Feature

Highs and lows for Canada solar co-op


Judith Lipp

Canada's SolarShare co-operative is all about keeping the benefit local and allowing regular people to own a part of the local resource, but while it's had some recent success, the path ahead looks rocky.

Donning hard hats and hoisting clipboards, a team from SolarShare inspects 2.5 acres of solar PV panels covering the roof of the Daimler Buses North manufacturing facility in Mississauga, Canada (pictured above). The system had been complete for a few days; the hard hats were for show, and clipboards were for collecting names of potential community investors who had gathered in the parking lot below for a ground breaking celebration.

And there was cause for optimism, for this was the launch of the largest of the 18 solar PV sites owned by the TREC SolarShare Energy Co-operative.

With a portfolio of over 600 kW, SolarShare is the largest solar PV Co-op in Canada and second largest in North America.

But there are more significant reasons to celebrate. The SolarShare project, like so many grassroots, community-led energy initiatives was a long time in the making and its success dependent on a deep-rooted commitment and conviction by a myriad of actors all coming together in the province of Ontario, to build community owned power under the province's 2009 Green Energy Act (GEA).

The TREC co-operative has been Canada's leader in community power development since 1998. And this is the second time in its history that TREC is using the co-operative enterprise model to enable citizens of Ontario to invest in clean, green, local renewable energy projects.

TREC's inaugural project was the iconic WindShare turbine in downtown Toronto. WindShare was also a development ‘first': the first urban turbine in North America, the first wind energy co-op in Canada and the first joint venture partnership with a local utility, Toronto Hydro – which owns half the project.

The wind turbine began generating power in January 2003 (about 1 million kWh annually), and continues to be a key landmark on the Toronto skyline.

But for the mountain of barriers that exist for community power development in the province, TREC would certainly have launched several other initiatives too, and they may still come to fruition if sheer tenacity has its way.

For now there is still much work to do on SolarShare. Beyond the ceremonial ribbon-cutting with municipal and provincial dignitaries, which took place on a gloriously sunny day earlier this year, it's now time to engage Ontarians as impact investors.

Investment needed

The co-op begins selling pre-release bonds this month – co-op members can purchase one C$1000 bond each, for now. Unrestricted bond sales will be possible after the province's regulatory agency – the Financial Services Commission of Ontario (FSCO) – approves the co-op's offering document.

But the scheme is not without its problems. Where grid constraints, cumbersome bureaucracy and policy issues hamper community power on the development end, the overly cautious nature of the co-op regulator hinders community involvement on the financing end.

The challenges appear never-ending for an idea that everyone loves to endorse, but few decision makers are willing to stand behind with concrete actions that enable significant development.

An idea is born

The idea of SolarShare had its genesis in 2007 when the Chair of TREC and now also president of SolarShare, Mike Brigham, started to explore the feasibility of community owned solar under Ontario's Renewable Energy Standard Offer Program (RESOP), the precursor to the Feed-in Tariff (FiT) program, introduced in 2009.

Brigham and research collaborator and renowned FiT expert Paul Gipe could not make the numbers work at 42 Ccents/kWh, the solar rate under RESOP.

At the time, TREC focused on other initiatives like Our Power (a solar neighbourhood buying club model), the LakeWind community wind farm and a Kids' World of Energy Festival (on-going).

But the financial model, which Brigham says they “turned every which way to make the fly under RESOP”, did live on and was used to inform the solar FiT rates applied in Ontario today – and which formed the backbone of the current SolarShare business model.

In early 2009, when the GEA and FiT program seemed like a sure thing, TREC revived the SolarShare idea and set out to make it a reality. The numbers looked like they were going to work and when the FiT rates were finally announced, TREC knew that even as a co-op (with higher cost development due to longer time horizons and higher cost of financing), the right sites would be feasible.

Finding those sites, however, was not so easy. Solar development in Ontario in 2009 was akin to the early oil and gold rushes, with developers tying up prime solar real estate with promises of a solar windfall. As the noise dissipated and TREC got its message out about the triple bottom line opportunities of community power, SolarShare projects started to come together.

First projects

The first 17 sites in the SolarShare portfolio are the 11.98 kW DC dual axis MECCA tracking systems consisting of 52 polycrystalline PV panels per site. The systems are installed on private land across south-western Ontario. SolarShare bought 17 leases held with local landowners, paying them 10% of revenues generated by their tracked installation.

It was hoped SolarShare would be able to acquire at least 20, and up to 40, of the now-dubbed SunField sites, however, before the minimum goal could be reached the Ontario Power Authority (OPA) announced a change to the micro-FiT program (for projects 10 kW or less) preventing the aggregation of ground-mounted solar sites. Aggregating was not in the spirit of the Green Energy Act, the OPA said, fearing windfall profits for the aggregators.

While certainly not generating runaway profits, the numbers on the 17 sites still worked, with the model showing an 8% return on investment. While disappointed to be pursuing the first SolarShare projects with a model that can not be replicated – for one of TREC's goals is to pioneer a model that can be shared with or followed by others – the local landowner benefit and shared-wealth approach of the model did appeal, and is very much in line with the philosophy of community power and TREC's mission – keeping the benefit local and allowing regular people to own a part of the local resource.

Through the co-op model, SolarShare site leaseholders become owners in the systems on their land without any of the up front development risk. And through this model, their neighbours too can invest in the projects they see dotting the local landscape, as can others in the province who want to invest in line with their environmental and social values.

As the initial legwork on the SunFields sites was winding down, another opportunity presented itself. Brought to TREC by the same ECT as on the SunField sites – AGT Solar – was a large rooftop system, 438 kW in size on the roof of the Daimler Bus plant, dubbed the WaterView site.

