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Towardasharedzero-carbon

EnergyFuture:AGlobalAnalysisofRuralEnergycooperatives

ExecutiveSummary

ES/November2024

hRMl

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TowardaSharedZero-CarbonEnergyFuture:AGlobalAnalysisofRuralEnergyCooperatives/2

AuthorsandAcknowledgments

Authors

YihanHaoJunLi

TingLi

OtherContributors

YuqinHan

HaimingWu

Authorsarelistedalphabeticallybylastname.AllauthorsarefromRMIunlessotherwisenoted.

Contacts

JunLi,jun.li@

SuggestedCitation

YihanHao,JunLi,andTingLi,ExecutiveSummary:TowardaSharedZero-CarbonEnergyFuture:AGlobalAnalysisofRuralEnergyCooperatives,RMI,Nov2024,

/insight/toward-a-shared-zero

-carbon-energy-future

Acknowledgement

Theauthorsareparticularlygratefultothefollowingexpertsfortheirinsightsandsuggestionsinwritingthereport.

QuanhuiWang,ChiefExpert,RuralEnergyandEnvironmentAgency,MinistryofAgricultureandRuralAffairs,China

JunHe,PolicyOfficer,RuralTransformationandGenderEquality(ESP),FoodandAgricultureOrganizationoftheUnitedNations(FAO)

DongWang,ProgrammeDirector,SustainableDevelopmentTeam,UnitedNationsDevelopmentProgram(UNDP)

JingmingLi,FormerChiefExpert,RuralEnergyandEnvironmentAgency,MinistryofAgricultureandRuralAffairs,andSecretaryGeneralofNationalBiogasSociety,China

MingGao,ResearchFellow,ResearchCenterforRuralEconomy,MinistryofAgricultureandRuralAffairs,China

HongZhang,AssociateProfessorandDeputyDirectoroftheInstituteofBuildingScienceandTechnology,SchoolofArchitecture,TsinghuaUniversity

HuYan,SeniorResearcher,StateGridEnergyResearchInstitute

WenjinLong,AssociateProfessor,CollegeofEconomicsandManagement,ChinaAgriculturalUniversityKe’nanZhang,Director,SustainableDevelopmentResearchInstitute,GoodWeTechnologiesCo.

Theanalysispresentedinthispublicationisnottheopinion/viewsoftheexpertsattheabove-listedorganizations.

TowardaSharedZero-CarbonEnergyFuture:AGlobalAnalysisofRuralEnergyCooperatives/3

GlobalContextofRuralEnergyTransition

TheUrgencyforRuralEnergyTransitioninDevelopingCountries

events,fundamentallyreshapinginternationalprioritiesregardingenergysecurityandaffordability.

Ruralregions,whichaccommodateapproximatelyhalfoftheglobalpopulation,facedisproportionatelycomplexchallengesintermsofenergyaccessibility,infrastructurereliability,andlong-termsustainability

comparedwiththeirurbancounterparts.

Thegloballandscapeisincreasinglyaffectedbyescalatingregionalconflictsandunprecedentedclimate\

Theenergyaccesschallengesareevenmoreacuteindevelopingcountries.TheInternational

EnergyAgencyreportsthatdespiteasignificant45%reductioninglobalenergypovertysince2010,

approximately760millionindividualsremainedwithoutelectricityaccessasof2022,representinga

persistentdevelopmentchallenge.1Furthermore,around2.4billionpeoplereliedontraditionalbiomass,coal,orkeroseneforcooking,resultinginlong-termexposuretoindoorairpollution,primarilyaffectingwomenandchildren.2Thispopulationlargelyresidesinruralareasofsub-SaharanAfricaanddevelopingAsiancountries.Eveninregionswithelectricitysupply,issuesincludingunstablepoweravailability,highenergycosts,andexcessiverelianceonfossilfuelspersist.Therefore,peoplelivinginruralareasurgentlyneedaccesstosustainable,cost-effectivecleanenergy,whichwillgreatlyimprovetheirqualityoflifeandhelpaddresshealthissues.

Ruralareasalsopresentnewopportunitiestocontributetoasustainablenationalenergylandscapeanddriveinnovativeeconomicgrowth.Abundantrenewableresources,suchaswind,solar,andagroforestrybiomass,areessentialforestablishingamodernenergysystem.Expandingcleanenergyinruralareascanhelpbridgetheurban-ruraldevelopmentgapbyenablingtheuseofaffordableandsustainable

cleanenergyinbothproductionanddailylife.Furthermore,thegrowthofnewenergyindustriesinruralareascanstimulateeconomicopportunitiesandjobcreation,furthersupportingruralrevitalizationandalleviatingenergypoverty.

