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Investment Season is Here, There is a Local Option!

RRSP Word Cloud

Written by: Dick Bakker, OREC Board Member

The February RRSP investment season is upon us once more.  Where to put that little nest egg we are each trying to protect and build?

Interest rates are low, the stock market unpredictable, mutual fund management expense ratios are high, while oil and other ‘sure things’ are not!  How can we make a relatively safe investment that pays back a return to ourselves and does something good that we can actually see and touch?

This is the season we are all bombarded with advertisement and promotions from the financial sector.  They are very good at showing high rates of return into our retirement, but many of us remember the financial collapse of 2008.

What about a local investment in your own community!  One that pays a nice steady return over many years.    An investment in something that we all use and need.  A relatively secure investment (everything in business is relative) paying a good, not unreasonable return.  Renewable energy cooperatives are such an opportunity.   They allow community members to jointly invest in projects within their neigbourhood; ensuring the jobs, profits, production and consumption (electricity) stays within the community.  Over the last three years over 60 such cooperatives have been established across Ontario.  Province wide there are now over 4,000 members with a goal of generating 100 MW through community power by 2015. They have formed a self-regulating federation called the Federation of Community Power Cooperatives and are a rapidly growing sector in the province.

Renewable energy contracts in Ontario are backed by a Feed-in Tariff that pays a guaranteed rate for production over a 20 year term.  The producers are paid when they deliver electricity only.  They are not paid to build, but just to deliver.  This way thee incentive is to be as efficient as possible and drive down costs.   Community Cooperatives enable many small investors to pool their money and jointly own renewable energy generation projects.

Within Ottawa we have the Ottawa Renewable Energy Cooperative (OREC).  Over the last two years it has grown to 340 members, has built 7 solar projects, raised over $3 million in equity from members and paid dividends annually.  It has proven that community ownership, by small retail investors, without traditional brokerage type management fees (and control) is a viable and profitable way to build energy production assets in Ottawa.

Over the last 20 years, northern Europe (Germany, Belgium and Denmark, etc.) has proven that community ownership of renewable energy is a profitable way to build an energy system.   Now Ottawa, and Ontario, are following the lead of our European friends.  OREC is now raising new equity to build six new projects in Ottawa.   Three sites will be on schools, two on local barns and one on a large commercial facility.   Construction has already started and all sites will be completed by August.  They will all be producing electricity soon and doubling OREC’s income stream. OREC Preference Shares are RRSP eligible and are expected to pay a 5% dividend for 20 years.  As a cooperative, OREC is democratically controlled by the members and follows the seven cooperative principles.

Cooperative investments are not often written about in the financial press because the traditional financial industry does not make a return on the sale or management of Cooperative assets.  Cooperatives are a huge part of the Canadian economy; they operate in almost every sector, have 17,000,000 members, $275 Billion in assets and employ over 150,000 Canadians.  Cooperatives operate successfully in every sector of the economy, banking (Desjardins), retail (Mountain Equipment Cooperative), food processing (Gay Lee Foods) and agriculture services (Federated Cooperatives) are just some of the better known sectors.

Because these organizations are cooperatives, and therefore directly controlled by their members they tend to operate more conservatively and thereby have a longer life span by quietly and steadily growing.  Renewable energy cooperatives, are a new spin on this proven business model.  OREC, and its fellow FCPC members, are using the coop model in a new market for Canada; renewable electricity production.   The prospects for growth are good, the need for new, localized energy production is strong and the side effects are positive.  We will all consume what the coops will produce.

What could be a better way to invest a portion of our retirement nest egg than to use it to build something we will all consume, have it generate local employment, and pay a good return! Any climate change impacts would simply be an extra benefit for everyone.

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