Oregon Co-op Law Lets Everyday People Invest in Local Renewable Energy — Episode 96 of Local Energy Rules Podcast

Dan Orzech

What we’ve tapped into was a, is a lot of appetite, a lot of hunger among people to invest in their own communities, to invest in a project that does something good for their community that they can actually see. They can, you know, go outside and look on the roof of their school or church and see the results of their, their money at work.

John Farrell

What if it was easy to make an investment in a local solar project, along with many of your friends and neighbors? I’m joined by Dan Orzeck, general manager of the Oregon Clean Power Cooperative, to learn how his company has taken advantage of a tweak to Oregon cooperative law to make it easier for ordinary folks to invest in local renewable energy projects. I’m John Farrell, director of the Energy Democracy Initiative at the Institute for Local Self-Reliance, and this is Local Energy Rules, a podcast sharing powerful stories about local renewable energy.

So Dan, you’re the general manager for a clean energy cooperative. And I’d just like to start with the basics for folks. Can you explain a little bit about what is a cooperative and how it’s different from other forms of businesses that might operate in the clean energy space?

Dan Orzech

Yeah, so renewable energy co-ops are common in Europe and Canada, but, uh, kind of, uh, unknown in the U.S. We are a co-op just like any other cooperative and people, uh, co-ops are sort of the hidden business form. People probably deal with them almost on a daily basis, but many don’t realize. So there are lots of agricultural co-ops in U.S. you know, that provide, uh, lots of, uh, land of lakes butter, and lots of foods that we eat on a daily basis. Um, credit unions are co-ops. They are actually a widespread form of, of business. They’re a corporation. Uh, we’re a corporation. The primary differences are that any profits are caught, make, go back to its members, uh, rather than serving shareholders. And they are democratically governed. So it’s one member, one vote. So, uh, you don’t have a situation where you’ve got majority control of the corporation, uh, in the hands of one person or a small group of people.

John Farrell

So thank you for explaining that a little bit. One of the things I am just excited about is the projects that you’ve managed to accomplish already. So having just learned about the Oregon Clean Energy Co-op, it was exciting to hear that you’ve already done a number of projects. Uh, you described it in some of the materials you gave me as letting everyday people finance renewable energy projects in their own communities. Could you maybe just share a few examples of the projects that you’ve already developed that are already out there?

Dan Orzech

Yeah, you bet. We focused on what I call community organizations. So that’s churches, schools, libraries, local governments, nonprofits. And though we don’t, we’re not required to focus on them, We can do corporations or, or businesses, but those are the organizations that have the hardest time getting solar. One reason is that they can’t take advantage of the federal tax credits for solar. So we’ve done school districts. Um, we’re on our third project for a for school districts in Oregon. Um, we’ve done a bunch of churches of all different denominations and about to do a synagogue, a library, uh, nonprofits. Um, we’ve done one to about, uh, let’s see, our third project for a local government we’ve done about, uh, we have about a dozen projects that are either built or just about to enter construction and about another seven or eight, uh, in the, in the queue for the next couple of months.

John Farrell

I wanted to ask you about the federal tax credit issue. So it’s definitely something that we’ve talked about on this podcast before. This challenge of, because the federal incentives for renewable energy are only available as tax credits, that means you have to have tax liability and it gets even more complicated when you have multiple investors. Is the way that the Co-op is structured allow you to capture those tax credits in a way that it would be hard for these, you know, houses of worship or schools to do so otherwise?

Dan Orzech

Well, yes. So the co-op is, we’re a, we’re not a nonprofit. We’re a corporation, cooperative corporation. So we can take tax credits. We have taken some, but we don’t actually have the tax liability to be able to make full use of them. So what we’ve done is found third party investors to take the tax credits, which is not easy and it’s not easy because primarily because of the size that we’re operating at. So if you’re, if you’re doing, um, you know, a large project, a one megawatt or 500 KW solar project, you can probably find an existing solar investor that wants the tax credits. But at the scale that we’re doing it for, for, uh, uh, an individual church say, or a school that’s not easy. So we’ve, we’ve struggled to do that. We’ve, we’ve managed to, uh, leverage your tax credits for almost all of our projects. But I wouldn’t say it’s been easy.

