Citizens' involvement in the energy transition
The concept of community renewable energy (community power, energy democracyi, prosumer and energy citizenshipii) revolves around the idea of community ownership, participation and shared interest in renewable energy initiatives, although there is no widely agreed definition.1 In community energy initiatives, citizens, social entrepreneurs and/or community organisations participate directly in the energy transition by investing in, producing, selling and distributing renewable energy or delivering energy services.
Community energy may describe a geographic community or a community of interest, and may be in the form of shared renewable energy projects or small locally controlled grid-connected systems.2
Common characteristics include:
Citizens running projects through communities, such as co-operatives or development trusts;
A co-operative, democratic or non-corporate structure in which individuals participate actively in decision making;
Tangible local benefits to people living or working close to projects; and
Profits returning to the community or being re-invested in other community
energy schemes. 3
Community energy initiatives have existed since the middle of the 19th century. Such projects enable communities to share their resources and can be used to power small-scale industrial activities. It was not until the late 1970s, however, that community energy initiatives began to become more associated with modern renewables, beginning in Denmark with the Danish Wind Turbine Owners’ Association in 1978.
Now many communities are turning to local renewable energy production. Most projects are focused on electricity generation, although examples also exist for heating and transport. Project feasibility and the choice of technology depend on the regulatory framework; the potential to export the power, heat or fuel produced (determined by regulations and the available infrastructure); and possible remuneration.4 A wide range of services may be delivered, including the provision of infrastructure, energy distribution and grid management, renewable energy generation and energy provision to end-users.
The extent of public participation in community renewable energy projects varies. Generally, the form that the initiative takes is determined by local needs and resources and the policy and regulatory environment.
Consolidated data on community initiatives are very limited, particularly in the developing world, as information is decentralised and often is not collected at the local level. Nonetheless, community energy networks to share data and strategies are slowly being established at the national and regional levels in some countries.
i Energy democracy goes beyond national security of the energy supply to bringing energy resources and infrastructure under public or community ownership or control, from Gegenstrom 2012, www.gegenstromberlin.net, cited in http://rosaluxeuropa.info/userfiles/file/Energy-democracy-in-Europe.pdf.
ii Energy citizenship refers to the idea that citizens and communities can contribute more broadly to energy transitions when a wider consciousness of energy issues has been initiated. This encompasses the prosumer and community energy, but also citizens beginning to own or operate distribution grids, as well as supply and energy service companies, from ClientEarth, “Model Legal Frameworks for citizen-owned renewable energy,” http://www.clientearth.org/reports/community-power-report-250614.pdf.
Status and Trends
Since 2008, there has been a marked rise in initiatives focused on community renewable energy,
especially in Europe.5 In
industrialised countries, particularly over the past decade, community renewable energy initiatives have tended
to rely on government incentive schemes and market mechanisms, whereas in the developing world, initiatives
often rely on additional government and NGO support or on partnerships with private enterprises.6 To some degree, community energy projects across
the world have tended to develop in more affluent communities, often where there is greater energy literacy and
interest in environmental issues.7
The role and potential of community renewable energy projects in larger urban areas is, as yet,
historically have relied on wind power, small-scale hydropower and micro-hydro (typically
5-100 kW), biogas and solar PV technologies.
In Europe, more than 2,800 energy co-operatives were in operation as of 2015.9 In Germany, the number of renewable energy co-operatives increased from 67 to 772 between 2008 and 2014.10 Although almost half (46%) of the installed renewable energy capacity in Germany is owned by private individuals and farmers, the growth of renewable energy co-operatives has decelerated, due largely to recent changes in energy policy.11 The Netherlands has experienced similar growth, with the number of energy co-operatives increasing from 19 in 2008 to 500 in 2015.12 In Scotland, an estimated 508 MW of community and locally owned capacity began operation in 2015, already exceeding the government’s 2020 target of 500 MW.
In Australia, 45 community energy projects had been deployed by 2015, and 70 more were in planning phases.13 However, projects in Australia have faced difficulties in the form of investment regulations (limiting small-scale projects to no more than 20 investors per project within a 12-month period) and financial constraints.14
Community renewable energy projects are beginning to play an important role in many parts of the United States and Canada, where individual states and provinces are free to set their own policies governing co-operatives and local energy policy.15 Several US states – including Colorado, Massachusetts, Minnesota and Vermont – and the Canadian provinces of British Columbia and Ontario have supported community renewable energy projects through tax credits, net metering and other policy measures.16
Some countries in Asia have a history of community energy projects, particularly in micro-hydro generation. For example, in India, community energy projects (largely micro-hydro) have existed since the 1950s. In Nepal, roughly 15% of electricity is produced by community-owned micro-hydro installations.17
In Latin America, renewable energy co-operatives are playing an important role in the electrification of rural areas.18 Costa Rica, with its ambitious goal of becoming carbon-neutral in 2021, is home to four energy co-operatives with over 180,000 members, controlling almost 15% of the energy market.19 In Chile, new co-operative initiatives are emerging out of a period of intensive opposition to proposed large-scale coal-fired and hydroelectric generation. Recent legislative changes are allowing the entry of small-scale generators to the electricity market for the first time.20
In Africa, existing community energy projects have been initiated largely by international NGOs, governments, and educational and religious institutions, such as the SharedSolar initiative developed by Columbia University. In poor, rural parts of Africa, formal recognition such as bank accounts or official holdings are rare for individuals and small businesses. Without such recognition, initiating community energy projects is difficult.21 Nonetheless, there are some successful examples of more localised initiatives, for example in East Africa, where community energy projects have driven energy access efforts in areas that lack a centralised electricity grid.22 (→ See Sidebar 5.)
