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Advantages of CSOPs for Stakeholders

CSOPs have a lot of advantages for a variety of stakeholders. Consumers benefit from CSOPs both on a financial and an operational level. Local authorities are provided amongst others with the opportunity to fulfill their role as pace-makers. Participation in a CSOP is also advantageous for commercial investors, since voting rights are proportional to shareholding. Moreover, backing a CSOP entails low transaction costs with guaranteed profitability for commercial banks. Also, CSOPs are in line with political priorities and regulatory requirements, so they can raise additional financial support with public financial institutions.

Advantages of CSOPs for Consumers

Consumer participation women CSOP(c) rawpixel / Pixabay

Acquiring productive property, consumers become (co-)owners of the utility which supplies them with energy. They are thus entitled to participate financially in its development as well as in management decisions.

A CSOP can be launched by consumers themselves or set up for them by another entity - for example the municipality they live in - in order to invest in a new or existing installation.

One of the advantages for consumers of investing in a CSOP is that shareholding is pooled in an intermediate entity that is managed and represented in the CSOP-Ltd. by an expert (the trustee).

Coins consumer low investment CSOP(c) rawpixel.com / Pixabay

From a financial point of view, participation entails:

  • Low financial prerequisites: participation does not require substantial assets or savings because the loan is repaid from future profits; the productive property and shares are pledged as assets.
  • No individual liability: the CSOP-Ltd. takes on the bank loan, so the liability of individual consumers is limited to the value of their share.
  • Additional source of income: consumers can reap the rewards of their investment once the loan is repaid. Profits are redistributed amongst consumers in proportion to their shares.
Consumer Participation CSOP Group(c) Christina Morillo / Pexels

From an operational point of view, consumers benefit from:

  • Low entry and exit costs: consumers can easily buy or sell their shares. When, for example, a household moves away from the region, they can transfer their shares to new residents. Like this, the party of the trusteeship agreement changes, but there is no need for additional registration with the register court or notary public.
  • Simplified allocation of shares: shares are allocated amongst the consumers in proportion to their (monthly) energy consumption; of course, other principles of distribution are also possible.
  • Flexible involvement in decision-making: the trust agreement defines which decisions are retained by the consumers and which are delegated to the trustee. Clear rules prevent differences in time investment or knowledge from impacting day-to-day operations. At the same time, consumers can gain knowledge from their active participation.
  • Strong representation of their interest / increased bargaining power: consumers benefit from a stronger position relative to the other co-owners in the CSOP-Ltd. because they can avoid fragmentation of their shares and rely on the expertise of the trustee

Advantages of CSOPs for Local Authorities

Windmill in sunflower field(c) Pexels / Pixabay

Investing into a CSOP has many advantages for local authorities:

  • Fulfilling their role as pacemaker: a CSOP can be launched by the municipality the consumers live in. It enables local authorities to shape local development in renewables and energy efficiency by bringing together different stakeholders and aligning their interests.
  • Flexible financial participation: Local authorities are under strict fiscal rules and budgetary constraints that often prevent them from unlocking their full potential as pacemakers. Pooling the financial resources of local consumers (both individuals and SMEs), a CSOP reduces the pressure on local authorities to be the principle financial representative of a local project.
  • Representation guarantees: The necessity of representation in management and supervisory bodies is perceived as an obstacle to municipal investments in many citizen projects. In contrast to cooperative law, a CSOP, being subject to corporate law, guarantees the representation of local authorities in management and supervisory bodies once financially involved.

Additionally, the shareholding of consumers is pooled in an intermediate entity that is managed and represented in the CSOP-LLC by an expert (trustee).

Communication simplified CSOP(c) rawpixel.com / Pexels

For the local authorities, this leads to:

  • Simplified communication: one interlocutor, one phone number.
  • Guarantee of actors’ stability: turnover between consumers is settled separately and does not impact the overall shareholder structure in the CSOP-Ltd.
  • Efficient democratic decision-making: as the participation of consumers is mediated, investors have the guarantee that consumer participation does not impact the professional management of day-to-day operations. At the same time, consumers still have room to discuss, decide and learn about the operation of an energy plant if they have the time and will.

Advantages of CSOPs for External Investors

External Investors CSOP(c) Elevate Digital / Pexels

A CSOP can be launched by consumers themselves or set up for consumers by another entity like the municipality they live in. An external investor (SME, commercial investor, plant operators, etc.) can then back up the initiative.

Participation in a CSOP is advantageous for commercial investors, since voting rights are proportional to shareholding as opposed to other citizen energy models including minority stakes of commercial investors, like the one member/one vote system of cooperatives.

Additionally consumers’ shareholding is pooled in an intermediate entity, managed and represented in the CSOP-LLC by an expert (the trustee).

Woman pen CSOP financing(c) rawpixel / Pixaxbay

For the external investor, this entails:

  • Simplified communication: one interlocutor, one phone number.
  • Guarantee of actors’ stability: turnover between consumers is settled separately and does not impact the overall shareholder structure in the CSOP-Ltd.
  • Efficient democratic decision-making: As the participation of consumers is mediated, investors have the guarantee that consumer participation does not impact the professional management of day-to-day operations. At the same time, consumers still have room to discuss, decide and learn about the operation of an energy plant if they have the time and will.

Advantages of CSOPs for Financial Institutions

Advisory Board SCORE(c) rawpixel / Unsplash

Private financial institutions:

Backing a CSOP entails low transaction costs for commercial banks. This results from pooling individual investments in one corporate vehicle. The profitability of the project is assured by:

  • The scale of the investment being large enough to ensure the energy produced exceeds the energy needed by consumers, so it can be sold to repay the loan
  • Possibly additional regulatory measures for RES or citizen projects to level the playing field between commercial and non-commercial projects as well as carbon-based and non-carbon-based energy

Public financial institutions:

As CSOPs are in line with political priorities and regulatory requirements, they can raise additional financial support with public financial institutions like national or European development banks (e.g., KfW, BPI/Caisse des depots, BGK, BDB, EIB, …) or European structural and investment funds (European Regional Development Fund, European Social Fund, Cohesion Fund, European Fund for Strategic Investments).