Inthiscontext,theruralenergytransitionwillnotonlyexpandaccesstoreliable,clean,andaffordableenergybutalsodrivelocaleconomicgrowth,ultimatelyfosteringmoreresilientandprosperousruralcommunities.

PuttingPeopleFirst:AddressingCriticalBarriersintheRuralEnergyTransition

Theimplementationofruralenergytransitioninitiativeshasrevealedpersistentstructuralchallenges.Theinterplayoftechnical,financial,andorganizationalbarriershashistoricallymarginalizedrural

communities,limitingtheirparticipationintheconstructionanddevelopmentofenergysystemsandmakingdecisionsaboutthemaswellasopportunitiesforsharingthebenefits.Overtime,thislackoflocalinvolvementcanweakentheresilienceofenergyprojectsandexacerbatesocialandeconomicdisparitiesinavarietyofways:

?Infrastructuregapsinmanyruralareas,includingthelaggeddevelopmentofupgradedgridsandefficientenergystoragesystems,greatlyimpedetheadvancementofrenewableenergyintheseregions.

?Highup-frontcostsofrenewableenergytechnologiesposeasignificantbarrierforrural

TowardaSharedZero-CarbonEnergyFuture:AGlobalAnalysisofRuralEnergyCooperatives/4

communities,wherelowerincomelevelsandlimitedfinancingoptionshinderinitialinvestmentsincleanenergysystems.

?Profitdistributiondisparities,irregularpracticesbyenergyprojectdevelopers,andalackof

regulationrestrictlocalbenefitsfromanenergytransitionandoftenplaceundueburdens

oncommunities.Theabsenceoflocalinvolvementinrenewableenergyprojectshindersthemaximizationofbenefitsforthesecommunitiesandobstructstheachievementoflocalenergyconsumptionpriorities.

Therefore,apeople-centeredapproachemphasizinglocalengagement,equitableaccess,andbenefitsharingrepresentsafundamentalprerequisiteforfosteringasustainableruralenergytransitionandshapinganinclusivenationalenergylandscape.

RuralEnergyCooperativesasanEmerging,Effective,andEquitableModelforRuralEnergyTransition

Apeople-centeredapproachinruralenergytransitionisonethatpromotesenergyequityandprioritizesthewell-beingofcommunitymembers.Byinvolvingresidentsasactiveandimportantparticipantsanddecisionmakers,itaimstofacilitateasustainableandresilientruralenergysystemthatalleviatesenergypovertyandfosterseconomicprosperity.

Globally,manycountrieshavelaunchedcommunity-basedenergyprojectsthatencouragethe

involvementofcommunitymembersandlocalstakeholders,emphasizinglocalengagementandbenefitsharing.Ruralenergycooperatives,amember-ownedorganizationforcollectivelymanagingenergy

productionandconsumption,areemergingaskeyplayersinclimateactionandenergytransition

worldwide,reflectingatrendtowardpeople-centered,participatory,community-driven,andequitableenergytransitions.

ThepracticesandexperienceofenergycooperativesinEurope,theUnitedStates,andmanyother

countriesdemonstratethatthecooperativemodelcouldbeaneffectivemechanismtoaccelerate

regionalandnationalcleanenergytransition.Thiscooperativemodelpromotesequitableenergy

transitionsandfostersinclusiveenergysystemsbyempoweringlocalcommunities,optimizinglocal

resourceutilization,andengagingmembersasbothproducersandconsumers.Furthermore,it

ensureslong-termprojectsustainabilitythroughcollectivedecision-makingandbenefitsharingamongstakeholders.

TowardaSharedZero-CarbonEnergyFuture:AGlobalAnalysisofRuralEnergyCooperatives/5

TheEvolutionofRuralEnergyCooperativesAroundtheWorld

DefinitionandFeatures

Ruralenergycooperativesareorganizationsownedbytheirmembers,usuallyresidentsinruralareas,tocollectivelydevelop,manage,andusenaturalresources,includingfossilfuelsandrenewableenergy

resourcessuchaswind,solar,biomass,andgeothermalenergy.Theirgoalistoenhancelocalenergysupplyandpromotesustainabledevelopment.