Organisational structures of community energy initiatives may be in the form of partnerships, co-operatives, community trusts and foundations, limited liability companies, non-profit customer-owned enterprises and housing associations.23 The choice of structure often is determined by the interest or goal of the particular community as well as the regulatory framework. There is a general lack of analyses about organisational structures of community energy, especially in developing countries.
Partnerships generally are governed by a management board, with the ownership rights linked to the financial stake of each partner. In Germany, partnerships with a private limited company are a commonly used legal entity for community renewable energy ownership. In Denmark, partnerships also are referred to as co-operatives, because of their role as a typical form of “association”, and come with different liabilities and tax implications.
Co-operatives are democratic structures that follow a set of internationally agreed principles and make decisions on a “one-member-one-vote” basis; day-to-day operation is governed by an elected board. Renewable energy co-operatives exist in Europe, North America, Africa and parts of Asia and Latin America.24 Although the structure varies from one country to another, co-operatives tend to be the most common structure for community renewable energy initiatives.25 In the developing world, co-operatives historically have played a role in other sectors as well, such as in the agricultural sector.
Community trusts and foundations share benefits from community renewable energy projects with citizens that do not have enough money to invest, ensuring that returns on investments are used for specific local or community purposes. In the United Kingdom, “Development Trusts” may take a number of different legal forms: a charity, a company limited by guarantee, a community interest company (CIC) or an industrial and provident society (IPS). In Scotland, Development Trusts have become a popular form of community ownership of wind projects.26 In Denmark, the community foundation model has been used to create a community pot of money where generous profits from renewable energy production can go towards funding local development.27
Public and private limited liability companies (LLCs) are based on a legal framework that limits the liability of investors, protecting their private assets from losses. LLCs are becoming increasingly common instruments for implementing community energy projects, particularly in Europe and North America.28 One example is the University Park Community Solar LLC, formed by residents in the US state of Maryland to reduce their reliance on local utilities. Their efforts were facilitated by the state’s net metering policy and tradable renewable energy certificates, which created revenue-generation opportunities for the local community.29
Non-profit, customer-owned enterprises are similar to co-operatives in structure but add particular rules: for example, ownership might require grid connection, or votes may be capped to limit the power of individuals who own multiple properties. This type of structure is ideal for community power projects that rely on grid networks that are small or independent.30 It is particularly popular in Denmark's district heating sector.31
Housing associations are private, non-profit organisations that can finance community renewable energy projects by adjusting tenant rents. They are highly regulated in many countries and can form a number of different legal structures. In the United Kingdom, for example, housing associations may be in the form of an IPS, a co-operative society or a company limited by guarantee. In Denmark, tenants living in the social housing estate are members of a housing association and are in charge of managing the estate. Usually such community energy projects succeed only if there is a high degree of acceptance among local tenants.
Local governments also are important actors in community renewable energy. Under municipalisation (as it is called in the United States), or Stadtwerke (Germany), local governments – often in collaboration with community co-operatives – manage and operate local power utilities to provide a not-for-profit electricity service. In Germany, local governments own and operate 1,428 utility companies. Similar efforts are being undertaken in South Asia by panchayats (rural local governments). For example, the Indian village of Odanthurai has been investing in renewables since 2005. It has installed 65 solar street lights, a biomass gasifier to pump drinking water and a 350 kW wind turbine, creating a power surplus that allows the village to sell excess power back to the state electricity board.32
Drivers and Benefits
There are multiple reasons for the upward trend of renewable energy-based community initiatives. Drivers include potential economic benefits, increased control over energy generation, and social and environmental benefits. In most cases, the rationale for a given project involves a combination of drivers.
The cost of renewable energy technologies (especially solar PV and wind power) has fallen to such a degree that implementation has become economically viable in many locations. For some community groups, the potential for revenue generation is a key reason to become involved in a renewable energy project.
