The New Civic Energy Sector

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Regina Baker
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1 School of Earth and Environment FACULTY OF ENVIRONMENT The New Civic Energy Sector Municipal and civil society futures in the energy sector Stephen Hall, University of Leeds: Timothy J Foxon, University of Leeds: t.j.foxon@leeds.ac.uk Ronan Bolton, University of Edinburgh: Ronan.Bolton@ed.ac.uk

2 Key messages 1. The UK relies on a centralised internationalised model to deliver energy transitions but more diverse models are possible. 2. Municipal, citizen and community business models have compatible values and can be thought of as a civic energy sector. 3. Fostering a civic energy sector can increase the capital available for energy system transitions.

3 Approach Primary data drawn from 28 in depth interviews with 34 individuals from across the energy value chain in the UK and Germany. The sample comprised: 6 utility executives 9 energy finance providers (from hedge funds and pensions funds to citizen and co-operative finance) 6 project developers 5 institutional investment professionals 2 policy professionals 2 energy journalists 2 energy lobbyists and 2 academics

4 Context UK Municipal and civic groups owned town gas and electricity networks s Centralisation and nationalisation s-2010s Privatisation and marketization s- State price intervention and market stabilisation Germany Municipal and civic groups owned town gas and electricity networks s Partition, Reconstruction and municipal control s-2010s Tentative marketization and diversification s- Re-communalisation and competing diversity

5 Centralisation and diversity - Generation UK 32 Major Power Producers 85% assets under Big Ten Ownership Ownership concentrated into large utility, industrial or corporate sites Non state non corporate renewable energy 0.3% of total Germany 707 Listed power producing companies 33% capacity owned by German Big Four 6% capacity municipally owned 33% <10MW renewables 28% under diverse ownership

6 Ownership German Renewables, Source: REA 2013

7 We re really democratising the energy system by allowing everyone in Germany the opportunity, or giving everyone the opportunity to participate in the system. And that s something that has put the Energiewende at the heart of political priorities. (Energy Journalist, 2014) So you can feel this entrepreneurship and this regional community thing in this kind of business. It is very impressive that there is millions and millions in investments in the region from the money of the people into regional projects using regional craftsmen etc. I think this is the key story of energy co-operatives in Germany. It s more about regional development. (German Co-operative Banking Group Executive, 2014)

8 Centralisation and diversity - Distribution Germany Hundreds of grid concessions. Rolling contracts for concession operators Municipal, co-operative, private and community ownership structures

9 Re-municipalisation, Recommunalisation..The clear goal is to accelerate the energy transition and the ways to operate the grid in terms of supporting the change to renewable energies [ ] another motivation is this empowerment idea yes, this is something I have observed in many citizen driven energy co-ops, the do it yourself philosophy. We can do it on our own. (Source: Co-operative energy developer, 2014) Interviewer: what is the effect of the company being municipally owned as opposed to owned by private shareholders? The main effect is we are not talking every quarter every year about results and profits. The communes [municipalities] are long term oriented, because they are very much interested in a very good and safe reliant infrastructure. (Stadtwerke executive, 2014)

10 Centralisation and diversity - Supply UK Big Six suppliers own circa 95% of domestic supply and 80% of commercial supply 24 companies in total offer electricity and/or gas supply to households and 30 to commercial consumers Co-operative supplier has minor market share Germany Big Four 44% market share Over 1000 active supply companies. 850 Of which are municipal utilities with 31-45% market share co-operative utilities German households average a choice of 102 electricity suppliers

11 Centralisation and Diversity - Finance UK Centralised banking system 50:50 split between utility and project finance Move to access international capital, pension, hedge, insurance funds Policy designed to favour large scale renewables Leaves sub 20m finance gap Germany Diverse local banking system Diverse renewable energy finance Promotional lending from KfW All scales of finance available Co-operative and municipal customers explicitly supported

12 Note on Finance Risk and returns either accrue to: Shareholders of public companies Project financiers (banks, institutional investors, hedge funds etc) Equity investors of non public companies The Nation State The Local State Civil society or citizen investors

14 The difference between a savings bank and other lenders is that the savings bank will not withdraw [ ] it is anchored within that local area and also bound to only operate in that local area, will have to live off the profits that it can make in that local area. [ ] So each and every savings bank can adapt its actual business to the condition it finds in the local area; and that is very important. That is this decentralised model. (German Savings Bank Group Employee, 2014) the local co-operative banks, they are rooted or backed in the regions [ ] In Germany we have a little bit less than 1100 Volksbank and Raiffeisen banks [ ] we don t want to have such big units that we are not near enough to the customers and therefore we are still quite a lot of Volksbank and Raiffeisenbank so that they are anchored in the regions on a local level. (German Co-operative Bank Group Employee, 2014)

17 Questions 1. The UK relies on a centralised internationalised model to deliver energy transitions but more diverse models are possible. 2. Municipal, citizen and community business models have compatible values and can be thought of as a civic energy sector. 3. Fostering a civic energy sector can increase the capital available for energy system transitions. Stephen Hall Research Fellow Tel: +44(0) s.hall@leeds.ac.uk

The new civic energy sector: civil society institutions and energy infrastructure transitions in Germany and the UK

The new civic energy sector: civil society institutions and energy infrastructure transitions in Germany and the UK Stephen Hall 1, Timothy J Foxon 1,2, Ronan Bolton 3 1 Sustainability Research Institute,