Pei-Hao Li, Elsa Barazza and Neil Strachan
16 February 2022
The scale-up of smart local energy systems (SLES) will be funded through a range of investors and enabled by a range of governance institutions. This Briefing Report aims to assess the role of novel cooperatives that can leverage household finance in the SLES transition by using an innovative agent-based energy model (BRAIN-Energy).
Cooperatives with investments from households can benefit from economies of scale when investing in renewable energy and subsequently expand their business model to allow households to access policy mechanisms such as capacity market and contracts for difference. Modelling has enabled us to investigate how the rest of the market reacts to these cooperatives, both competing against them and copying their business model.
Key findings are that cooperatives can have a major impact on both the scale-up of SLES and overall national efforts to decarbonise the electricity sector. The role of local cooperatives is boosted when they have access to a larger pool of cheap household capital to enable them to quickly grow their renewable energy portfolios and become national players. In the long-term, when cooperative financial strength is tied up in existing renewable investments, new entrants can copy the cooperatives’ business model and complete the energy transition.