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Can Europe’s community-owned renewables compete with Big Energy?

Local wind and solar cooperatives have been instrumental in fostering Europe’s renewable energy growth. Now, as multinational corporations play an ever-larger role in efforts to decarbonize Europe’s economy, the EU is looking to bolster these grassroots clean-energy initiatives.

Offshore wind farm in the Baltic Sea off Copenhagen, Denmark

Offshore wind farm in the Baltic Sea off Copenhagen, Denmark.

This article originally was published on Yale Environment 360.

In the old medieval market town of Heilbronn, perched on the Neckar River in southwestern Germany, the zeal of the city’s award-winning renewable energy cooperative is on display just about everywhere. In this city of 126,000, solar panels adorn the roofs of homes, kindergartens and schools, municipal buildings and factory halls. The co-op, founded by 46 anti-nuclear energy activists in 2010, today boasts 1,150 members who collectively own two wind turbines and 48 solar farms, large and small, that spill out across city limits into surrounding towns and villages. The combined output of the co-op and other collectively owned, clean energy sources supplies the electricity for about a third of Heilbronn’s households.

The Heilbronn initiative is part of a nationwide network of roughly 900 community energy co-ops that sell renewable energy to German households or businesses. Across northwestern Europe, experts estimate that more than 10,000 community energy associations exist, mostly in Germany, Denmark, Belgium, the Netherlands and Great Britain. Members invest their own money — usually supplemented by bank loans to the co-op — in solar generation, wind power, small hydroelectric plants, bioenergy and even combined heat and power plants.

Under the new European Green Deal, the European Union has become a champion of community energy, with an EU directive stipulating that all member countries enact laws that make community energy not only possible but also profitable. "Community energy is a way to open the clean energy transition happening across Europe to more players," says Dirk Vansintjan, president of the European Federation of Citizen Energy Cooperatives. "When renewable energy is generated where people live, revenue is kept in the locality rather than going to out-of-town utilities or foreign countries." The goal, he says, is to turn tens of millions of Europeans into "prosumers" — namely people who both produce and consume energy.

Community energy projects played a key role in launching Europe’s renewable energy movement more than three decades ago, and the European Commission estimates that by 2030 citizen-run energy cooperatives could own 17 percent of installed wind capacity in the European Union and 21 percent of installed solar capacity. By 2050, the commission estimates that half of Europe’s population could be producing energy through rooftop solar on homes and other methods, with 37 percent of that energy coming from energy cooperatives such as Heilbronn’s.

Community energy is a way to open the clean energy transition happening across Europe to more players.

Nevertheless, the EU’s ambitious goal of decarbonizing the continent’s economy by 2050 inevitably means that large-scale wind, solar and eventually green hydrogen projects — built by multi-national companies such as Ørsted, Vattenfall and Iberdrola — will play an increasingly important role in achieving carbon neutrality. These companies envision a different kind of clean energy transition: one more centralized, with large centers of generation — be they massive offshore wind parks or nuclear power plants — delivering energy to urban centers and industrial regions through high-voltage transmission lines.

While the renewable energy produced and distributed by this model is expected to outpace the contribution from community cooperatives, experts say centralized and decentralized renewable energy production can work in tandem. "We need both," says Berit Erlach of Energy Systems of the Future (ESYS), a German initiative of leading scientists. Only a smart mix of local and national renewable energy generation — from rooftop solar systems to offshore wind farms — will make the renewable energy supply climate-friendly, secure and cost-competitive by 2050, a recent ESYS study claims.

The trend toward bigness is being accelerated by legal and policy changes in countries such as Germany and Denmark. Because subsidizing renewable energy development has driven up the cost of electricity, Germany has done away with the feed-in-tariffs — price supports paid to smaller producers of renewable energy — that strongly boosted the grassroots energy movement. In addition, in 2017 Germany began holding auctions for development of large renewable energy projects, a move that favors big commercial players. (The auctions’ red tape alone overwhelms small, volunteer-run co-ops, say their representatives.) In Denmark, new laws have scaled back rules mandating citizen shareholding in wind parks.

As a result of these changes, fewer community renewable projects have gotten off the ground in the past several years. In Denmark, the two forces are colliding at Middelgrunden, where private sector companies may take over the groundbreaking, community-owned offshore wind park once its 20-year contract expires this year. City officials say the costs of renovating or replacing the wind park’s 20 turbines are simply too great for the co-op that brought it to life two decades ago as the world’s first community-owned offshore wind park. Located just two miles off Copenhagen, the wind farm is half-owned by the 10,000 investors of the Middelgrunden Wind Turbine Cooperative and half by the municipal utility.

To ensure that community energy continues to thrive, Europe’s Green New Deal has established a goal of "active consumer participation, individually or through citizen energy communities, in all markets, either by generating, consuming, sharing or selling electricity." To this end, the EU says that residents and community energy co-ops should have equal access to the same incentives, financial supports and advanced technologies as corporations. The Green New Deal also says that the EU and its member states should help clean energy co-ops develop innovative financing schemes, that procedures for bidding on wind and solar projects should be simplified for co-ops, and that local community benefits should be considered when awarding bids for renewables projects.

