Community owned renewable energy as a mechanism to fight poverty and climate change

By Sunny Morgan “The decisions we make today are critical in ensuring a safe and sustainable world for everyone, both now and in the future” Debra Roberts, Co-Chair of IPCC Working Group II.

There are currently 14 million people in South Africa without access to the grid or who suffer the indignity of energy poverty. Eskom, the national utility, would need to spend R500 to R1000 billion (one trillion) to connect EVERYONE in South Africa to the grid. Simply put, there is no way in the current economic climate that the state will be able to connect the millions that need electricity to the grid. In addition, if we continue to build coal-based power stations we will never reach the emissions targets agreed to at COP 17 that Jacob Zuma was so quick to commit us to and that remains an objective of the current administration.

In this essay I will make the case for community owned renewable energy as a mechanism to fight poverty and to address climate change.

Community owned renewable energy (CORE) is gaining traction throughout the world. Germany, Demark, the UK including Scotland and Australia lead the list of countries that have successfully implemented CORE projects.

 What is community owned renewable energy?

Definition 1

CORE, also known as ‘community energy’, refers to projects where a community group initiates, develops, operates and/or benefits from a renewable energy resource or energy efficiency initiative (NCES, 2015).

An alternative definition that I propose is: Community owned renewable energy can be described as energy installations located in communities, where the community participates in one or more of the following ways:

• Where the community is an investor or legal owner of the energy installation.
• Where the community is an active participant/partner in the energy installation.
• Where the energy installation is run by the community, as in the members of the community are employed to manage and operate the energy installation.
• Where the community is a beneficiary of the energy installation, either as an end-user of the power generated or as a recipient of funds that flow from the sale of the energy generated by the CORE project or in other forms.

Objectives of CORE

Decarbonise the power generation sector:

It is imperative that decarbonisation becomes the central theme of energy generation. The need to limit global temperature gains to under 2% is more important than ever before. The recently released UN IPCC Report paints a bleak picture of the current efforts and sounds a dire warning of species loss and climate related risks for hundreds of millions of people by 2050. The report makes it clear that limiting warming to 1.5 degrees should be the immediate priority to prevent catastrophic climates risks.

Decentralise energy distribution:

The fact that more than 600 million people in Africa have poor or non-existent access to the grid is a staggering fact, this is according to data from the World Energy Outlook. The global figure is even scarier as some estimates put this figure at almost two billion. The old model of building new fossil fuel-based power generation, extending the grid, i.e. the transmission lines and the current models of selling electricity are archaic and has existed in its current form since the dawn of electricity. What is clear is that ‘business as usual” is no longer a model that is viable. Decentralised energy generation should be the new normal. Micro-grids, embedded generation and community owned renewable energy will occupy this space and may be the panacea for energy access and both climate change adaptation and mitigation. Decentralised renewable energy, especially solar is relatively quick to deploy at grid scale, easy to on-board new users at the domestic level and is becoming more affordable. The cost for Tier 0 and Tier 1 energy users are as low as a few cents per day so that users at the bottom of the pyramid (BoP) can afford it. The proliferation of payment mechanisms like ‘pay as you go’ solar (PAYG) and micro finance options has the potential to make energy access possible for anyone, anywhere!

Democratise the energy value chain

The old energy utility model is predicated on state or investor systems that lock out community ownership and are some of the earliest capitalist endeavours of scale. Banks such as JP Morgan were the earliest funders of Nicola Tesla and George Westinghouse at the birth of the electricity sector and they still play an active role almost 100 years on. Community owned energy installations and indeed the entire value has the potential to disrupt  this prevailing model.

Benefits of CORE

STEM education is supported in a CORE environment. This is evident from simple interventions that are implemented at educational institutions where renewable energy systems are installed to more complex scenarios where institutions of higher learning are central to the development, research and invention of new technologies. Some of the more promising breakthroughs in energy generation and battery storage come out of research labs at universities and colleges. With the advent of the Internet of Things (IoT) and the Fourth Industrial Revolution, STEM has gained an importance and relevance. The opportunities for community members to participate exist in all areas of the value chain.

Job Creation is an obvious beneficiary when it comes to the engineering, procurement and construction (EPC) of renewable energy installations. This initial phase creates more job opportunities and meaningful work, although this is normally temporary in duration. It is the ongoing operations, management and maintenance of the power plants where long-term quality jobs are created. The entire value chain offers opportunities for workers of almost all skill levels to participate and as the sector matures, even more opportunities may present. This sector is able to assist with the just transition to renewable energy where workers previously employed in the fossil fuel industry can, with minimal training and adjustment be employed in the new energy installations. The bourgeoning youth population will also find opportunities in this sector that are easier to access than traditional energy jobs.

