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Community Participation in Large-Scale Projects
As a rule, large renewable projects are considerably less expensive to build on a per megawatt basis than smaller ones. That is because they can take advantage of economies of scale in feasibility studies, permitting, turbine procurement, site development, lower financing costs per turbine, and other project costs. Thus, if a community group can participate in a utility-scale project, it may be able to do so at a lower cost per megawatt than if it were building a stand-alone project.
As part of its mission to promote cost-based renewable energy for the communities it serves, the Last Mile Electric Cooperative commissioned legal, financial and institutional experts to explore ways that community groups could participate in utility-scale projects and thereby take advantage of these economies of scale. The resulting White Paper, downloadable as a PDF file, describes some alternatives. In brief, the White Paper recommends:
The community participants need to have a clear understanding of the financial, time and other commitments expected of them in order to participate in the project, as well as of the risks they will be undertaking and their ability (e.g., financial strength, liquidity of assets, creditworthiness) to carry and manage those risks. Where participants have different project development experience and risk tolerance profiles, particular issues arise that must be coped with through careful design of decision-making procedures.
The community participants need to negotiate purchase power agreements or other arrangements that will provide the project financer with the necessary level of comfort in the creditworthiness of the community participants. Participants can pool their assets or rely on the larger participants to market the power, with the understanding that the larger participants may expect a consideration for doing so.
Community participants will need to establish one or more separate legal entities to hold the assets of smaller participants, define their relationships, and act on their behalf. Possible entities include cooperatives, limited liability corporations, or an arrangement to separately finance, market and own individual turbines or other generators. The advantages and disadvantages of each type of arrangement are more fully described in the White Paper.