John Farrell

That’s helpful to hear it. You know, we are, uh, have had on this podcast before a good friend of mine, Timothy DenHerder-Thomas, who is the general manager at Cooperative Energy Futures here in Minnesota, uh, which is also doing a similar kind of projects, although under our community solar law, which I’m gonna want to talk to you more about community solar in a minute. And I think it’s funny that you mentioned that, you know, maybe if you had a megawatt it would be easier. He has I think about nine megawatts of community solar projects now either in development or, or have it been constructed and he still struggled to find tax equity investors that were interested at that small of a scale. So I think, uh, sometimes you find even that those incumbent investors are very interested in tens of megawatts or hundreds of megawatts, but less so in these smaller community scale projects unfortunately.

Dan Orzech

Okay.  Yeah, I mean I, I would agree the whole structure was not really set up to support this sort of solar.

John Farrell

One other question I wanted to you about was with the cooperative, so the folks who are making investments are becoming members of the co-op. Is it the same people then that are investing in each of these projects or is it different folks and is the co-op then kind of growing as you do a new project because more and more people are becoming members or are there separate co-ops for separate projects? Maybe you could explain a little bit about how that structure works.

Dan Orzech

Sure. Um, so I think the original idea behind the legislation was that each individual project would have its own co-op, but we quickly realized that didn’t make any sense because you know, the overhead logistics of setting up a co op, incorporating it, forming a board of directors and then just the knowledge of running it. So what we do is we have a statewide co-op for covering the entire state of Oregon and we’re sort of an umbrella for projects around the state. So we’ve done projects in, you know, everywhere from, from the Oregon coast to the, uh, the desert on the East side of the state. To invest, you become a member and then you can invest and the number is growing. What we found is people have different objectives or different criteria for investing. So some people really want to invest in their local community or their, their school, the school that their kid goes to or their church. Um, and so that’s the project they do. Um, and other people just want to invest in solar or just want to invest in solar in Oregon. And so, you know, maybe they’ll do multiple projects. So we kind of have a mix of people and um, and why they’re investing and how much they’re investing in what they want to achieve.

John Farrell

Okay. So you mentioned this about the legislation. I’m glad you did because I wanted to hear a little bit more about how the state law changed to enable this kind of investment to happen. So I referenced earlier that we wrote a report in 2016 on community renewable energy called beyond sharing. And in it, we talk about some of these challenges like tax credits and then state and federal securities laws that have made it difficult to do community based renewable energy. Could you share a little bit about how that Oregon state law made it easier for ordinary folks to do investments in local renewable energy?

Dan Orzech

Yeah. So you mentioned earlier that, you know, we’re not well known at this point and that’s partly intentionally, we sort of stayed under the radar until this point because we wanted to prove the model and have some projects that we can show people, but we are hoping that people will look at the legislation and um, use it elsewhere because we think it’s a viable model. The legislation itself was very simple, very small change to the existing co-op law that, you know, Oregon, uh, creates this new type of entity called a renewable energy cooperative and lets us take investment from what they call non-accredited investors. So that’s basically everyday people. And uh, we operate only in Oregon, only in one state because that way we’re essentially governed by the Oregon securities laws rather than the national, uh, the federal sec regulations. So, uh, yeah, so we can take investment from anyone in Oregon. The legislature passed the legislation and then kicked it over to the state securities regulators, uh, and we spent about a year working with them while they came up with rules that govern us. Uh, so we were sort of a new, a new type of beast and they didn’t quite know what to make of us. So we have some sort of securities rules that, that I think are probably unnecessary and some that, you know, probably make sense.

John Farrell

I would be really interested in getting a link to the law that passed and any kind of relevant stuff around the securities law that we could include on the show page for the podcast. So hopefully we can connect afterwards and, and get some of that information. I think it would be really helpful for folks to see like what did this look like in writing and how could we maybe replicate it in our state.

Dan Orzech

Yeah, absolutely.

John Farrell

You know, one of your newer projects, uh, it was, it looks like it’s for the Corvallis school district includes solar and energy storage with a battery. Could you talk a little bit about why you’re including energy storage with that project and potentially with other projects, like some of the resiliency benefits for the school district of having a battery storage as well as the solar project.

