Home » Blog » Building Local Economies through Cooperative Ownership
Seven Co-op Principles
Seven Co-op Principles

Building Local Economies through Cooperative Ownership

It is common belief that companies build our economy.   Most of us assume that strong businesses build a strong local economy.   But most corporations operate on the premise that their prime responsibility is to maximize return for the shareholders while NOT breaking any laws.  Focusing on the local economy is not their legal responsibility, unless of course the executives specifically choose to do so.

On the other hand, cooperatives are by definition responsible to keep the local economy in mind as they go about their business; it is one of the seven cooperative principals under which they must operate.

1)      Voluntary and Open Membership
2)      Democratic Member Control
3)      Member’s Economic Participation
4)      Autonomy and Independence
5)      Education, Training and Information
6)      Cooperation Among Cooperatives
7)      Concern for Community

Cooperatives may be ‘for-profit’, or ‘not-for profit’, but in all cases they are judged on how they follow these principles.  Enhancing local economic development is key to the success of cooperatives, because it is important to where their members live.

The economic challenges of the 21st century (gyrating energy prices, pollution, climate change, growing debt, and rising income disparities, etc.) will require the world (and all economies) to be much more resilient and self-reliant than they have been over the last several decades.

The book “The Resilience Imperative, Cooperative Transitions to a Steady-State Economy”, by Michael Lewis and Pat Conaty, presents concrete examples of how cooperative businesses and social enterprises, in conjunction with a mixed economy of private enterprise, local private small businesses and appropriate government regulation, will build local economies to withstand the shocks we know are coming.

Cooperatives, based in a local community, can be, and are, viable partners in the economic system; they maintain the profit motive and supplement it with a local perspective on employment, suppliers and environment.  As individuals and enterprises we need to earn an income and a profit, while we also wish to live in a community that has employment and opportunity for our neighbours.   Cooperatives around the world successfully strive to match profit and community development; by matching investment, production and consumption in the same community.

The trends to globalized supply chains, big financing companies and large transnational firms hunting for the cheapest labour (and environmental rules) will not go away.   But there are ways for communities to build local capacity from within, and cooperative ownership of for-profit companies is one such tool.

Cooperatives that raise capital from members within a defined community will tend to be sensitive to the environment in which their owners-members live.  And they will be more likely to utilize products, services and employees from within their community.  In this way they foster the development of supply chains with businesses within the community, building stronger resilience and strength.  Germany and the Basque region of Spain are two examples of areas where this has been especially true; the Resilience Imperative outlines many other examples.

In the renewable energy sector Ontario has followed the lead of Germany and established a category of renewable energy cooperatives that are given certain advantages in acquiring projects if they are community owned.   As of December 2014 there were over 70 such cooperatives established in the province with over 4,000 members and 100 MW of electricity generation capacity built.  The largest cooperatives have established a self-regulation association ( Federation of Community Power Cooperatives) to deal with governance, regulatory and media/PR issues.

The Economist magazine recently did a special feature on the exploding growth of renewables, their steady cost reduction and future impact on the electrical industry, called ‘Let There Be Light”.  The last article, entitled “Invisible Fuel” ends with a very perceptive comment about the key drivers for renewables:

“The fifth and final part is finance. Business models for new energy systems are now proven, both in the rich world and in emerging economies. A wave of money is breaking over the old model, sweeping away incumbents. If they and their friends in government try to hold it back, everyone will suffer.”  (The Economist, January 17, 2015)

Community ownership of electrical generation is and will be an increasingly important new source of investment for the renewable sector and a new means for communities to influence (and potentially control) their local power industry.

By raising equity and debt from members within a community, new electrical generation can be installed faster and with greater community support than would be possible if it were pushed by corporate or big government interests.   Smaller, locally owned projects are viewed with more friendly eyes than when they are imposed from the outside.  Keeping the ownership, and thereby the profits, locally will diminish the potential NIMBY (Not In my Back Yard) sentiment.

The province of Ontario has a serious long term power supply challenge; as of November 2014, over 38% of our “distribution based” electrical supply comes from three nuclear generation sites.  These plants were built 30 to 50 years ago and will all have to be replaced and/or seriously retrofitted.  The cost of which will be astronomical, and the time line unpredictable.   Waste and long term storage is another challenge that keeps getting punted into the future for our children (the future taxpayers) to deal with.

Reinforcing the financial issues of nuclear is the fact that this is a centralized power source.  The electricity must be transported by the grid over long lines to the over 13 million residents of Ontario.   Not a very ‘resilient’ system should something go wrong, and certainly very wasteful in terms of line loss.  Again the Economist articles mentioned above refers to the inherent inefficiencies of centralized power distribution.

A better system would be a decentralized power system in which more of the electricity was generated close to the consumption.   This would allow the industry to more easily utilize the efficient distributed technologies of the computer and internet industries, making the power industry more localized, responsive and intelligent.

Community owned renewable energy cooperatives, like OREC, are an obvious way to implement such a change in the Ontario electrical system.  It will be a radical change and it will need local support.   Germany has proven it can be done and the rapid growth in the last 4 years of the Ontario energy cooperatives shows that it can happen here as well.

Subscribe To Our e-Newsletter

Sent 2x a month; be the first to know about investment opportunities, OREC news, and relevant events throughout Eastern Ontario.

You have Successfully Subscribed!