Author: Ain Alvela

At TalTech, researchers have studied the nature of energy cooperatives, possible business models, and their feasibility. As a result, they concluded that an energy cooperative can create a significant proportion of the power consumed at local municipalities from renewable sources with minimal expenses, reduce the need for centrally produced electricity, increase awareness among the citizens and public officials about energy issues, and provide an alternative to individual small producers and major producers. In addition, locally produced and consumed electricity increases the energy independence of a community in terms of security of supply and price, provides communities with an opportunity to contribute to the production of renewable energy while remaining in control of investments, and includes them in a dialogue for solving local energy issues, helping foresee and prevent problems.

The researchers consider local governments to be the leaders in establishing and operating cooperatives. The activity of cooperatives could be roughly based on cooperation between three parties – local governments, companies, and communities. All this is still theoretical, because the current number of energy cooperatives that are operating or are in the middle of being established in Estonia is in single digits. Moreover, researchers believe that this type of cooperative could operate as a non-profit organisation, but the existing cooperatives are usually for-profit organisations.

We need clarity for initiatives

As the public perception of energy cooperatives is mixed and often their nature and objectives are unclear, TalTech has decided to explain the nature of such cooperatives and explain in plain language how energy cooperatives could alleviate energy problems of local municipalities and communities as well as how the active participation of locals could motivate utility companies to get involved.

Why is establishing energy cooperatives so slow here, despite logic and scientific research dictating that we should have started these a long time ago? Tarmo Korõtko, researcher at the Department of Electrical Power Engineering and Mechatronics of the School of Engineering of TalTech, believes that there is no clear understanding of the objectives of an energy cooperative – they are associated with classical business models. Therefore, the established cooperatives operate in the standard format of enterprises and attempt to earn a profit with their economic activity. According to Korõtko, this is not the goal of an energy cooperative in the context under discussion.

‘The actual objective of an energy cooperative is different; it is not profit for owners. However, economic efficiency is still important for energy communities,’ Korõtko explains. ‘The idea of an energy cooperative is to earn back the investment that was made. However, the point is not for the owners to withdraw funds from the cooperative, but to earn profit that is reinvested into implementing new solutions of renewable energy or improving the daily life of the community in other ways.’

An energy cooperative has a concrete legal format in accordance with the Electricity Market Act, and naturally, research is not trying to change that. However, it is possible to study various manners of implementing energy cooperatives and how a method could affect a community at the micro and macro level.

In anticipation of first success stories

A pilot project of so-called micro-networks is currently underway in Tartu. Three parties (the local government, private sector, and the energy community being created) would like to start a partnership where the local government orders a public service provided by a company which needs power for the service and the cooperative produces the power on land owned by the local government.

‘In principle, the city of Tartu provides a plot for the energy cooperative to build a production unit which will produce electricity for the company that is going to provide the power distribution service,’ Tarmo Korõtko describes the essence of the pilot project. ‘We would like to implement the energy cooperative model in Tartu to create a specific example of such cooperation working in practice that others could rely on as a model in the future. Someone must complete this journey first to create a positive success story. Local governments could be pioneers by providing plots and completing paperwork. Later, when we already have examples of energy cooperatives and their efficiency, citizens could start taking initiative.’

*Long version of the article was published in the Novaator science portal.