The Financial Conduct Authority (FCA) has been giving the UK’s small but fast-growing community energy sector a serious headache.

For years a cooperative ownership structure had proved highly popular for small scale, community based renewable energy projects, and a valuable alternative to standard companies limited by shares.

But last summer the Financial Conduct Authority suddenly – and without warning or prior consultation – ceased to register new energy coops.

The surprise move appeared to be no change of government policy, but rather the financial regulator itself applying existing rules more strictly than it had before.

Not surprisingly the move created significant political controversy, and before long Labour’s energy minister Tom Greatrex stepped into the fray with a letter to the FCA complaining that “future energy co-ops are being put at risk” by the change of approach.

“This sudden change threatens a model that combines the twin goods of decarbonisation and community involvement in energy”, he continued. “The FCA must urgently reconsider their approach – and Ed Davey needs to wake up and get a grip to prevent lasting damage to the prospects of more community energy projects in the UK.”

Consultation launched

The upshot was that the FCA launched a consultation on the topic – and tomorrow, 28th November, is the deadline for putting in comments. So please try to get your comments in!

Energy4All – a ‘co-operative of co-operatives’ in the renewable energy sector (and my employer) – also launched a 38 degrees petition aimed at the FCA: “Allow the creation of Renewable Energy Co-op’s with the Financial Conduct Authority.”

At the heart of the issue is the question of whether energy co-operative members participate enough in the co-op. To register a co-op, FCA rules require it to “show participation” by “buying from or selling to the society”, “using the services or amenities provided by it” and “supplying services to carry out its business”.

But unlike a co-op shop, which can sell direct to its members, energy co-ops are too small to apply for the public energy supply licenses that would allow them to sell electricity from their solar panels or wind turbines direct to members. Instead, they tend to sell their power into the local power network. Profits are divided among co-op members based on the size of their investment.

And there is no requirement in the ‘seven principles‘ of the International Co-operative Alliance that co-ops have to trade with their members. We believe the FCA should register any co-op that complies with the international principles without imposing additional constraints.

Co-ops have the potential to become a significant alternative to the big energy companies, but the growth of the sector – which is Government policy and backed by all parties – is at risk unless the FCA backs down.

What’s so good about co-ops?

Co-ops are open democratic structures (one member, one vote) with a social rather than a commercial ethos and would appear to be the natural way for like minded people to come together to make a renewable energy project work. The ‘seven principles’ are, in full:

1. Voluntary and Open Membership – there is usually a public share offer to raise funds to build the project;
2. Democratic Member Control – each member will have one vote no matter how much they have contributed to the capital of the co-op;
3. Member Economic Participation – the members contribute equitably to and democratically control the capital of their co-operative;
4. Autonomy and Independence – renewable energy co-ops are self help organisations controlled by their members;
5. Education, Training and Information – renewable energy co-ops provide education and training for their members, and inform the public about the benefits of co-operation and of renewable energy;
6. Co-operation among Co-operatives – renewable energy co-ops help other co-ops;
7. Concern for Community – renewable energy co-ops spend part of their profits on community projects, especially those related to energy efficiency and education.

It’s not hard to see how an organisation set up and operated on these principles is not the same as any old limited company or PLC, and makes an ideal vehicle for locally-based energy projects for the mutual benefit of members and the wider community.

FCA proposal not good enough

The FCA says that using a Society for the Benefit of the Community (a ‘BenCom’) is more appropriate for community energy. However the consultation looks at making the raising of capital by a BenCom very restrictive. The result is that larger projects, the ones that generate most power per pound of investment, will be more difficult to finance.

It does seem odd that an individual can take advantage of the Feed in Tariff by putting solar panels on their roof, whereas other less fortunate people – say those with less cash, living in flats, or just with wrongly positioned roofs – are not to be allowed to come together in a co-operative which can often achieve a better result in terms of renewable energy output and social benefits.

Most people think renewable energy co-ops are a force for good and should be encouraged. Elswhere in Europe the co-operative is the main form for community energy ownership, and in countries where community ownership is much more established than in the UK, such as Denmark, co-ops have been instrumental in driving the expansion of the sector.

Wider use of the co-operative model in the UK can make an important contribution to changes in energy production and consumption which will help democratise the ownership of energy, reduce energy prices, support communities and increase the production of renewable energy which is such a vital tool in the fight against climate change.

It seems a pity that the UK, where the co-op was invented in the 19th century, cannot see its way to permitting its wider usage.

Would the Rochdale Pioneers have used a co-op to generate energy if they could? Surely the answer is a resounding ‘YES!’ Co-operative enterprise has a long and proud history and we must, in the spirit of the early co-operative pioneers, oppose needless restrictions on the sector.

Petition: “Allow the creation of Renewable Energy Co-op’s with the Financial Conduct Authority.”

Consultation document: CP14/22 Guidance on the FCA’s registration function under the Co-operative and Community Benefit Societies Act 2014. The consultation closes tomorrow,
Friday 28 November 2014.

If you want to see more renewable energy co-operatives running community projects in the UK please participate in this consultation and make sure your views are heard!

Energy4All was formed in 2002 to expand community ownership of renewable energy. We now have 15 projects in the Energy4All family with 10,000+ members, £37m capital raised – enabling many more communities to benefit from renewable energy. We are ourselves a co-operative, owned by the co-ops that we serve.

Tammy Calvert is office manager at Energy4All.