Consumer Owned Business

In traditional finance, the suppliers of capital own businesses. Another way of organising ownership is for consumers to own the business. With solar panels, consumers can own the energy production business. In Australia today this is a very profitable business as the price of electricity from the grid is high, and the main cost is the cost of capital.

Consumers can band together in Cooperatives to collectively own panels. They can distribute the profits to lenders as high fixed returns on capital and the remaining surplus to consumers as lower prices.

The cooperatives can be distributing cooperatives or non-distributing cooperatives. With distributing cooperatives, all members get an equal share of the profits with members who contribute finance getting a fixed return and all members sharing equally in the profits. With non-distributing cooperatives, the cooperatives have to distribute the surplus, and they do that with lower costs of electricity to consumers plus a fixed return to suppliers of funds. Non-distributing cooperatives are fairer than distributing cooperatives because everyone can get an equal share of the profits whether they contribute money before the electricity production or they contribute cash when they pay for the electricity.

Non-distributing cooperatives can be economically more productive if they produce the same amount of electricity for less money. This increase in productivity is shared between investors and consumer members by investors getting higher returns and consumers receiving lower prices. They can achieve lower prices by giving buyers a discount when they prepurchase electricity rather than giving investors interest.

PrePower One, a not-for-profit cooperative in Canberra gives investors a return equivalent to a 7.5% interest rate while lowering the price of electricity to consumers to 70% of the grid price. A 7.5% return is twice the return of the average Australian Superannuation Fund allocated pension.

As the investors receive repayments, they lose equity in the panels and the equity transfers to the consumers in proportion to the consumption of electricity. When consumers have purchased all the equity in the panels from which they get electricity, the cooperative can reduce the price further, or they can keep the prices the same and the cooperative can reinvest the money and distribute the benefit to all.

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Kevin Cox

Kevin works on giving individuals control over their online information - particularly their financial information with local communities.