Althoughdifferenttermsareusedforruralenergycooperativesglobally,suchasruralelectric

cooperativesandenergycommunities,theyallsharecommonprinciplesdefinedbytheInternational

CooperativesAlliance.3Basedonglobalcasestudiesandbenchmarking,someofthesedistinguishing

featureshavebeenidentifiedasessentialforthesuccessandprosperityofruralenergycooperatives(seeExhibitES1).

ExhibitES1CorePrinciplesandDistinguishingFeaturesofRuralEnergyCooperatives

Principles

Features

VoluntaryMembership

Themembershipstructureemphasizesthevoluntaryinvolvementofcommunityresidents,whojointlyownenergyprojectsandparticipateinthedevelopmentandoperationofthecooperative.

Collective

Decision-Making

Cooperativemembersactivelyparticipateinpolicymakinganddecision-making,withequalrights,suchasthroughaone-member,one-votesystem.Governanceistypicallycarriedoutthroughanelectedboardofdirectors.

AutonomyandIndependence

Cooperativesarecontrolledbytheirmembers,especiallywhennegotiatingagreementsandsecuringfundingfromexternalsources.

BenefitSharing

Thecollaborativeframeworkensuresequitabledistributionofeconomicandsocialbenefitsderivedfromenergy-developmentinitiatives.

CommunityReciprocation

Cooperativespromotesustainabledevelopmentinthelocalcommunityinvariousways,aimingtoenhancetheirmembers’well-being.

RMIGraphic.

Althoughenergycooperativesarefoundinbothruralandurbansettings,theirimpactisparticularly

significantinruralareas.Theyhelpaddresschallengessuchasenergypovertyandlackofinfrastructureandpublicservices,offeringbroaderenvironmental,social,andeconomicbenefits.Ruralenergy

cooperativesalsoplayakeyroleinleveraginglocalrenewableenergyresources,offeringgreater

potentialforcleanenergydevelopmentcomparedwithurbanareas.Thesecooperativesprovidevaluableinsightsforglobaleffortstoaddressenergyaccessandsustainabilityindevelopingregions.

HistoricalDevelopmentandCurrentLandscape

Theevolutionofruralenergycooperativesasmember-ownedentitieshasdemonstratedremarkable

advancementacrossdiversenationalcontexts,revolutionizinglocalapproachestoenergymanagementanddistribution.Theyhavecontributedtoenergyaccess,thepromotionofrenewableenergy,energy

TowardaSharedZero-CarbonEnergyFuture:AGlobalAnalysisofRuralEnergyCooperatives/6

transition,andenergydemocracy.Today,ruralenergycooperativesareaneffectivesolutiontoaddressenergyaccessibilitychallengesandprioritizelocalinterestsinmanyregions(seeExhibitES2).

ExhibitES2NumberofEnergyCooperativesbyCountry

Numberof

EnergyCooperatives

RMIGraphic.Source:RMIAnalysis,basedonpubliclyavailabledata,non-exhaustive

UnitedStates:RuralElectricCooperativesasNonprofitElectricUtilities

TheemergenceofruralelectriccooperativesintheUnitedStatesduringthe1930srepresenteda

strategicresponsetosevereruralelectrificationdeficits,withgridconnectivityreachingmerely10%

ofruralhouseholdspriortointervention.ThegovernmentpassedtheRuralElectrificationActof1936,

whichprovidedlow-costloanstoformcooperatives,enablingthemtobuildtransmissionlinesand

deliverelectricitytoruralresidents.By1953,over90%ofUSfarmshadaccesstoelectricity.Today,nearly1,000ruralelectriccooperativesserveover42millionpeopleacross56%ofUSland,providingmorethan10%ofthenation’selectricity,primarilysupportingruralcommunities.4

TheEuropeanUnion:LegislationtoPromoteaDistributedEnergyMarket

ThegenesisofEuropeanenergycooperativesisintrinsicallylinkedtotheconvergenceofthe1970s

oilcrisisandantinuclearmovements,whichcatalyzedafundamentalshifttowardalternativeenergy

paradigmsandacceleratednationalenergytransitions.Theriseofenergycooperativeswasbotha

technologicalmovetowardrenewablesandatransformationofenergyownership,fosteringcommunity-driven,decentralizedenergysolutions.AccordingtotheEuropeanCommission,community-led

cooperativeinitiativesareexpectedtoown17%ofwindgenerationcapacityand21%ofsolarinstallationcapacityby2030,representingasignificanttransformationinenergyownershippatterns.5

TowardaSharedZero-CarbonEnergyFuture:AGlobalAnalysisofRuralEnergyCooperatives/7

TheEuropeanUnion(EU)hasestablishedacomprehensiveregulatoryframeworkforcleanandfairenergy

transitionthroughtheCleanEnergyforAllEuropeanspackage.Aspartofthepackage,theEUlegislatively

identifiedbothrenewableenergycommunities(RECs)andcitizenenergycommunities(CECs)asfoundationalelementsofthedistributedenergymarket,advocatingfordistributedenergygeneration,peer-to-peer

trading,andenergysharing.SomeEUMemberStateshavealreadybegunimplementingpoliciesand

measuresforenergycommunities,whileothersareintheprocessofdevelopingregulatoryframeworks.

