CO - OP DEVELOPMENT ACTION
Renewable energy sparks
surge of new co-ops
Editor’s Note: This column has been compiled
by CooperationWorks! to provide highlights
of cooperative development activities
funded under USDA Rural Development’s
Rural Cooperative Development Grants
(RCDG) program. This article focuses on
sustainable-energy technologies and facilities.
CooperationWorks! is a network of
cooperative developers who share knowledge,
develop skills and use the cooperative business
model to create social and economic
benefits. For more information, visit:
www.cooperationworks.coop.
New England goes solar
In largely rural western Massachusetts,
demand for solar energy is on the rise
and Pioneer Valley Photovoltaics —
also known as (PV)2 — is growing to
meet it. The worker-owned cooperative
designs and installs solar electricity and
hot water systems in Massachusetts and
Connecticut. To date, it has installed
almost 100 residential, commercial and
municipal photovoltaic systems.
In the past three years, the co-op
has more than doubled annual revenue
and has added eight new
employees who are on track for
ownership stakes in the cooperative.
As one worker-owner
explains, “People are really concerned
about energy these days,
both how much it costs and
where that energy comes from.
They like that we’re workerowned
— it helps them feel
comfortable that we’ll be there
to help them with energy for
the long haul. And we like it
that our successes have a positive
impact on the environment
and allow us to serve as a role
model for other businesses.”
The Cooperative Development
Institute (CDI), headquartered in
South Deerfield, Mass., and serving
New England and New York, has partnered
with (PV)2 since its earliest days.
CDI assisted with the initial planning
and launch of the co-op as well as its
sales and marketing efforts, and helped
them to secure $350,000 in incentives
for photovoltaic installations from the
Massachusetts Technology
Collaborative.
Hoosiers focus on forest fuel
Indiana is home to diverse agricultural
based resources available for sustainable
renewable energy development. In addition
to the state’s emphasis on expanding
the production and use of bio-based fuels
such as ethanol and biodiesel, opportunities
are also being explored to process
wood waste from Indiana’s expansive
hardwoods industry into a marketable
wood fuel pellet. The Indiana
Cooperative Development Center
(CDC), with offices in Indianapolis, is
bringing together primary and secondary
wood businesses with economic development
partners to explore the potential of
cooperative and other collaborative business
models to expand an emerging biomass
industry within the state.
An exploratory meeting in early 2006
with wood product business owners led
to a feasibility study, now being conducted.
This comprehensive study,
which will investigate the demand for
wood fuel pellets in the home heating
and industrial-scale markets, the comparative nature of fuel pellets with existing energy resources in Indiana, the
appropriate scale with cost of production
at various levels, marketing strategies
for the finished product, and the
potential for diversifying a production
facility to utilize other emerging biomass
residues.
Midwest powers up
In the nation’s heartland, where
corn, soybeans and other potential fuel
crops dominate much of the landscape,
renewable energy is on everyone’s mind
— and cooperative development practitioners
are no exception. Cooperative
Development Services (CDS) with
offices in Madison, Wis., and St. Paul,
Minn., has been actively expanding into
the area of renewable energy in Wisconsin,
Minnesota and Iowa.
During the past two years, CDS has
completed feasibility studies and business
plans on community-owned wind
power enterprises, cooperatively owned
manure digesters and biodiesel facilities.
It has also has provided board
training to three ethanol development
groups. One project now in operation,
Central Bi-Products of Redwood Falls,
Minn., is owned by a farmer co-op of
more than 5,000 Midwestern producers.
The project created an initial total
investment of $4 million and 10 fulltime
jobs, as well as $2 million in sales
last year.
Another co-op with a business plan
CDS helped develop is HarvestLand
Co-op in Morgan, Minn., which is a
partner in a 5.6-megawatt wind farm
that went online last August. In its first
year of operation, it will produce more
than 52 megawatts and generate $2.5
million in sales under a power-purchase
agreement. Another wind farm is being
developed under a second phase of this
project. The co-op will again be the
primary owner/operator.
Iowa catalyst for
ethanol development
In the heart of the Corn Belt, farmers
have been looking at ethanol for
some time. The Value
Added Agriculture
Program of Iowa State
University Extension
has been a supporter of
the industry as it has
“grown up” in Iowa. It
has developed tools to
help farmers, such as a
resource manual and a
feasibility calculator,
which are posted on the
Ag Marketing Resource
Center website
(www.AgMRC.org). It
has also conducted half a
dozen feasibility studies
for potential new ventures
in the past few
years.
More than 250 people attended indepth
training sessions on biodiesel,
which the Center co-sponsored this
spring with USDA Rural Development
and other partners. Currently, the
Center is assisting the development of
four biodiesel facilities with a combined
production topping 175 million gallons
a year.
Will this ethanol boom bring the
cattle-feed industry back to the Corn
Belt? To explore this topic, the Center
partnered with others to sponsor a conference
in June titled: “Growing Iowa’s
Cattle Industry: Ethanol, Opportunities
and Economic Development.” Interest
in the conference drew more than 200
participants, including lenders, corn
growers, economic development officials
and bankers.
