Andrii Zinchenko

Every city can become solar
Andrii Zinchenko,
a Co-founder of Energy Cooperative «Solar town»

There are several countries where energy cooperatives play a great role in the green transition. Certainly, this is Germany, where there were more than 1,100 energy cooperatives a few years ago. They are diverse: the vast majority use renewable energy sources, there are those growing and burning biomass, there is a majority of «solar power proponents» as well as «wind power proponents». The Americans have a very interesting experience, because they have got not only traditional European energy cooperatives, where they all together build a power plant. In the United States, there are cooperatives that own power grids, this practice dates back to the 1930s. Among such co-operations of people or companies there are those engaged in electricity distribution services – that is oblenergo in our country - and there are even those engaged in energy transportation services between the states, like Ukrenergo in our country - these are mega-cooperatives, which are associations of other cooperatives. Sometimes they have generation, including large, coal or ownership shares in nuclear generation. Today these cooperatives pay a lot of attention to make a «green» transition, on their web-sites you can often come across «we are going green». They are implementing their own programs for the transition to renewable energy sources, some are developing the energy storage direction. These local citizens' unions are thinking about how to reduce their dependence on fossil or non-renewable resources, they are rapidly moving from a «fossil» model to a renewable one.

Models of interaction in cooperatives in the Netherlands are very interesting. You can see how a hundred-megawatt wind farm is being built by the cooperative members. Earlier, in the 1970s, this model was adopted in Denmark, when wind turbines were still much less powerful, but people came together to build a source of renewable energy. There are interesting models in Spain, where the cooperative can act as a supplier of energy for various types of RES generation, and they are a kind of intermediary through which people and companies can be sure that they buy energy from renewable sources. There are various interesting experiences, energy cooperatives are developing rapidly in the world - from the United States and Europe to Australia. It seems that this process has commenced in Ukraine as well.

How far are we lagging behind the rest of the world in creating energy cooperatives? Will we catch up?

One of the foreign technical assistance offices once said that Ukraine is a country where you will never be able to correctly assess whether the situation is good or bad. We are a frontier country where civilization and the wild field coexist, with great opportunities and significant threats and turbulence. Undoubtedly, we are a civilized country with interesting companies offering technical solutions for energy, and a regulatory field that is moving towards Europe slowly and with difficulties. But partially we are a «wild field». Therefore, whether we will catch up with the world in the creation of energy cooperatives depends on our efforts, our ambition. At least, I personally have an ambition in the near future to help Ukrainian communities, companies, associations interested in the model of energy cooperatives with the implementation of their projects. I want to share my and the world's experience with them so that they can implement this model. There is a cool principle: if you want to go fast - go alone, if you want to go far - go with someone. I think Ukrainians will produce very creative and unexpected things from this cooperative «constructor» - and we will show a lot of new things to the world. Everything depends on ourselves, on our attention to each other, on our joint effort, because cooperation is, first of all, collaboration.

It seems easy to unite people around a good idea that improves the world and also brings income. But only in theory. What obstacles had to be overcome in the process of attracting investors?

How we imagined crowdfunding and how it actually worked out are two different processes. Practice has shown, for example, that one should not rely entirely on marketing research. But we must not forget that without these studies, you should not get started – that is an interesting paradox. That is, you need your marketing research as something around which you build your plans to attract investors, this is your cutoff point. However, you need to be prepared to change plans «along the way». Thus, you need to be prepared to quickly develop and test hypotheses about your audiences during the campaign itself. By the way, this is confirmed not only by our experience - Daniel Tonkopiy, who recently completed his crowdfunding for the production of electric motorcycles, says that they had a completely different audience than they had supposed. From the very beginning, they planned the whole campaign expecting people from the US and the EU to be their main investors. However, in fact, the vast majority of their depositors turned out to be Ukrainians.

In our case, the investors' attraction was very badly affected by the fact that in 2019 the authorities literally started intimidating and blackmailing the RES market, it happened right in the middle of our campaign and became a major obstacle. When you run in turbulent times, it always creates challenges. It is good that we were able to maneuver, we understood how to change communication. Well, and the main thing - to tell people the truth, not to embellish the reality. This creates trust.

«Solar town» has gone through all stages - from design to successful implementation. Being the first is always the most challenging. What will be easier for those following your path?

Literally everything will be easier for those following us. After all, first, you can refer to the «Solar town» and say: «It works». There is already a clear working model, there are real people who have invested, there are results. You can always call us and ask how we are doing. It will be easier to attract new members, investors, and draw up documents. The only thing that may be more difficult for future projects is that last year the state treated investors in «green» energy very harshly - this may alert many. There are some problems with this, but the «feed-in» tariff is not the only model of cooperatives, as the world experience demonstrates. I suppose that in time there will be other models for the energy cooperatives operation in Ukraine.

Are there other interesting examples of energy cooperatives in Ukraine at different stages of implementation?

There are several people who are actively interested in energy cooperation, and now I am gradually helping them with my knowledge and experience to reach a clear and high-quality business model. All these projects are in the early development stage. We hope to launch training in the near future for people who want to create cooperatives to give them what we did not have - a clear path and a set of variables to work with to get the project up and running.

Speaking of the energy transition, is this path of crowdfunding promising for the development of the renewable energy sector in Ukraine?

Energy, unfortunately, is excessively dependent on government regulation. The success of crowdfunding as a tool in Ukraine is very much dependent on government regulation and available niches for adequate and safe business. However, it is clear that crowdfunding is not the only energy transition tool, there are many things that can be done with it. Theoretically, it would now be possible to jointly invest in electricity storage, but there is no market for this yet. That is, there is potentially a market, but the legal and regulatory framework makes it impossible to function.

Through the efforts of the current government, the energy transition in Ukraine has been put on hold. Unfortunately. Investors are so intimidated that the growth we see today is growth in the business consumption sector for their own needs: so far it is quite little, and these are small stations. There is a growing sector of domestic power plants, but this is not enough for the energy transition, it is such a «snail» pace. But with each new successful decision of the state in regulation and deregulation there will be more opportunities for crowdfunding and cooperative movement.

What can accelerate our energy transition?

Liberalization of energy markets. There is such a notion as «market design». For example, in due course the incorrect market design in California led to well-known problems with Enron - the market, created by the regulators in their imagination, in practice worked quite differently. You need to be very careful about market design. What we have - with all the subsidies, market distortions, PSO - is a big obstacle to the energy transition. The state said it would protect vulnerable consumers - this is in the law on the electricity market, the law on the gas market. However, despite what has been said there, no practical steps have been taken so far, there is no idea of who the «vulnerable consumers» are. The lack of this clarity greatly affects the prospects of the market, as the government imposes its own social obligations on companies operating in the market. This destroys the business models of its participants and creates considerable instability. There is no clarity about externalities - the harmful effects of a particular production and its corresponding financial discouragement. Fortunately, we are somewhat pushed by the European Green Deal, an external factor that we cannot ignore, because Europeans will consider how carbon-intensive the goods we export to the EU will be carbon intensive and will be taxed at the border accordingly.

In my opinion it would be better if the changes started from the inside, with the understanding that the «green» transition for Ukraine means making a lot of social decisions - this is what business requires. Without business, without the markets being interested in it, there will be no «green» transition in principle. It is necessary to properly balance the interests of business and the interests of vulnerable social groups. We are talking, in fact, about national interests, they are always debatable and complex, they are not made up in one minute, they must be sought in negotiations, serious strategy, understanding of the interests of key groups. As soon as we have definiteness, fixed for at least 5-10 years, then the real energy transition will begin.