By 2050, the commission estimates that half of Europe’s population could be producing energy through rooftop solar on homes and other methods, with 37% of that energy coming from energy cooperatives such as Heilbronn’s.

Large energy companies and governments argue that Europe’s decarbonization is an epic undertaking that will necessitate constructing many giant offshore wind farms like those in operation in the North and Baltic seas. In Germany, mega-scale, high-voltage transmission lines are being constructed from the North Sea coast, where Europe’s biggest wind parks lie, to the south, where the country’s carmakers and other industrial giants consume vast amounts of energy.

The commercial heavyweights say they don’t have anything against smaller-scale energy projects, but that it is illusory to think that these players can supply industrial centers or cities with sufficient energy. "You’d need a wind park nearly the size of the state of Rhode Island to generate the energy to power cities as big as Munich or Berlin," says Gerald Kaendler of Amprion, a transmission system operator in Germany. "And when renewable sources create surpluses, which happens on particularly windy or sunny days, you need a serious transmission system to get that energy where it’s needed."

Experts note that large offshore wind farms can involve investments of hundreds of millions of dollars. "Even the largest utilities require investment partners to build an offshore wind farm," says Christoph Zipf, communications manager of WindEurope, a Brussels-based advocacy firm.

In contrast to highly centralized large energy systems, distributed citizen- and community-led renewable energy involves thousands, even millions, of individuals, local businesses, villages and communities involved in energy production. Renewable energy projects are connected to one another through inexpensive, low-voltage smart grids that mix and match supply to demand. At any given moment, consumer demand is met by a different composition of energy sources, depending on weather and other factors.

Proponents of local energy acknowledge that it can’t shoulder the brunt of the energy transition, even with ever-smarter energy management systems and now-affordable storage capacity. "But there are countries, such as Germany, or regions, for instance in India or Africa, where distributed private and community energy plays an important role,”" says R. Andreas Kraemer of the Ecologic Institute, a Berlin-based think tank.

In Germany, citizen energy stretches back to the 1980s and '90s when environmentally minded groups began striking out into renewable energy. Communal energy projects in Germany took off dramatically when the EU broke up the private-sector energy system monopoly in 1998, and the German government set up a price-support scheme that favored renewables in 2000. In the first decades of Germany’s Energiewende, or energy transition, grassroots energy projects and private individuals produced the bulk of clean energy, while the utilities held out, believing conventional energy would prevail, as it always had.

In Denmark, Europe’s other community energy powerhouse, community initiatives took off in the early 1980s. Danish communities invested in onshore wind turbines and district heating systems. By 2016, 67 percent of onshore wind energy in Denmark was generated by citizen-owned parks. This production, together with bioenergy and offshore wind generation, grew the country’s share of clean electricity to more than 50 percent of consumption by 2019.

But today the picture looks very different. In Denmark, recent legislation has reduced mandatory citizen shareholding in new wind farms. In Germany, as of 2017, individuals, farmers and collectively owned initiatives still accounted for around 40 percent of Germany’s installed clean energy capacity. Now, however, that number has dropped substantially as sprawling offshore wind farms in the North and Baltic seas have burst into the picture. And this expansion of ever-larger wind installations will increase: The EU forecasts that Europe’s offshore wind capacity will have to go up twenty-fivefold by 2050 in order for the continent’s economy to become carbon-neutral by that target date.

By 2016, 67% of onshore wind energy in Denmark was generated by citizen-owned parks.

Nevertheless, proponents of community renewables argue that they are integral to the goal of achieving carbon neutrality and should continue to receive state support. They point out that community renewables boost local economic activity through investment, jobs and tax revenue. One German study showed that a seven-turbine community wind park of 21 megawatts generated $71 million in regional income over a 20-year operating period, while the same-sized park in the hands of commercial developers produced only $8.6 million for the local economy. The difference lay in the profit, tax revenue and job creation that stayed in local hands.

And the non-profit enterprises can save consumers money, too. In Denmark, communal ownership of the district heating systems resulted in cost-efficient clean heat, a model widely considered a best practice in Europe, studies show.

Another key argument for community energy is that involving ordinary people in energy generation and distribution boosts local acceptance for renewables. Not-in-my-backyard protesters have slowed the expansion of new wind farms across Europe in recent years. But where the wind farms are "owned by local community stakeholders, such as farmers, landowners, individuals, [and] municipalities," they "often enjoy higher levels of trust than commercial developers, which are usually not embedded locally," concludes a 2020 study by the Cicero Center for International Climate Research in Norway.

In Heilbronn, the co-op’s membership continues to grow, says Sebastian Stauden, one of the Heilbronn project’s five paid staff. Each of the 1,150 co-op members is entitled to one vote on co-op decisions, regardless of number of shares. A single share costs $121, and every year, the Heilbronn members decide together on the size of the annual dividend; the remaining surplus is reinvested into more sustainable energy projects in and around the city. "Everyone shares the desire of facilitating a decentralized energy transition run by locals," says Stauden.

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