Across Canada, communities eager to power themselves with local, co-operatively-owned renewable energy are hitting walls set by regulators and lenders that seem to favour big, centralized, fossil fuel-driven power corporations.

Since 2003, when the Peace Energy Cooperative laid the groundwork for British Columbia’s first commercial wind turbine, these grassroots renewable energy cooperatives (RECs) [pdf] have been fighting an uphill battle to get off the ground.

In Ontario, the regulatory landscape is part of the problem, with provincial regulators not especially inclined towards RECs, John Kirkwood, president of the Ottawa Renewable Energy Co-operative (OREC), told The Energy Mix.

(Disclosure: The Energy Mix Publisher Mitchell Beer is a longtime OREC member.}

“From our point of view, some within the regulators view RECs to be an annoyance that threatens their centralized, command-and-control model,” Kirkwood said, adding that regulators find it easier to deal with established, private-sector energy producers that remain committed to fossil fuels even as renewables like wind and solar become more affordable.

And when it comes to dealing with financial institutions, OREC is seen as “a relatively small, niche potential customer,” Kirkwood said. “Some institutions have declined to work with us because they don’t have the expertise in RECs to make an informed assessment of our risk/return.”

Community Buy-In Needs Government Support

The Wintergreen Renewable Energy Co-op (WGC)—created in 2012 by local farmers, green energy advocates, and community members in South Frontenac, Ontario—can serve as a lesson for groups seeking to establish a source of renewable community power.

David Hahn, WGC’s president and founding director, said the co-op had been on track with 17 projects in the pipeline. But despite the community buy-in, the province had offered little support, and the developer didn’t have sufficient experience with the co-op model.

Then in 2018, Ontario’s then-new Premier Doug Ford cancelled 758 renewable energy projects across the province, which had a devastating impact on WGC’s development.

“We sort of thought the writing was on the wall,” Hahn said. “There was not going to be any framework of support from the government anymore—really not any framework for projects, and certainly not any support for a co-op.”

So in 2020, eight years after it formed, the co-op ceased operations.

WGC had to shut down, Hahn said, but other RECs have succeeded under different circumstances, like the Oxford Community Energy Cooperative (OCEC) in Ontario’s Oxford County. Though it faced the same provincial regulators as WGC, Hahn said OCEC worked with Prowind Inc., a developer that was much more familiar with co-ops and considered it part of its mission “to help the co-op succeed.”

Helmut Schneider, vice president of renewable energy development at Prowind and one of OCEC’s incorporating directors, agreed the relationship between the two entities was fundamental to the co-op’s success. Compared to other North American developers, for which working with co-ops is not a priority, he said Prowind’s background includes projects in other countries like Germany, where renewable energy co-ops are widespread.

“The partnership that OCEC built with Prowind is 100% a contributor to the success of the project,” Schneider said. He added that the partnership was “supportive in ways other than financial, such as resources and experience.”

Challenges Facing Renewable Energy Co-ops

For co-ops like WGC and OCEC, the difference between having access to supportive systems and developers, or dealing with those that favour more traditional models, can be a decisive factor.

In an email to The Mix, a spokesperson for the Ontario Energy Board (OEB) said the independent regulator “recognizes that RECs may offer a unique model for community engagement in renewable energy projects.” They said OEB has taken steps to better accommodate distributed energy resources’ (DERs) connection to the grid, sometimes in partnership with Ontario’s grid operator, the Independent Electricity System Operator (IESO, and “developers of REC-related projects will benefit from these initiatives.”

The OEB has also “received valuable feedback from energy sector participants through numerous public policy consultations” on renewable energy and DERs, the spokesperson added, and “those consultations are open to all stakeholders, including RECs.”

More broadly, however, Schneider said the Ontario government has not shown interest in the co-op model, though the IESO is aware of how useful energy co-ops are.

With past cancellations of renewables projects, and procurement announcements that fail to mention energy co-ops, the government says it recognizes the value of RECs but “their actions don’t really show that,” Schneider said.

A recent census recorded 49 active and 48 inactive RECs across the country—a number down from a total 129 reported in 2015. The census researchers say the two sets of numbers are not fully comparable as they could not identify and replicate the methods used in the 2015 research.

But the census did identify [pdf] various challenges faced by RECs, and in some cases pointed to specific policy changes that undermined their performance. In Ontario alone, 29 co-ops had cut back or closed operations since 2015—a statistic the authors linked to the government’s 2018 cancellation of its feed-in-tariff policy that compensated homeowners for selling power back to the grid.

But the challenges facing RECs go beyond government policies—the very energy landscape they function in is generally more suited to centralized energy systems.

“In other provinces, a surprising number of RECs simply gave up in the face of seemingly insurmountable barriers put in place by monopoly utilities and the disinterest of regulators and policy-makers,” the census researchers wrote. They described both external barriers—like high interest rates on loans and lack of government support—and internal barriers such as difficulties in hiring experienced team members and limited capacity from having to rely on volunteers.

When it comes to how financial institutions interact with RECs, “the picture is mixed,” said Chad Park, vice-president of sustainability and citizenship at The Co-operators, a Canadian financial services co-op. “Some financial institutions are supportive and patient; others not so much.”

He added that for financial services regulators, “the general sense is that this topic is far from their day-to-day thinking, which is largely focused on macro issues for the financial system as a whole.”

Regulators Can Help

But there are some opportunities to improve things. OREC’s Kirkwood said regulators like Ontario’s IESO and OEB can support RECs by enabling exceptions to regulations that hold them back from adding to the province’s electricity supply. For example, he said a battery energy storage system project being pursued by OREC should be rewarded for reducing peak power demand—just as residential consumers enjoy ultra-low rates for overnight power, and Class 1 industrial consumers benefit from the IESO’s Global Adjustment program. Regulators could also make better use of RECs’ agility and innovation when they strategize about how to meet rising electricity demand.

Park pointed to another possible opportunity in new guidance around managing climate change risk, introduced in mid-April by Canada’s Office of the Superintendent of Financial Institutions (OSFI). Park said those rules could “encourage banks and credit unions (federal ones but also provincially to the extent the provinces follow OSFI’s lead) to look at RECs in a different light.”

As well, he said better support for organizations like Community Energy Co-operatives Canada (CECC) could facilitate collaboration among RECs and help them develop an advocacy strategy to build relationships with regulators and policy-makers.

“My sense is that this combination of local mobilization and broader coordination and alignment on policy advocacy was instrumental in some other countries—like Sweden and Denmark—in making RECs thrive, which in turn was very important in pre-empting or overcoming potential opposition toward renewable energy projects,” said Park.