The Community Energy Organisation – an Energy Co-operative

Community energy organisations generally coalesce under the form of something called an energy co-operative. An energy coop has various features, including one-member one-vote, limited liability and limited returns on investment.

As a co-operatives, an energy co-op is not subject to the strict rules around raising capital for new projects. That means it’s cheap to raise money for new solar energy – instead of spending tens of thousands of pounds to get the approval of regulatory authorities, any group of renewable minded individuals are free to set up an energy co-operative and talk to their community directly. It’s a highly democratic initiative.

There are many hundreds of energy coops around the UK – click for examples.

While co-operatives have been around for a hundred years more, the combination of the co-operative organisational form with renewable energy has allowed thousands of people to get involved with new, locally-owned renewable energy projects. Due to the legislation that dictates how co-operatives operate, benefits are not simply limited to interest to shareholders (which is capped). By diverting the surplus in this way, many community energy organisations build up sizeable community funds to re-invest benefits in their local communities.

Energy Cooperative
Energy Coop structure

The structure of an energy co-operative

Community Energy organisations are an esoteric form of co-operatives, known legally as a Community Benefit Society. A CBS is a category of an organisational form known as an Industrial and Provident Societies (IPS). IPSs are have limited liability; and – crucial for community energy organisations – are exempt from financial regulations surrounding financial promotions (for ‘normal’ companies this is expensive and overseen by the Financial Conduct Authority). This means that energy coop can raise capital without the costs associated with normal fund-raising.

Energy coop Governing documents

The official relationship between the community group and its members is governed by their Rules. These contain certain fundamentals that include the organisation’s responsibilities to members and the holding of an Annual General Meeting. The rules specify how the AGM is run, board practices, financial reporting and oversight of the executive team. These governing rules are written when and organisation is formed, and can only be updated through the agreement of the membership.

energy coop governing documents
Energy Cooperative board meeting

Energy Coop board meetings

At the board meetings of community energy groups, directors go through the organisation’s finances, discuss deviations from targets, future financial modelling as well as any other responsibilities that arise. While the specifics are unique to each organisation, board meetings may talk through the annual accounts, ongoing management accounts; new developments and where new prospective sites are within the development pipeline.

Paying interest and capital back to members

The structure of an energy co-operative also governs decisions around withdrawing shares and dividends. Withdrawals are at the discretion of the Board. Dividends are limited to amounts ‘sufficient to retain capital within the society’ i.e. at a fairly competitive market rates. In addition to capital repayments, a community fund may also fund projects in the area that align with a particiular energy coop’s objectives.

Energy Coop pay members interest