Entrepreneurial Opportunities are part and parcel of the energy sector, more so with the decentralised nature of ‘new energy’. Opportunities exist for project developers, joint ventures, collaborations and for resellers of energy tokens via retailers and spaza shops. Repairs, new installations and cross selling opportunities should further encourage entrepreneurial endeavours.

Clean Energy is a prerequisite for a quality life and CORE installations have a positive effect on the lives of community members. Pollution, lack of lighting, poor or no access to technology and lack of safe spaces are all clear and present dangers for marginalised communities and other spaces that lack access to power! The provision of clean and reliable energy via the CORE model must be pursued with vigour as it offers untold benefits when properly implemented.

Climate adaptation and Climate mitigation are both addressed in the rollout of CORE and the resultant benefits trickle down to all beneficiaries in direct and indirect ways.

Requirements for CORE to thrive

Policy and Legislation

In order to create an  environment where CORE will thrive there needs to be a realignment of policy and legislation. The South African legislative landscape is narrow and restrictive; it is designed to exclude new entrants and to stifle competition. The national utility is monopolistic and controls the three most important levers of the sector: generation, transmissions and sales; although the municipalities are also resellers and/or agents of the utility. For CORE to live up to the promise that it offers, laws MUST change to favour competition in the energy sector and the very restrictive monopoly of the single utility that is Eskom must be broken up! To this end the creation of the Independent System Market Operator (ISMO) must to accelerated and the requisite laws be promulgated to make this happen sooner rather than later. The ISMO would then act as the market exchange for the buying and selling of energy from the traditional operators, the IPPs and in time from the new category of micro generators like CORE projects. Of course, the transition to a smart grid must happen in tandem with the modernisation and rebuild program that is essential to service the increase in demand as the economy improves, and as new generation methods and modalities emerge.

Funding

The success and roll-out of renewable energy in general and CORE projects in particular will demand more investment into the sector. It is encouraging that the sector is already a hive of activity and attracts capital inflows from far and wide, although these have been from traditional sources to date. New innovative funding models must be developed and the injection of new thinking must prevail. The pooling of community resources, the creation of new financial instruments like Green Bonds and RE Certificates, coupled  with the proceeds of carbon credits or off-sets all offer  potential for new inflows. Imperative to the success of CORE is shared ownership models and shared capital pools, the billions of Rands in worker money in the form of provident and pension funds could be unlocked for this purpose. The nascent financial sector of IMPACT FUNDS also looks promising and may be a source of future funds for CORE. Communities must be enabled through access to information, training and financial assistance to develop their own CORE projects.

Cooperatives

The potential of cooperatives, the ease of setting it up and the support of the state for this form of ownership lends itself to be the preferred vehicle for CORE projects. Because cooperatives are developmental in nature and outlook, makes its suitability for CORE very attractive and it should be more fully developed as a vehicle for community participation.

Stakeholders

End users must be encouraged to adopt renewable energy. The benefits of solar or biomass over traditional fossil fuels must be properly explained and implemented with the buy-in of community members so that they see the benefit themselves, they must be able to gauge the improvement in the quality of life and they must be able to feel the economic value of participation in CORE in their pockets or bank accounts.

Investors must be given certainty and competitive returns, encouraged not to be exploitative and they must develop the habit of “patient capital” so that their expectations are managed and not unrealistic. This applies to both the traditional mature investor and the new community investor.

Project developers must develop new projects bearing in mind that community members expect to be and indeed should be active partners in new projects. This will foster ownership and buy-in so that all stakeholders are vested in the success of new ventures. Too often investors and project developers are parachuted into a new project with a ‘quick escape’ foremost in their minds. CORE projects require that everyone stays the course. Banks or funding agencies must recognise that innovative mechanisms must be developed and new assessment tools like “Community ROI” need to be developed to assess CORE projects, here the pooled resources of STOKVELS must be understood and the billions invested in them must be unlocked. IMPACT FUNDS must shine the investment light on CORE too.

NGOs and activists are already active in communities and have credibility thus they are active partners with communities and their inclusion as stakeholders cannot be ignored. The same goes for faith-based organisations who both have credibility, influence and access to capital so their inclusion in stakeholder management is obvious. Key concepts like The Just Transition cannot be ignored and that must be fully explored.

In conclusion, through my experience in the sector, I am confident that CORE offers a clear path to poverty alleviation in communities. This is evidence by the increase in economic opportunity that is unlocked when renewable energy is installed in areas that did not have access to energy before. The need to fight climate change is fully addressed by the development of new CORE projects especially through the development of Micro grids built around solar and containerised energy storage. The falling component prices in solar modules and the increase in efficiency of battery technologies all open the way to address the twin evils of poverty and climate change.

Sunny Morgan is a climate activist and social entrepreneur. He is a member of a civil society organisation called Johannesburg Against Injustice. He is the owner of Enerlogy Solar.