Community Power
is a term I’ve heard a lot of over the last few years. What it means exactly is hard to say because there are different interpretations of it around.
Personally, I’ve got the sense over the last 12 months that it means power projects owned by a co-operative, even though the Ontario Power Authority (OPA) and the Ontario Sustainable Energy Association (OSEA) define it much more broadly and also include “local residents, farmer collaboratives, First Nations, municipalities and other institutions working to develop local sustainable energy projects” that own at least 50% of the project.
My goals
have always been focused on emission reductions, renewable power production, support for food producers and local economic development. It doesn’t matter to me if the project is owned by a co-operative of many local citizens or a partnership between a handful of local citizens. Yes, greater accessibility will be achieved with the co-op. And yes, decision making would be more democratic with a co-op. But other significant roadblocks stand in the way of the co-op fund raising process – like more onerous regulations, for example. If the goal is local economic development and maximizing potential biogas opportunities, which it is, it makes the most sense to develop the projects through multiple different corporate structures – more in line with the OSEA definition.
In a Limited Partnership (LP),
the broad accessibility to the investment opportunity doesn’t exist across the local community. However, ownership of energy production is still in the hands of local individuals – meaning that a greater amount of funds will flow through the local economy, maximizing the positive multiplier effect and benefiting the whole community in the long run. LPs also offer investors the added benefit of tax loss flow-throughs – which means that the project development costs can be subtracted from the personal incomes of the partners, reducing the tax burden over these years.
Creating and funding a co-op, as I’ve learned, is no simple matter.
A greater amount of time and money will be spent meeting regulatory requirements and on legal expenses, as compared to creating and funding an LP. Granted, funding an LP is no easy feat either, but I’ve learned that it is more straightforward and easier to understand for potential lenders and investors. LP’s also qualify for the OPA’s Community Adder (although that could potentially change with the current FIT review).
Finding the sweet spot
Seemingly the only meaningful difference between pursuing either one of these structures is accessibility, which could be very meaningful if the project in question is a wind project – something that has received very vocal opposition in many Ontario communities to date. Ultimately, different situations will call for different approaches – a small group of wealthy local investors interested in biogas may not exist in a particular area, whereas many locals with a little something to put into an RRSP and a strong sense of community may. It’s about finding that sweet spot where biogas plant development and local economic development are both maximized.
photo credit: mikemcsharry