Germany:EnergyCommunitiesforEnergyTransition

Germany’senergycooperativeshavealonghistory.Thesecooperativestructures,initiallyconceivedintheearly20thcenturyasmechanismsforruralelectrificationthroughconventionalfossilfuelsystems,

haveevolvedstrategicallytobecomeinstrumentaldriversofGermany’scomprehensiveenergytransitionagenda.Originatinginthe1970s,thistransitionwasshapedbythecombinedinfluenceofclimate

concerns,energysecurityneeds,andantinuclearmovements.Atthattime,largeutilitiesandenergy

corporationswerereluctanttoinvestinrenewables,creatinganopportunityforcooperativestoemergeaskeyplayersintherenewableenergylandscape.

Renewable-focusedenergycooperativesempowercitizenstobecomeenergyproducersandfoster

acollectiveapproachtolocalenergygoals.Byengagingdiversestakeholders—includinglocal

policymakers,community-orientedbusinesses,andregionalassociations—thesecooperativesharnesslocalsupporttomeetrenewableenergytargets.Althoughrenewableenergycooperativesemerged

relativelylate,theyhavegrownrapidly,withastrongfocusonsolarenergy.Currently,Germanyhas951energycooperatives,withatotalof220,000members.6

Netherlands:EnergyDemocracyandCitizenParticipation

Inresponsetothe1970soilcrisis,Europeannations,includingtheNetherlands,soughttodiversifytheirenergysourcesforenergysecurity.TheNetherlandsintroduceditsfirstrenewableenergypolicyin1979,whichgrantedlocalgridaccessin1980.Thisenabledfarmersandcommunitiestoproduceandsupplytheirownenergy,breakingtraditionalpowermonopoliesandpavingthewayfortheemergenceof

energycooperatives.

Followingnuclearincidentsinothercountries,publicinterestincleancommunity-basedenergygrewintheNetherlands.Inthe1980s,environmentalpioneerslaunchedsmallwindcooperatives,promotingenergyindependenceanddemocraticparticipation.The1989ElectricityActstrengthenedthismodelbymandatinggridaccessandstandardratesforlocalproducers.Withenergymarketliberalizationinthe21stcentury,cooperativesexpandedrapidly,drivenbythemottoenergievan,voorendoorons

zelf(energyfrom,for,andbyourselves).Today,over700energycooperativeswithmorethan130,000membersdrivegreenenergyandcommunityenergyownershipacrosstheNetherlands.7

Denmark:TheEnergyCooperativeModelasaKeyPillarofEnergySupply

Denmarkhasalonghistoryofcitizeninvolvementinpowerandheatsupply.EvenbeforeEUenergy

marketliberalization,electricityandheatwereconsideredpublicgoodsinDenmark.Sincethe1970s,Denmark’sgovernmenthasestablishedpoliciestopromoterenewableenergyandcommunity

ownership,particularlyforwindenergy,inresponsetotheoilcrisis.KeypolicymeasuresinDenmarkincludetaxexemptionsonincomefromcommunity-ownedwindfarms,guaranteedgridaccess,

purchaseobligations,prioritydispatch,andfeed-intariffs(FITs)tosupportenergycommunities.Inthe1980s,supportivelegislationledtomanycitizen-drivenwindprojectsformingasgeneralpartnerships,

knownaswindcooperatives(Vindm?llelaug).Currently,energycooperativesinDenmarkownmorethan

TowardaSharedZero-CarbonEnergyFuture:AGlobalAnalysisofRuralEnergyCooperatives/8

23%ofthecountry’swindpowercapacityandsupplyapproximately40%ofitsdistrictheatingsystems.8

UnitedKingdom:CommunityEnergyforRenewableEnergyPromotion

IntheUK,ruralenergycooperativesemergedinthe1990s,drivenbyenergymarketprivatizationandthepromotionofrenewableenergypolicies.TheCommunityEnergyProgramwaslaunchedin1997,andthefirstenergycooperative,Baywind,wasestablishedthesameyear.In2002,BaywindmembersfoundedEnergy4Alltosupportthegrowthofothercommunityenergyprojects.