Dan Orzech

Sure. We are trying to put batteries in every project going forward. It’s a little bit challenging, because although the prices have come down, they’re still relatively expensive, at least at least in the Oregon market for, for what you get out of them. But the real drivers you mentioned is resiliency. And what we’re concerned with on the West coast is, first of all the Cascadia event earthquake and secondly fires. So, uh, Oregon, the two, uh, large investor owned utilities here recently adopted the public safety power shutdown policies that are widespread in California now. And so people here are, uh, you know, are looking at the possibility, the real possibility of power outages from wildfires.

So what we’re doing is putting in relatively small battery systems and the, the thinking there is, it’s not necessarily going to power a whole building, but what it will do is, for example, we were putting a solar and batteries at two schools at the Oregon coast and they’re actually concerned about something different there besides the Cascadia event earthquake. They’re concerned about the tsunami because they’ve had experience with large winter storms, which are basically isolated with flooding, which then isolated parts of their community. So we’re putting solar in these schools and it will keep the lights on and the power on in, you know, perhaps one or two classrooms. So if there’s a real disaster situation, people will be able to go there. Um, have light into the early evening, be able to charge cell phones. Um, the schools have AM radios, communications. The Chorale school district is a little more ambitious. The district there is actually, we’re putting in a solar and they’re putting in, the batteries are paying for the batteries and what they’re doing there is providing backup power to their entire IT operation. So if the grid goes down for whatever reason, they will still have computers. They’ll have internal communications, they’ll have power for an emergency operation center in the district office. And the, um, the goals they’re thinking there is to stack technology. So we’ve got solar providing power during the day time batteries, which will keep the system, their emergency system is running into the, into the evening. At some point and then they’re looking at adding, adding a generator which would sort of extend the life of the whole system.

John Farrell

We’re going to take a short break. When we come back, we’ll talk about community solar, why electric utilities are preemptively shutting off the electricity, and what advice Dan has for expanding the cooperative investing model beyond Oregon – After I take a quick tangent to ask Dan about “the really big one,” also known as the Cascadia earthquake and why communities are using solar and energy storage to prepare for it.

John Farrell

MIDWAY PITCH

John Farrell

You have mentioned a couple times the this Cascadia event earthquake. I feel like I have heard of this before, that this is sort of the being overdue for a very large earthquake up in that part of the country. Is that right?

Dan Orzech

Yeah, that’s exactly right. So the Pacific Northwest has a, historically, apparently these large earthquakes have hit every 500 years or so. Uh, and we’re overdue. So, you know, we’re hoping it doesn’t come anytime soon, but we’re trying to be prepared.

John Farrell

Yeah, I remember reading a few pieces about that. There was a story, I guess that was a couple of years ago. I follow a fellow David Roberts who writes for Vox and he did a fairly long piece about sort of the lack of preparedness, since none of them have happened during modern times compared to say like California, which has had earthquakes more frequently and therefore been more prepared. So it was some stunning stuff. So if you want to read something disturbing folks, maybe we’ll include a link to that piece that he wrote about what happens if a 9.0 earthquake hits the Pacific Northwest. Uh, so you can understand where the preparations are coming from. Uh, we’ll go back to community solar here perhaps. Um, which is to talk about, uh, specifically Oregon’s community solar law. So I have been following this for a number of years. I think the law passed actually in maybe three years ago now. And we are hoping that we are in the final stages of the program development for the state’s community solar program. I don’t know if you have anything to share about that. Maybe some insider information about when that program may come live? But I was curious if the cooperative will be helping to organize investors for community solar projects and if there will be then, like will investors then also be able to get like a credit on their bill as a subscriber to a community solar project as well as being as they have been so far an investor in a community based renewable energy project?