This revenue can be spent on other projects within a community, helping to make it more resilient and its future more sustainable. Renewable energy projects also can provide a second revenue stream for local farmers, offering them sustainable and profitable investment options. As seen with community solar projects in the United States and with onshore wind in Denmark, community ownership has been able to protect consumers from volatile energy prices, while guaranteeing a long-term return.33
Another driver is the growing interest in citizen control over energy production, which enables communities to choose the technologies and resources used, and to keep investments local.34 In an increasing number of communities, people have become dissatisfied with the inflexibility of the traditional centralised model of energy production, which provides them with little-to-no influence over the sustainability of their energy supply and generally does not reinvest profits locally.35 For some communities, sending a political message is a key motivation.36
Environmental concerns – ranging from local air pollution and health impacts to global climate change – often are important drivers for community energy initiatives. Community projects can be a successful means for addressing and raising awareness about environmental issues, as these projects are at a scale where people can engage, and the projects can be appropriately adapted to the local context.37 Ownership in community energy projects has been shown to shift mindsets from energy consumption to the balance between consumption and production. Local ownership builds a constituency for distributed renewable energy in a way that buying renewable-derived electricity as a commodity may not.38
Other social benefits – including improved energy access, security and reliability of supply, a strengthened sense of community, and local job creation and related capacity building – also drive community renewable energy projects.39 Energy (power or heat) that a community produces and uses locally is not subject to the same level of transmission and distribution losses that occur with more centralised systems. In addition, in some remote, off-grid areas, the presence of community-owned energy access initiatives has led to a leapfrogging to renewables.40
Enabling Environment and Outlook
The main challenges and barriers for community energy initiatives worldwide include: uncertainty and risk caused by changes or fluctuations in regulations, support systems and available financing; continued government support of existing energy players (including fossil fuels); a lack of local skills, knowledge, confidence and engagement of local populations; and local opposition.41 Community energy projects in Europe, in particular, have been inhibited by legal and administrative bottlenecks, rather than by financial barriers.42
Many of these risks have a greater impact on local community efforts than on large corporations that can draw from a larger network and spread risk across numerous projects and regions.43 In countries with strong, centralised monopolies, the energy market may not be equipped for, or open to, small bottom-up initiatives. Even in countries with state support for community energy initiatives, it can be an enormous challenge for local communities to access the funding (either through grants, loans or the sale of shares), necessary skills, time and other resources to organise and construct a project. For these reasons, community projects often are slow to come to fruition or may even fail during the development process.44
An enabling environment for community energy involves stable and long-term political support from governments at the local, regional, national and even supra-national (e.g., EU) levels, as well as dependable provision of credit and capacity-building frameworks.45 The policy framework plays a crucial role in fostering community renewable energy projects, even more so than overcoming technical barriers, and regions that have supporting policies have seen a proliferation of community energy initiatives.46
Several countries (mostly within Europe) and local governments (e.g., US states) have enacted policies that have either directly or indirectly supported community energy. Denmark and Scotland have specific policy frameworks for local participation. Project developers in Denmark are legally required (with some exceptions) to offer 20% ownership of schemes to local communities through the country’s Promotion of Renewable Energy Act.47 The Scottish Government set a target of 500 MW by 2020 for community energy, implemented financial support mechanisms and provided clear guidance on Good Practice Principles for Shared Ownership of Onshore Renewable Energy Developments.48
Stable feed-in tariff schemes (e.g., in Germany) have enabled and encouraged investments from communities and individual citizens, supporting the emergence of a variety of business models based on community energy. Important policy elements have included the purchase obligation and the guaranteed price for the electricity produced. Other policy measures – such as tax credits, net metering or small-scale incentive schemes – have helped to support community energy initiatives in the United States, Latin America and Asia.
The movement for 100% renewable energy among local governments also has enabled community energy projects. City governments such as Copenhagen, Frankfurt, San Francisco and Vancouver, and regional governments such as Fukushima prefecture and Lower Austria, have developed locally appropriate models for community energy, which support the goals to achieve a full transition to renewable energy.49
Micro-credit also has been used as a model for initiating community energy projects (particularly in Latin America, Africa and South Asia), while at the same time addressing poverty by increasing energy access.
Because many projects are led by volunteers or community members that have limited capabilities compared with commercial developers, the success of community energy often relies on the long-term commitment and perseverance of key individuals. Capacity-building efforts often play an important role in community energy initiatives. The Belgian co-operative Ecopower uses some of its profits to provide the local municipality with an energy expert on staff, building capacity from the bottom up.50 New types of energy co-operatives are emerging – such as Sharenergy (UK), Energy4All (UK) and Bürgerwerke (Germany) – that work with communities, helping to set up new energy co-operatives, building capacity of community energy groups and offering administrative support.51
Although the number of community energy projects is increasing worldwide, driven by an ever-diversifying set of possible models, challenges persist. A coherent and comprehensive policy framework that integrates community energy across governance levels and sectors, as well as building capacity and expertise, is needed to realise the full potential of community renewable energy.52