Provider Ownership or Community Ownership?

Two ways of funding Community Batteries are with a Battery Provider or Community Funding. Battery Providers operate like a retailer and supply a service to the grid of shifting energy from low-cost times to high-cost times. Alternatively, the Community of Consumers can fund the Battery and keep the Capital and Profits.

Provider Ownership

Assume a provider invests $1,000,000 in a battery serving 100 consumers. Each year the Battery earns a profit of $160,000 by buying low and selling high. The Provider keeps all the Capital in the Battery and has $60,000 of profit. Assume the Battery lasts ten years. At the end of the ten years, the Service Provider has made $1,600,000 in profits. The Service Provider has zero Capital left in the original batteries and $600,000 of gains.

The returns will go to the Provider unless the regulator sets the return on investment at a price lower than 6%. The most recent determination for providers is currently 6.88%, which means it is likely to increase the cost of electricity unless the Community subsidises the Battery.

Community Owned Batteries

Consumers organise themselves into Non-distributing Cooperatives to purchase and operate Community Batteries. A Non-distributing Cooperative means that the Cooperative owns the Battery and has no shareholders.

The Cooperative obtains funds with regular loans, community grants, impact investments or by Cooperative members prepurchasing Battery services.

When a member purchases Battery services, they pay the cost of operating the Battery and buy some of the Capital in the Battery.

Assume the same profits and costs as a Provider Service, and the Battery Cooperative has purchased and sold electricity and earned $160,000 each year. Rather than a 6% return over ten years, let the Cooperative agree to pay investors a 10% return over 20 years. The Cooperative knows that it will need storage for the foreseeable future and will continue to reinvest or refurbish the Batteries. The Cooperative uses Public Capital for its internal transfers between members. Public Capital is money available to all consumers irrespective of their ability to raise investment money.

The Capital remains in the Community with community-owned batteries, and the returns come from lower-cost electricity. There is no return of Capital as it stays in the Community. The earnings from the Capital accrue to members who contribute to the Capital, including those who pay for electricity. The Cooperative collectively decides what to do with the profits, and initially, it chooses to purchase more Batteries. When it buys more Batteries, it allocates the Public Capital to members in proportion to their payments for electricity.

In year one, investors receive $100,000 in Public Capital. $50,000 is a return on Public Capital, and $50,000 is a return on investment. The $50,000 of Public Capital. The Cooperative invests $60,000 profit in more Batteries and distributes $110,000 of Public Capital to consumers.

Community-owned batteries will earn more than Provider owned Batteries because Communities will purchase local electricity to supply electricity to the Batteries at lower prices than from the grid. Arrangements with local distributors can also reduce the charges for local transmission.

Summary

The Rewiring of Australia will require Community Batteries. At current prices per kWh, they will require subsidies from Government. Governments will get better value for the subsidies with Community owned Batteries, and the subsidies will benefit all consumers. Further savings will occur if the Cooperatives operate as retailers and integrate with solar generation.

If the Government subsidises Battery Providers, most of the benefits will flow to the owners of Batteries.

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Kevin Cox

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