Two Thumbs Up – Oxford Community Energy Co-op
I recently met with Helmut Schneider, President of the Oxford Community Energy Co-operative. They are working on building a ten turbine, 18 MW wind farm in Oxford County at Gunn’s Hill. They have a very sound plan.
The project has completed its environmental assessment report, and is in the 6 month review process. It is expected to be completed and approved in October. The project may be appealed, but so far opponents of wind have not been successful in their appeals, so this is a very low risk. The project has a power purchase agreement with the Ontario Power Authority.
Critics of the project have complained that the project has been changed, and that the change is significant, and therefore in need of public comment. The July 29 Sentinel Review, the Woodstock newspaper, had this as its lead story. But when I read the story, I could tell that the criticisms were misguided. The project has changed to a quieter turbine model. The point of connection has been changed so that less feeder lines need to be installed. And one of the turbines had a transcription error on its GPS co-ordinates, that put it 25 m from its final location. The Ministry of Environment has correctly defined these minor changes as not significant. The Ministry is very cautious in its approach these days, and it is clear they made the correct and cautious decision here. The environmental assessment process, a big risk factor for projects, looks sound, and it will be completed.
The project has an interesting and solid structure. The developer, ProWind, is a partner on the project. The co-op can purchase up to 49% of the project if they raise $9.8 million. They have raised about $3.5 million so far, and are raising $500,000/week. They have about 35 investors, and 85 members so far.
The structure is designed to remove risk from co-op shareholders. For example, the developer is promising a fixed capital cost. Service contracts are in place at defined rates for a long term. The management fees (3% of revenue for the developer, 1% for the co-op) are set at fixed rates. The senior lender on the project typically reviews things like wind forecasts etc, to verify production estimates, and an adjustment in the capital cost of the project will occur if the current forecast is found to be wrong. This reduces, but does not eliminate the risk that the wind forecast for the next 20 years is wrong.
The project will use the Senvion MM92 wind turbines. This is the same model that I use at the Oxley Wind Farm that began operation in February. The machine and the vendor are field proven, and have performed beautifully so far at Oxley. There is always technology risk in a project – will the equipment perform, can it be maintained for 20 years etc? In this case, I believe that risk is fairly low.
One thing I like in particular is the Board’s sense of mission. Board members are not currently being paid, and it is an active board. For example, the equity is being raised by the board members, not a paid middle man. The Board clearly want this to be a successful model for co-ops, and is dedicating their time to ensure that happens. The Board reminds me of Solarshare, another renewable energy co-operative that has successfully launched, and is making progress on bringing community energy to Ontario.
Investors must first purchase a $100 membership in the co-op. Then they can invest. The minimum investment is $5000. The co-op also offers bonds that pay 5.5%, and that will be paid before the equity investors for those who are more risk averse. The first payouts are expected to start in 2016. The forecast return for equity investors is over 11%. The investment is open to any resident of Ontario, including corporations.
In short, the structure is designed to minimize risk, while offering a decent return for co-op investors. The people running the co-op are very dedicated and determined.
I am investing. And if you believe in renewable energy, and are tired of paying fees to Bay Street, you should consider investing too.
I grew up in Oxford County. My hometown is doing me proud.