Dan Orzech

Yeah. Um, so one of the advantages of the co op structure is that we are, we’re not restricted to, to various other various programs. So we have the model that I described where we’re putting up solar for community organizations, but we are not limited. For example, we’re not limited to solar, so we can do any renewable energy technology. So small wind or we’ve looked at micro hydro projects, um, bio gas digesters. So, as you mentioned, the Oregon community solar program has been in the works for a very long time, uh, multiple years and it’s essentially the same model that’s been, um, running successfully in Colorado and Minnesota and other places. Um, but uh, for whatever reason it’s taken us a long time to make it happen. We’re hoping it, it goes live in the next few months and yes, the co op, the uh, Oregon King power co-op has a couple of projects in development, so we’ll be, we’ll be offering people the option to, um, to subscribe to those projects. Those are the, that program is only running in the two large investor owned utility territories in the state. So that means there’s a third of the state that can participate. So that’s one advantage of the fact that we’re a broader, if you will, then those programs were statewide so we can offer multiple options to people.

John Farrell

Do you see opportunities to scale up and it sounds like you have had pretty good response to the availability of the projects that you’re doing. Do you anticipate kind of picking up the pace and seeing a lot more investment through the op structured?

Dan Orzech

So there, uh, yes, we are scaling up and the community solar program is one way we’re doing that. So those, those projects are essentially solar farms not connected to a building directly tied to the grid, which means you can locate them, you know, in Eastern Oregon or Southern Oregon where there’s more sun say than in Portland.

John Farrell

Do you see other co-ops, are there other co-ops like yours in Oregon or you’re familiar with them and other places where you see this model really growing?

Dan Orzech

Yeah, there are not so far, there are some folks in Southern Oregon who are talking about it. We’ve been talking with them and it sort of remains to be seen whether they’re in municipal utilities, we’re kind of in their own little electrical utility world. And, uh, I think together we haven’t figured out whether it makes sense for them to create their own parallel co-op, which, you know, we would happily support or, uh, whether it makes sense for us to work together. Um, but so far most people have have been grateful that we have the structure set up already and they don’t have to sort of reinvent the wheel. They can just focus on their project for, for their organization.

John Farrell

I want to just take a minute and ask you, cause you mentioned earlier about the investor owned utility, so you were talking there about a municipal utility should kind of triggered this thread that I wanted to pick up on about the investor owned utilities in Oregon following suit on the California investor on utilities and doing these public safety power shutoffs and you know, I know they have very good reason to do it obviously in terms of both the financial liability to the companies of the fires has been assessed to them. So obviously I think they’re feeling very motivated in that sense. But I feel like it almost exacerbates the problem that they have longterm, which is as people have more choices to produce energy locally, like the kinds of stuff that you’re cooperative is helping finance. This only drives people to that kind of solution faster because they’re looking for how do I not be left without power for five days. A lot of people of course who have critical needs, whether it’s a school district or elderly folks who have oxygen or who have other medical needs. So I’m just kinda curious for your perspective. I know it’s not specifically regulated to the co-op, but you’re in this business and you’re selling people supplements to, if not alternatives to the utility. Do you think that these public safety power shutoffs are going to push people away from utility service to looking for their own ways to get electricity?

Dan Orzech

Yeah, I think there’s no question that that’s happening. It’s certainly happening already in California. You know, you just read the wall street journal, it’s been covering this actually. So it’s sort of a, you know, it’s, it’s, I think it’s quite ironic that the utility is losing, losing customers out of their own sort of policies. As you mentioned, people are moving to batteries, solar and batteries cause they can’t afford to be down for, you know, for a week or five days or three days. I was actually in California two months ago in Santa Cruz at a, uh, a party for a bunch of 12 year olds and you know, 9:30 at night, they’re just about to serve the ice cream and the power goes out and it stayed out. That was Saturday night and uh, you know, it was out when we left the following Monday and not come back on yet. So you can’t run a society like that. So I would say Oregon is not quite as far along. But when the two investor on utilities here last summer announced that they were doing these public safety power shutdowns, we in very short order got phone calls from two of the four counties that were affected, wanting to know if, if we could work with them and help them get solar and batteries at key installations. One of them is actually hood river County, which two summers ago, uh, one of the small towns along the Columbia river there, cascade locks was actually out of power for a week because there was a wildfire right next door. The town itself didn’t burn. But um, you know, they shut down the power and for a week.