The Rockies rally to renewables
The Rocky Mountain Farmers
Union’s (RFMU) Cooperative
Development Center, Greenwood
Village, Colo., knows how important
biodiesel is to its farmer-members and
their urban neighbors in Colorado,
Wyoming and New Mexico. The
Center hosted a well-attended regional
seminar this spring focusing on oilseed
crops and producer options, such as
growing the right oilseed crop for the
region, efficiently processing the seed
into oil and meal co-products, and how
to market in ways that will generate
more profits for farmers. It examined
models for both large-scale commercial
facilities and for smaller, communityscale
projects where co-products are
used as inputs for farm operations.
Participants at the RMFU Center’s
seminar also examined the opportunities
biodiesel development might present
as part of a larger effort to create
more renewable energy businesses in
rural communities. For example, the
Center helped develop a feasibility
study and business plan with a group
of farmers in Freemont County, Wyo.,
to use an existing grain elevator. The
650,000-bushel facility may be used
to store oil seeds for processing into
biodiesel, creating about eight new jobs
and adding more than $1 million to the
local tax base.
Local focus energizes the Northwest
In the environmentally conscious
south Puget Sound area, demand for
biodiesel is booming. In response, the
Northwest Cooperative Development
Center, Olympia, Wash., is leading
the Olympia Biofuels Cooperative
through feasibility research, capacitybuilding
and education. The Center
plans to use this project as a pilot that
can be replicated to assist
other co-ops emerging
throughout the Pacific
Northwest. The Center
serves not only
Washington, Oregon and
Idaho, but Alaska and
Hawaii as well.
The Olympia co-op
intends to locally produce
and distribute renewable
fuels using sustainable
production methods and
innovative technologies.
Originally, the co-op’s
plan called for using waste
vegetable oil from commercial
and institutional
cooking facilities. But in
an industry as rapidly changing as this
one, other feedstocks are also being
considered. USDA is providing part of
the funding for this cooperative business
development assistance.
Terrain is still unclear for new co-op legal landscape
Editor’s note: CooperationWorks! conducted a national
conference call in June on “Current Trends in Cooperative
Incorporation Models,” with guest speaker James R.
Baarda, agricultural economist with USDA Cooperative
Programs. In April, he prepared a comprehensive, 200-
page discussion paper on “Current Issues in Cooperative
Finance and Governance.” For an electronic copy, e-mail
him at: james.baarda@wdc.usda.gov.
New category: ‘investor member’
Recently enacted statutes in Wisconsin, Wyoming,
Tennessee, Minnesota and Iowa have created a new category
of cooperative: “investor members.” These members
invest capital for an expected profit and typically do not
use the co-op in other ways. But some of the new statutes
afford these investor-members as much as 85 percent of
the profits of the business and as much as 85 percent of
the vote in its governance.
This is a dramatic departure from traditional cooperatives,
which give no voting rights to “preferred shareholders”
who invest in the co-op hoping to make money on
their investment, but not demanding any control over the
business in return.
The new statutes are apt to make it possible for some
farmer co-ops to expand where they otherwise could not
have. But these statutes also are causing concern — even
opposition — from those who seek to protect the essence
of cooperatives as user owned and controlled enterprises
operated for the benefit of their members. A national commission
is examining this issue and is expected to make a
recommendation in the near future regarding creation of a
uniform, national cooperative law, Baarda noted. (For more
information on this topic, visit the website of the National
Conference of Commissioners on Uniform State Laws
(NCCUSL): http://www.nccusl.org/Update/.)
Look closely at co-op principles
During the conference, Baarda stressed that contention
over this issue is unnecessary. Instead, he said, what is
needed is a lot more information. “We need to know what
works and what doesn’t,” he said. Cooperatives — not just
agricultural, but all co-ops — need to define their bedrock
principles and build their businesses around them. He cited
several versions of cooperative principles that are widely
used today, giving some historical context to explain differing
emphases.
Although he recognized that no co-op business model is
perfect, “this is what we have to work with.” New economic
and social forces — including some never faced before
— raise critical questions: Are there inherent limitations in
what a co-op is? Or are limitations simply a result of how
cooperatives work now, but need not work in the future?
“If you have one strong principle, can you reduce the
importance of other principles?” Baarda asked. “Is there a
balance? Or is each and every one of these principles —
however we state them — a mandate, without which we
don’t have a cooperative?
“We don’t have enough answers yet. We have a lack of
experience with the new statutes. The increased focus on
investment of capital is quite opposite to what traditional
co-op members thought about.” A corporation’s objective
is to maximize return for investors. “The cooperative’s
objective is to maximize value for user-patrons. These may
or may not be the same thing.” The issue, he said, is how
does the co-op protect the members?
Keep communications flowing
In this brave new world of cooperative finance and governance,
new statutes will be passed and lessons will continue
to be learned, Baarda said, emphasizing that the most
important thing is that — in the cooperative tradition —
those who are testing the waters should share what they
learn with the rest of the cooperative world. Sharing lessons
learned and insights gleaned from both successes and failures
will be the key to effective cooperative development.
“I don’t know what the mechanism is to do that,”
Baarda concluded. “That’s a little outside our resources at
the moment. Maybe CooperationWorks! is the organization
to do that.” After all, as he noted, “that’s what this group
already does.”