RenewableenergycooperativeshavecontinuedtoemergeintheUK,drivenbyincreasedgovernment

support,technologicaladvancements,andtheneedforcooperationduetolandprivatization,especiallyinruralareas.Akeyturningpointcamein2009,whentheintroductionofFITsprovidedincentivesfor

renewableenergyprojectsintheUK.

ThereleaseoftheUK’sCommunityEnergyStrategyin2014wasalsoasignificantdevelopment.Thestrategyhighlightedtheimportanceofempoweringcitizensandcommunitiestoengageinrenewableenergy

productionandoperation,energyefficiencymanagement,andenergyprocurementtoachievenationalenergysecurityandclimategoals.Thestrategyalsocommittedtosupportingandunlockingthevast

potentialofcommunityenergy,leadingtoasurgeinthenumberofcommunityrenewableenergyprojects.

Japan:RuralCooperativeModelsforEnergySupplyDiversification

CooperativeshavelongplayedakeyroleinJapan’sagriculturalandruraldevelopment,andtoday,thegrowthofrenewableenergyhasfurtherexpandedtheirrole.Afterthe2011Fukushimanucleardisaster,Japansignificantlyreduceditsrelianceonnuclearpowerandurgentlysoughttodiversifyitsenergy

supply.Supportedbygovernmentpolicies,especiallythe2011RenewableEnergyAct,cooperatives

gainedaccesstoFITs,financialincentives,andregulatoryframeworksdesignedtopromotelocal

renewableenergyprojects.The2013RuralRenewableEnergyLawemphasizesreturningprofits

tolocalcommunitiesandpreventingunplannedrenewableenergydevelopmentthatcouldharm

agriculturalproduction.Theselegislativeframeworkstogetherwithothertargetedpolicieshaveenabledcooperativestogeneratecommunity-focusedbenefits,boostrenewableenergygrowth,andpromote

agriculturaldevelopment,layingasupportivefoundationforcooperativestoundertakeenergyprojectsinruralJapan.

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OtherCountries:AMixofApproachesandMaturity

InsomeSouthAmericanandAsiancountries,theenergycooperativemodelcloselyresemblestheUSmodelofcooperativesfunctioningasutilitiestosupplyelectricitytoruralareas.Forexample,Argentina

has600cooperativesserving58%ofitsruralpopulation,withcooperativesowning80%ofrural

electrificationnetworks.9Boliviaishometotheworld’slargestruralelectriccooperative,10andabout50%ofruralhouseholdsinthePhilippinesand85%oftownshipsinBangladeshrelyonenergycooperatives.

Incontrast,11manyAsiancountries,suchasChinaandIndia,havelimitedenergycooperativemodels,andAustraliahasonlyaroundadozenenergycooperativesofficiallyregistered.12Similarly,thedevelopmentofenergycooperativesinAfricaisstillintheearlystages,withmanyrelyingoninternationalaid.

ValueChainofRuralEnergyCooperatives

Thevaluechainofenergycooperativesspansawiderangeofactivities,fromelectricityandheat

productiontosupply,distribution,andenergyservices(seeExhibitES3).Whereasmanycooperativesstillfocusonlocalrenewableenergygenerationandsupply,othersoperateacrossthefullvaluechain.

Globally,cooperativesdifferinassetownershipandenergysources.IntheUnitedStates,rural

electricitycooperativesmanage42%ofthenation’sdistributiongridandprimarilyserveruralareas,13

oftenmaintaininglong-termpowerpurchaseagreementsthatcreateanear-verticalintegrationwith

generationcooperatives.Incontrast,mostEuropeancooperativesownonlygenerationassets,althoughrecentEUregulationshaveexpandedcommunityrightstomanagelocaldistributionnetworks.Asfor

energysources,cooperativesinEuropeandJapanfocusonrenewables,whereasintheUnitedStates,thePhilippines,andBangladesh,fossilfuelsstilldominate.