John Farrell

Wow. It really is interesting to see, you know, we’ve talked about clean energy for a long time as the solution to climate change in the sense of mitigation and how do we prevent climate change from running away. It is really fascinating in the past couple of years to see this turn into a conversation about resiliency and to do so really fast in a way that can accomplish both things, right? Cause people who do solar and batteries for resiliency are also helping on the bigger picture of like where that energy is coming from, uh, in the first place.

Dan Orzech

Yeah.

John Farrell

I wanted to wrap up just by asking you about this sort of broader picture of community renewable energy investing. Sounds like folks that are already in Oregon already talking to you about how do they either replicate or join in with this framework that you’ve established for cooperative investing. I’m curious what kind of advice you’d have for folks in other States, I mean you already suggested this Oregon legislation was pretty good about creating a structure for cooperative ownership. Are there other things that people should be thinking about as they’re talking about trying to do this and replicate this work? Cause I’m sure there is a hunger for it that they should think about as they’re trying to advance this notion of community based renewable energy.

Dan Orzech

Yeah, good question. I mean it’s a little bit of new territory that we’re blazing here and one piece we haven’t really touched on is the the intersection, if you will, of community and investing I guess, or new approaches to investing. So, you know, there’s a whole movement of local investment, invest in main street, not wall street and so on. And I think there’s a lot of, what we’ve tapped into was, is a lot of appetite, a lot of hunger among, to invest in their own communities to invest in a project that does something good for their community that they can actually see. They can, you know, go outside and look on the roof of their school or church and see the results of their, their money at work. And when you put those pieces together, the results can be really powerful.

So, so we did a project year and a half ago for the Corvallis high school in Corvallis, Oregon. And we pay back our investors, we start paying them back after the first year, pay them back annually part of their return and part of their principal. Um, so we had an event, a little celebration to pay back the first years, give the first year’s checks to these investors. And at the same time we took advantage of that to, to announce the next project we were doing Corvallis for the school district and we ended up raising all the investment we needed for the, for the next project. Uh, this is the school district project with a battery we we’re talking about. We raised that in 90 minutes. So when people are familiar with the model and comfortable with the model, some of it was just people that were turning, turning around and sort of reinvesting what we had just given them their payback and the next project, the results can be really powerful. And there’s a piece about the ownership. So instead of, and of course you don’t, you have municipal utilities and rural electric co-ops where the consumers and members own the utility. But this is a little more direct. So people are, are literally owning a piece of the solar on their kids’ school or their towns, a fire station or whatever. And that’s, that’s a powerful, a powerful connection that you don’t, an emotional connection, if you will, that you don’t get when you invest in a mutual fund or your IRA or 401k or something.

John Farrell

It’s a pretty powerful case for making sure that there is a legal framework for this kind of work and other places. Any other last thoughts, questions I didn’t ask you? Burning things that you’d been thinking we should talk about or any further advice in terms of, you know, let’s say you had this legislation in place, how you get a co-op up and running?

Dan Orzech

Well that, that’s probably a more complicated question.

John Farrell

Fair enough.

Dan Orzech

Then I can answer briefly, but I’m, I’m happy to talk to people in share wisdom and in fact I have a call later today with someone from Washington state who’s, um, they’ve been kind of wrestling with the same problems there. So I’m happy to share wisdom, what we’ve learned, uh, and support other people and trying to do the same sort of thing around the country.

John Farrell

Well, Dan, thank you so much for taking the time to share with me about what you’re doing. Uh, with the Oregon clean energy cooperative. We will have links to your website and more information about community-based renewable energy investing on the show page. But thank you again for taking the time. Really appreciate it.

Dan Orzech

My pleasure.

John Farrell

This is John Farrell, director of ILSR’s energy democracy initiative. I was speaking with Dan Orzech, general of the Oregon Clean Power Cooperative about their successful model of community based clean energy investment. Check out the show page for links to the cooperative’s homepage, Oregon’s cooperative law and securities regulations, and ILR’s Beyond sharing report on community renewable energy. You can also learn more about how communities drive local climate action and clean energy with the interactive community power map and community power toolkit, both available from the Institute for Local Self-Reliance at ilsr.org. While you’re at our website, you can also find summaries of more than 90 past episodes of the local energy rules podcast. Until next time, keep your energy local and thanks for listening.