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Brian Iler
Kirsten Iler
The growth of community-owned green energy in Canada

| September 27, 2012
The growth of community-owned green energy in Canada

Community power was given a boost this summer with the release of the second round of Nova Scotia's Community Feed-In Tariff (COMFIT) projects on July 9, 2012 and Ontario's FIT 2.0 Program Rules on August 10, 2012.

Until now, ownership and participation in Canada's growing green energy sector has been dominated by private sector interests. It looks like things may be starting to change.

Community power means community‑owned renewable energy products that are developed and controlled (entirely or in part) by people living in the community. In other parts of the world, such as Germany and Denmark, large portions of green power are in fact community power projects. In Canada, however, most renewable energy projects are privately owned.

The term "FIT", which is short for "Feed‑in‑Tariff", refers to the price the government will pay to suppliers of green energy for the energy they produce.

With the new FIT Rules in Nova Scotia and Ontario, there's an opportunity for communities to work together to develop and own green energy infrastructure and to experience the full benefits, including creating a stable revenue source, generating clean energy and nurturing community leadership.

Established under Ontario's Green Energy and Green Economy Act, 2009, the FIT Program was North America's first comprehensive guaranteed pricing structure for renewable electricity production. It was the result of determined lobbying by a broad coalition of community, environmental, agricultural and labour groups -- and a receptive Ontario government.  

Nova Scotia's NDP government followed with its own FIT Program in its 2010 Renewable Electricity Plan. The COMFIT Program is "the first community-based feed-in tariff program in North America and is designed to increase local ownership of small-scale energy projects in Nova Scotia," according to the government.

British Columbia, too, is considering introducing a FIT Program.

The first version of Ontario's FIT Program, FIT 1.0, was released in 2009. It included incentives for Aboriginal and community applicants, a grant program for community and Aboriginal groups, and a top‑up on the contract price in proportion to the amount of community ownership in the project. These features continue under FIT 2.0.

Community power advocates were crestfallen, however, when the vast majority of the contracts under FIT 1.0 were awarded to the private sector, and those projects took up most of the available grid capacity, leaving little room for community power.

Activists lobbied hard for changes to the FIT Rules to give priority access to community power, and they won.

Version 2 of the FIT Program, or FIT 2.0, includes a 10 per cent contract capacity set-aside for community- and Aboriginal-controlled renewable energy projects. Co‑ops with a community or Aboriginal equity interest in a project that is 50 per cent or greater, and a demonstrated ability to attract members from the local community, will receive priority over all other applications. This is a huge victory.

In addition, points are awarded to community and Aboriginal projects, among others, which is another way community projects can move ahead in the queue to be awarded contracts.

Another significant change in FIT 2.0 relates to renewable energy co‑operatives. Under FIT 1.0, many different types of people and entities could qualify as community power projects. Under the COMFIT Program in Nova Scotia, this is also the case.

Under Ontario's FIT 2.0, however, only co‑operative corporations that meet certain requirements can qualify as community power projects. The goal was to place a significant barrier to the private sector's ability to game the community set‑aside for their own benefit; co‑operatives are entirely foreign entities to most private sector players.

Although there are many ways to develop green energy projects, activists have long believed that co‑ops are the perfect model. Co‑ops have democratic member control, autonomy, open membership, and member economic participation, to name a few key co‑op principles.

Co‑ops can be for‑profit or not‑for‑profit. For‑profit co‑ops generally raise funds through selling shares (equity) in the co‑op. Not‑for‑ profit co‑ops generally raise funds through selling bonds.

To qualify as a community power co‑operative under FIT 2.0, a co‑op must have a direct equity (ownership) interest in a project of at least 15 per cent and a minimum number of members and investors in the project who are local landowners. For small projects, at least 35 members who are local landowners are required. For large projects, at least 50 members who are landowners are required.

Since the new FIT 2.0 rules were released, there has been a flurry of activity. Many residents are working together, at breakneck speed, to set up new green co‑ops in their Ontario communities and assemble their applications to meet the application window for small FIT projects (those 500 kW or smaller), which is open from October 1, 2012 until November 30, 2012.

Community power includes potential for co‑ops to collaborate with private and public sector entities -- for instance, through a joint venture where a community group (a co‑op) signs an agreement with a private sector developer or with a public body to develop a green energy project. Each participant is a part owner of the project.

To be successful, though, the relationship must be one in which the community co‑op is respected and engaged as a full partner in decision-making and governance, as well as in financial contributions. The limitations community groups have, by their very nature, must be understood and accepted: they often can't make decisions as quickly as private sector players, and they'll take time to raise from their communities the money they'll need for their share of the project's capital costs.

It's an exciting time to be involved in community power. While the private sector may still dominate green energy development in Canada, the flourishing of activity in the community power sector this summer attests to the fact that people are committed to developing and owning green energy projects in their communities.

Iler Campbell LLP is a law firm serving co-ops, not-for-profits, charities, and socially-minded small business and individuals in Ontario.

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