loan together to build a mini solar power plant on the roofs. They not only provide for themselves, but, having created a legal entity, sell 2/3 of the generated electricity, earning about 10 thousand UAH per month. The project will pay off in 2.8 years.

Today in Ukraine, about 1000 solar power plants have been built on the roofs of private households. The first solar power plant also appears on the roofs of high-rise buildings (which is prevented by legal issues).

The economy of such a solar energy cooperative is calculated separately for each energy cooperative. Before building a solar power station, it is necessary to find out in Ukrenergo whether they have free capacity for connection.

In Ukraine, it is profitable to sell coolants and it makes sense to build boiler houses on biomass (straw, grain, corn, sunflower and other crops).

In rural areas, it is beneficial to build bio-TPPs – cogeneration plants for the production of heat and electricity at the same time on biomass, which will provide them with complete energy independence. According to experts, such projects will pay off in two heating seasons.

However, the rapid development of energy cooperatives in Ukraine is hindered by the fact that complex models of cooperatives for the production of heat and electric energy still require permits and licenses. That is why activists have prepared and are now demanding the adoption of a law “On Good Energy Cooperatives,” which will simplify their activities.

To implement local projects in the field of alternative energy, residents, organizations and enterprises are united in the so-called energy cooperatives. Often, energy cooperatives strive for independent, independent of anyone environmental production of electricity. In other words, this is a peculiar form of civic activity or public participation in processes related to politics, adoption of laws and local decisions – at the level of regions and communal societies.

Residents of the EU are well aware of all the advantages of switching to environmental renewable energy sources. In Europe, they are not only actively implementing the use of alternative types of energy, but are also constantly increasing their pace by organizing activities in the form of cooperatives. As an example, it is worth looking at the UK, which has about 5,000 energy cooperatives using solar and wind energy.

Energy holdings in Germany nowadays feel serious competition from energy cooperatives, as the latter produce about 30% of their electric energy through the use of wind farms. In this regard, the Clean Energy for All Europeans energy package in the EU countries restricts the right to connect energy cooperatives primarily to the network.

Also, energy cooperatives are first obliged to provide their own needs for the carriers of electricity that they generate, and to sell the remainder in the network according to the “green tariff”.

In the next ten years, the EU sees a temporary energy perspective in the use of energy cooperatives. According to studies conducted by CE Delft: as early as 2030, house managements and cooperatives that are participants in the energy market will occupy about half the population of the European Union. And cooperatives producing electricity will contribute 20% (today – 9.8%).

In rural areas, especially in isolated villages, where the problem of stable electricity supply is quite large, energy cooperatives using the energy of direct and diffuse solar radiation (sunlight) have an excellent chance to become profitable for village communities.

In this regard, the production of electricity generation facilities in rural collective enterprises or the union of producers of agricultural products of different volumes into energy cooperatives may serve as an impetus for future energy independence.

In this case, an excellent solution would be to create special loan packages from banking organizations (typical for such projects) for energy cooperatives in agriculture. The calculations mentioned above were carried out taking into account Ukrainian credit rates. When attracting more financially profitable European money, projects for the generation of heat carriers and cogeneration of electricity should pay off within 3-4 years.

The climate and the “green” tariff in Ukraine significantly accelerates the payback process and increases the income of cooperative participants.

When creating a business plan for a future energy cooperative to provide members with heat, it should be noted that in Ukraine such activities today require the receipt of the following permits, namely:

  1. obtaining licenses: for the production of thermal energy; transportation of thermal energy; heat supply. Relevant licenses are issued by regional state administrations;
  2. compliance with licensing conditions for the number and qualifications of personnel, technological conformity of processes, organization of accounting and reporting;
  3. approval of fixed tariffs in local authorities;
  4. confirmation of the intended use of land on which boiler and heating networks are located, etc.

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