ElectricitySupplyandServices

ExhibitES3MainEnergyActivityModesofRuralEnergyCooperatives

Transmissionand

DistributionNetworks

(ownedbylocaloperators

orcooperatives)

RegionalTransmissionNetwork

Household

Consumption

CooperativeCommunityCleanEnergyGeneration

HybridPowerSourcesCleanPowerSources

EnergyProsumer

PublicBuilding

PowerGeneration

HeatSupplyandServices

DistrictHeatingService

Cogeneration,combinedheatandpowerprojects/heatingprojectswithbiomassasthemainmaterial

DistributedHeatingService

Distributedheatingequipment(i.e.,groundsource,airsource,solarheatpump)

PublicBuilding

EnergyProsumer

Household

Consumption

Note:Prosumerreferstosomeonewhobothproducesandconsumesenergy.RMIGraphic.

TowardaSharedZero-CarbonEnergyFuture:AGlobalAnalysisofRuralEnergyCooperatives/10

BusinessModelsofRuralEnergyCooperatives:Financing,RevenueStreams,andEquitableBenefitSharing

Thefinancing,revenuesources,andprofitdistributionmethodsofruralenergycooperativesvarywidely,

shapedbytheirsocioeconomiccontexts,geographicalfeatures,policyframeworks,andstrategicgoals.Bydiversifyingtheirfinancingmethods,ruralenergycooperativeseffectivelyharnesslocalandexternalresources,enablingthemtoofferaffordableenergyservicestomembersandreinvestinthewelfareof

thebroadercommunity(seeExhibitES4).

Ruralenergycooperativesusevariousfinancingmethodstofundrenewableenergyprojects,cover

operationalcosts,andenhanceinfrastructureandassets.Keyfinancingchannelsincludecommercial

loansfromfinancialinstitutions,government-guaranteedlow-interestorinterest-freeloans,andequityorbondsales.Duringprojectdevelopment,cooperativesoftensecurepowerpurchaseagreementsto

ensurelong-termbuyers,whichstrengthenstheirpositionwhensecuringloans.Workingwithpublic

creditagencies,cooperativescansellequityorbondstocustomerstocreateafinancingstreamand

attractnewmembersthroughownershipandenergyservicesbenefits.Cooperativesmayalsorelyonmembershipfeesandcrowdfundingplatformstosecureup-frontfundingandallowmemberstoaccessenhancedenergyservices.Inaddition,governmentpoliciesplayavitalroleincooperativedevelopment,providingcrucialsupportsuchaspreferentialloans,taxincentives,andsubsidiesthathelpcover

feasibilitystudiesandsupportinvestmentsinfixedassets.Thesemeasuressignificantlylowerfinancialbarriersandpromotethedevelopmentofrenewableenergycooperatives.

TowardaSharedZero-CarbonEnergyFuture:AGlobalAnalysisofRuralEnergyCooperatives/11

Therevenuegenerationofruralenergycooperativesstemsprimarilyfromenergyproduction,supply,andrelatedservices.Cooperativescanalsogeneraterevenuefromgreenattributepremiumsfor

renewableenergyprojects.Cooperativesgeneratemodestprofitsbysellingenergy,includingelectricityandheating,directlytomembersorexternalmarkets,andbyofferingenergy-relatedservicessuchasefficiencyconsultingandretrofitting.Governmentsubsidiesforrenewableenergyprojects,oftenintheformofFITs,feed-inpremiums(FIPs),orcontractsfordifference(CfDs),alsocontributetorevenueandhelpguaranteethepricestabilityofenergy.Cooperativescanalsotraderenewableenergycertificates,carboncredits,andothercertificationstocapturethegreenpremium.Thesecertificatescanbesold

toenterprisesseekingtomeetrenewableenergymandatesorvoluntarysustainabilitygoals,furtherenhancingthecooperative’sfinancialviability.

Intermsofprofitdistribution,ruralenergycooperativesenjoyautonomyindecidinghowtoallocate

surplusearnings—typicallythroughvotingorboarddecisions—aftercoveringexpensesforproject

construction,operation,maintenance,andloanrepayments.Profitsaregenerallyallocatedinthree

ways:(1)cooperativespaydividendsorinteresttomembers,eitherthroughproportionalreturnsbasedoninitialinvestmentoratrateslowerthancommercialloans;(2)profitscouldbereinvestedinnewor

purchasedrenewableenergyprojects;and(3)cooperativesusuallyallocate1%to10%ofenergyrevenuetocommunitydevelopmentfunds,supportinglocalwelfareandgrowthinitiatives.

ExhibitES4FinancingandRevenueStreamsofRuralEnergyCooperatives

Cooperative

CommunityFund(Trust）

Welfareprojects

FixedRatio

Members

Potential

CrowdfundingPlatforms