“The WaterView project has brought together cutting-edge technology, industry-leading design and local human resources in a project that allows residents in Mississauga and across the province to invest in, and benefit from, clean solar power,” says SolarShare project manager Matt Zipchen.

Boasting a novel PowerTilt system supplied by thin film technology providers, United Solar, the WaterView project is expected to generate 500 MWh of power and revenues of C$323,000 each year. The FiT rate for the project is 63.5 cents/KWh.

Growth ambition

The SolarShare portfolio currently represents C$3.78 million of solar development, and the co-op has plans to increase that to C$10 million worth of projects. With the FiT rates contracted for 20 years, SolarShare offers its members Community Solar Bonds that earn 5% annual returns over a 5-year term.

Because the projects are financed with bridge loans and already operating, bonds represent a competitive and low risk investment for Ontarians. At a time when the regular securities market looks bleak and when citizens are keen to invest in social and environmental initiatives, SolarShare Community Solar Bonds may offer a compelling investment.

With this kind of impact, one might assume these projects are springing out of the ground in Ontario, but the reality is, doing good is hard work. There were high hopes for renewable energy development broadly – and community power specifically – when the Liberal government of Ontario introduced the Green Energy and Green Economy Act in 2009 and legislated with the first comprehensive FiT programme in North America.

With aggressive pricing, streamlined approval processes and a 20-year PPA contract, there was finally a clear policy framework by which to go about building out Ontario's renewable energy potential. There was also support specifically for community power in the form of a 1 to 1.5 Ccent/kWh ‘adder' for projects owned by community or aboriginal groups.

To support development costs, a grant program was established – the Community Energy Partnerships Program – which has allowed groups like TREC to pursue the SolarShare project. While the interest has been strong and the green energy sector appears to be blossoming, the reality for community power looks quite different.

Barriers blight progress

While TREC and other groups around the province are eager to implement citizen-owned projects, they find many barriers along the way. For one, Ontario's aged electricity infrastructure limits access to the grid, so a group can spend years on a project (as TREC has done with its 20 MW LakeWind project) and not get connected.

Others, including even small distribution system-connected solar projects under 100 kW, face similar constraints. Waiting for grid upgrades, which have been promised, can take years and a community group may not have the resources nor the stamina to do so.

Even with sufficient grid capacity, the financial regulations of Ontario are currently not set-up to understand community power. Offering statements to sell bonds or shares to community members in these renewable energy power projects are viewed with extreme caution by the Financial Services Commission of Ontario (FSCO) and SolarShare's ability to market its bonds without restriction is dependent on FSCO approval.

Unlike Germany, Denmark and other jurisdictions with a longer history of renewable energy and community power development, Canadian banking institutions are hesitant to finance projects. Community groups have to get very creative in their financing arrangements, appealing to their membership to provide bridge loans or construction finance.

Because of the delays in getting offering documents approved, most groups have been unable to sell bonds or shares in their projects, so they are caught between a rock and a hard place. They need to get their projects in the ground or risk losing all their work to an uncertain policy future (being battled out among political parties leading up to a fall provincial election). But they don't have the approvals needed to raise the money.

Co-op law in Ontario allows for a few exceptions to the offering document and SolarShare (and others) have used this to raise initial capital, but it's an interim measure at best. As a result, two years after the FiT program was introduced, there are only a handful of renewable energy co-ops under development and only two – WindShare and SolarShare – generating power.

The value of community power in Ontario is underestimated and not being leveraged to its full potential, in the very public fight about the aesthetics, price and health concerns of renewable energy. A surge in solar and wind developments across the province has caused tension between rural communities and the proponents of renewable energy.

Large commercial wind development, in particular, has sparked the outcry of a very vocal opposition representing a minority view but effective at appearing to represent the masses. Anti-development arguments are many and the benefits of renewable energy brushed aside.

Lack of control and ownership is certainly one reason for the tension, with local communities and landowners feeling disrespected, ignored, and unable to influence their landscape. This dangerous combination breeds an undemocratic process and has produced contempt from the local communities towards renewable energy. Unfortunately, these sentiments have scaled-up to an anti-Green Energy Act movement that has been usurped by various groups to fuel regressive energy policies.

Risky times

In addition, the Ontario provincial election that took place in October 2011 puts community power at further risk.

The Progressive Conservative Party of Ontario (now serving as official opposition) had vowed to eliminate the FiT programme and the Green Energy Act, claiming the pricing model is “unsustainable.”

Their platform proposes a competitive bidding process that typically awards contracts to companies that can build renewable energy projects at the lowest cost. Community power is unable to participate in such a process because local groups, co-operatives and communities are not able to access the capital, resources or economies-of-scale necessary to make a competitive bid.

Community power has the potential to help reduce tensions over renewable energy projects in Ontario. By being locally organised, financed and developed, community power devolves decision-making and authority back to the individuals who use the energy and live close to the point of production.

As people become both personally and financially invested in renewable energy, they become less likely to protest. The Danish expression about your own pigs not stinking is a fitting analogy to the potential of community power – to positively engage local communities in renewable energy development.

Also, with local members and investors, public input becomes a consistent and essential part of the project's development as opposed to a regulatory check box in commercial projects. And community participation also builds local capacity by providing skills, training and education in renewable energy, project development, and business management.

While much of the province, and most decision-makers, haven't really caught on to the brilliance of community power, TREC and SolarShare work on, enabling the participation of (hopefully) thousands of SolarShare investors.

The work of community power will carry on, regardless of the odds, because it's the right thing to do and its time has come. But a little more support from the elected leaders would be a welcome break.

About: Dr. Judith Lipp is the Executive Director of TREC Renewable Energy Co-op, Canada's leader in community power project development. She has more than 10 years experience in renewable energy policy and project development.

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