Cooperative Energy Model is the Missing Piece in Puzzle

A genuinely cooperatively owned consumer retailer is the missing part of the energy puzzle in Australia, according to the head of the Business Council of Cooperatives and Mutuals.

Speaking in the wake of the announcement from SA BEST leader Nick Xenophon that he will cut power prices by as much as 20 per cent by setting up a community electricity co-op, BCCM CEO Melina Morrison said the co-operative model had an internationally proven track record for delivering services.

“The co-operative energy model is already being deployed in countries around the world, including the USA, Germany and Denmark,” Morrison said.

“The collective purchasing power created by this structure returns power back to the people.” 

It comes after senator-turned-candidate for SA state premier, Xenophon, weighed into the South Australia energy war with an election promise to establish the Community Electricity Trust of SA (cETSA).

Billed as an “exciting plan to lower power prices using the co-operative model of community electricity trusts”, the co-operative retailer would be made up of 50,000 lower-income households and up to 5,000 small businesses.

It would be able to enter into a tender process for a power purchase agreement for the development of a new 150MW dispatchable renewable energy power station in South Australia, to compete in the highly concentrated generation market.

Morrison told Pro Bono News it was an exciting proposal.

“We’re pleased to see the announcement of any form of energy ownership which puts customers at the centre of the business, which is the co-operative model,” Morrison said.

“So there is still some detail that is to be forthcoming. If you’ve seen the announcement from Nick Xenophon, it doesn’t say in detail how they will set it up but he is calling it a cooperative and he does know what a cooperative is, so we’re thrilled by the idea.”

According to Morrison, Australia has been “behind the rest of the world” in having a genuine consumer owned cooperative on the retail side of energy.

“This form of energy ownership is ubiquitous across the world,” she said.

“So across northern Europe and now in the UK, there’s a lot of energy owned cooperatively.

“Australia is starting to catch up now.”

One of the reasons Morrison gives for Australia being “slower of the starting block” centres on the motivation behind people coming together .

“With energy the motivating factor for coming together, to do something collectively, is if your power bills are high or you’ve got a lack of access to power supply,” she said.

“We haven’t had these problems historically. We’ve had cheap sources of power, so it hasn’t been such an issue and people have felt quite comfortable with power being supplied to them by a third party.

“We also didn’t have the problem that they had in the USA in regional areas… The reason that Roosevelt gave them the original debt funding as communities to get going is because they couldn’t actually get for-profit providers to put poles and wires into very far flung rural areas because the markets were too thin.”

But she said there were a lot of benefits Australia could get from adopting the cooperative model.

“By having member owners you are effectively collectivising the self-interest of all of those people and cutting out the intermediaries and that’s how you get the benefits of the cost reduction in power costs, as well as the opportunity to own a power producing asset like a solar array,” Morrison said.

“It is because you are collectivising the capital of a whole lot of people matched with debt funding often. And all of the benefits, all of the surplus, if you like the profit created, can be reinvested back directly into the community that owns it.”

She said cooperatives also has a long-termism that separated them from other models.

“So cooperatives, not being profit maximising companies, can look much further down the road and think again about how they are going to reinvest the surplus,” Morrison said.

“These are all profitable businesses, whether you call it a non-profit or a for-purpose, they all have to make money. But because you are not looking at quarterly reporting for shareholders, you can look down the track and that’s what they did in the US.

“They invested in the infrastructure, the poles and wires that are now across 75 per cent of the USA supplying 42 million Americans, because they were able to look down the track and invest for the future.”

She said what was particularly exciting for Australia was the ability of the model to adapt and scale.

“If I could give one example, in Belgium there is now one of the largest cooperatively owned renewable energy business in Europe, called Ecopower. They started with 47 members… they now have 43,000 members,” she said.

“They’ve scaled and added more members, and obviously the scale of the business has been able to generate more surplus. That means they now own power generation as well, so turbines and the like.

“This is what’s so exciting for Australia. This could really work for regional centres, if you say there’s 20,000 people in Mount Gambier for example, you can start off collectively partnering with a power company to purchase a collectively co-owned asset such as solar array and then over time you might even have a deal where the community part of the business buys out the asset because the money that you would return to the shareholders you can put back in the bank, and then you can decide as a community what you’re going to do with it.”

Morrison said that as more people “jumped on the renewable energy bandwagon”, more states were looking to diversify energy supplies.

“If you look in Victoria there’s been a recent announcement around the Victorian government’s investment in community energy hubs which are helping people to come together as communities and address their energy supply and their energy concerns together,” she said.

“We’re also seeing governments creates subsidies for investing in putting solar rays on your roof.

“Actually in South Australia the three parties are all contesting around who’s got the best renewable energy platform, so they’re all offering something and collectively if you think of society as one big cooperative, everything is going to contribute.”

But she said cooperatives were the missing piece of the puzzle.

“I think we are blessed with a lot of sunshine, a lot of wind and you know, if countries like Germany can get something like a third of their energy supply from renewable energy sources, and they’ve got a much longer winter than us, it’s crazy if we can’t mix up our energy sources,” she said.

“I think parties of all inclinations are responding to that in the community.

“I suppose I would just add the missing part of the puzzle in Australia has been a genuine cooperatively owned consumer retailer with people collectively purchasing purchasing energy.”