Owning wind power together – Swedish wind power cooperatives
Sweden has gone through an energy transition over the last decades where wind power have started to play an increasinlgy important role, and in 2016 wind power made out around 10 percent of the total electricity production. An important part of this is made out of wind cooperatives, where private citizens, sometimes togehter with corporations, own shares in wind power plants. There are around 20 000 persons that own shares, and it has been considered as an intreguing option for citizens to be part of the transition in investing in renewable energy as well as saving money.
- What is the best practice?
The best practice concerns co-ownership of wind power plants through incorporated associations (ekonomisk förening) in Sweden. Mostly the owners are citizens, although co-ownership between citizens, corporations, and public organizations also exists. The business models differ, but members buy shares based on yearly electricity use and get economic dividends or reduce the equivalent of the produced shares from the invoice through an energy company. Incorporated associations mean that members do not have to take personal risk upon economic problems in the organization (expect their own shares).
The wind cooperatives have meant that citizens have been able to invest in renewable energy, give input on the organizations directions as well as save money in their energy production. The first cooperatives were started in the 1990´s, around the time of the liberalization of the Swedish energy market, meaning that it became, in practice, possible and substantially easier to enter the electricity market with new production. Today there are around 80 cooperatives spread across Sweden in various sizes, with the largest having 4000 members, although 200-300 members is more common.
- How are wind cooperatives regulated?
The cooperatives are embedded in the Swedish electricity market, basically running like a regular producer. It means that they deliver and sell electricity to the spot market Nord Pool based on the prices and get return based on the production and price. The electricity is not sold directly to their members as it is not allowed based on the electricity law, meaning that the actual electrons delivered to the members are not necessarily the ones produced in the plants.
As the cooperatives are producers of renewable energy, they are eligible to enter the green electricity certificate system. Through this program producers of renewable energy, with plants younger than 15 years, receive one certificate per MWh produced and they may then sell the certificate on an open market. Buyers are actors that are required to buy certificates, such as electricity distributors, users or electricity intensive industries.
In general, the cooperatives make their own bylaws, but needs to follow specific regulations that always applies to the organizational form. For example, there needs to be three different persons starting the organization, they need to be run for the economic benefit of the members, at least three persons must make up the board of directors, and they need to handle accounting correct and accordingly to the law.
- How are wind cooperatives organized and supported?
As described above, the cooperatives’ forms are regulated under the law of incorporated associations. There needs to be an economic activity, at least three persons in a board of directors and members buy shares. Every wind cooperative is then a bit different, for example regarding the initial cost of shares. They generally costed around 4000-5000 SEK per share, covering 1000 kWh, when established, but they are generally sold on an open market after the cooperative has been established and costs today vary from 1000 SEK to 2000 SEK. The reasons for the lower prices will be elaborated on below. The members also pay a membership fee each year.
The members are generally quite passive after becoming members. They may attend annual meetings and become active in the board of directors, but they are not involved in the day-to-day decisions. The models on how to handle maintenance vary quite a bit, but generally the cooperatives make deals with an external partner that handles it. In some cases, it might be the manufacturer of the plant and in other cases external companies with expertise in maintenance are hired. In recent years some of the cooperatives have built plants in parks together with private investors, spanning from 10-50 plants, and the maintenance is often handled through partnership with the investor.
The wind cooperatives are supported through the above-mentioned green electricity certificate system and often with some subsidies when building the plants. When the electricity market was deregulated there were investment support for wind power, from 15-30 % of investment cost during the early 1990´s and in 1997 production support was started as producers received 0,09 SEK per kWh. This was replaced with the green electricity certificate system in 2003.
The wind cooperatives have an umbrella organization, Svensk Vindkraftförening but not all cooperatives are members, and that means that there are more potential for networking and mobilizing among the wind cooperatives.
- Which typical challenges do wind cooperatives experience?
There are a few challenges that have emerged in recent years. Many of the cooperatives are reaching a point when the end of the technical lifespan of the plant is approaching. That means that there are increasing risks upon breakdowns and decisions needs to be made on what to do with the existing plant, and whether to invest in a new plant or dismantle the organization. In the last five years, around 20 cooperatives have been dismantled, and the actors themselves state that there are a few reasons for this. The electricity prices have been low for a few years and the future is considered a bit unsafe in this aspect, and investing in a new plant, along with attracting existing or new members for this, has been difficult in light of the economic insecurities. The other reason is the mentioned factor that the plants are getting old, and the original driving actors do not have the same drive to go through the same process again. A further reason is that the old plants are no longer eligible for green electricity certificates, which changes the economy drastically overnight. Running costs are increasing and the economic risks have thus increased.
The low electricity prices are challenging for many, as that is what determines the revenue. As the cooperatives cannot sell directly to consumer or sell to self-cost price, they need to operate on the open market. This will be challenge for some years to come.
A major shift for wind cooperatives were around 2009 when the Swedish Tax Agency changed the interpretation of the law. Previously the members could buy electricity based on self-cost price, but the change meant that they had to pay tax on the difference between market price and self-cost price. It generated large insecurities for the cooperatives and it has been argued that it slowed down the development considerably.
- Some interesting examples
- Kvarkenvinden, based in Umeå in Northern Sweden, is one of the biggest wind cooperatives in Sweden with 2100 members. They were a quite “normal” cooperative from the sense that they started in 1997 with one plant, outside of coastal town Holmsund, and after deciding to invest in an additional plant, which took several years to get up and running in 2007, they expanded fast. By 2009 they invested in several new plants and attracted members across Sweden; they went from a small local initiative to involving people from the whole region and finally country. Today they own 7 plants spread across the region.
- Slättens vind, based in western Sweden, is one of the largest cooperatives in Sweden, although it is no longer an incorporated association as they were transformed into a limited corporation in 2015. At the point they had around 700 members, whose shares were transformed into stocks. They do now own shares in 26 plants and has 19,6 MW installed capacity. They show how a cooperative can start in one form and change into another as they evolve.
- Qvinnovindar was started in 2007 by 10 women that wanted to invest in renewable energy but also make a political statement regarding gender inequalities among ownership in the earth’s resources as well as being role models. They are now involved in several different projects and cooperatives and tries to inspire others.
- Lessons learned
- Wind cooperatives have generated quite some momentum over the years, with around 20 000 members
- Investing have been considered economically beneficial as well as a good environmental investment
- The deregulation of the electricity market was more or less the starting point for wind cooperative development
- Some of the cooperatives are more or less local, while others have grown into regional and national actors, with members all across Sweden
- There have been, and still are, challenges for cooperatives in terms of changed tax regulations, low electricity price, and many cooperatives being dismantled
- More information
Svensk Vindkraftförening: https://www.svensk-vindkraft.org/
Handbook for wind cooperatives: https://www.natverketforvindbruk.se/Global/N%c3%a4ringsliv/Vindkraft%20tillsammans%20web.pdf
Slättens vind: http://www.slattensvind.se/