Energy Transition

Is this a new golden-age for energy communities?

Energy communities are more powerful than simply waiting for participation and consultations

Promoting active structures like energy communities is more powerful than simply waiting for participation and consultations based on private services and products. Image: REUTERS/David Gray

Xavier Blot
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Energy Transition

More than two years have passed since the COP21 climate change conference in Paris.

Two years of opinions, investments, initiatives, and lots of ups and downs. Two years of actions for all kinds of stakeholders, from big corporations to local farmers. Four things have come to the fore in this time: technologies enabling the transformation to a sustainable society, policy frames promoting such solutions, financial capacities helping their deployment, and social approaches mandatory in a decentralizing world.

Why we need energy communities?

In two years, technological evolution has benefited from tremendous improvements, from storage solutions to new IT tools, such as blockchain. The most impressive step has been achieved with the access of certain technologies, spreading standards and giving access to a new class of proven products. The sector experienced a hardly imaginable decrease in prices. For instance – due to massive investments – in the photovoltaic industry:

In addition, in two years, the political momentum has swung irreversibly towards the adoption of renewable energies. Climate issues are now commonly acknowledged, and governments are taking the lead to fight them: China is by far the most serious player.

While US President Donald Trump has now shown the same level of commitment, President Barack Obama’s mandate left a strong legacy, in demonstrating that the interests of capital and the planet can be aligned, while reducing emissions can cut costs for citizens and deliver returns for shareholders. When Google, Facebook and Apple decided to commit to a 100% renewable energy target, they understood very well the potential for greater income and security to deliver their products.

In two years, the EU has also decided to launch some serious initiatives, especially since the presentation of the “winter package”, a set of propositions and rules for a consumer-centric energy market. This is a forerunner of a new energy organization: less direct financial incentives to stimulate the market (such as feed-in tariffs), but more transparency and liberty for the consumers to make a choice. The goal is to empower them but also to protect the most vulnerable. In France, you now have the right to self-consume the PV energy you produce and trade the excess energy into the grid. But, far more interestingly, you can also collectively self-consume renewable energies. This means that, under the same legal entity, consumers and producers can trade their energy, allocate electricity supply and act on their energy bills.

In a nutshell, in two years, we have paved the way for a profound transformation of the energy sector. It has never been so easy to access the right technology. But technique is not everything: new kinds of legislation need to be tested, and serious pain points remain.

An inconvenient truth, but are energy communities an answer?

If technological and political pillars in the energy sector have moved very fast in the last couple of years, the financial and economic aspects need to be solidified. We do not know how to invest and accurately predict the risk and the potential of renewable energy. A paper in the journal Nature recently revealed that the potential of solar energy has always been underestimated, causing structural limitations in its adoption. In other words, the deployment of a photovoltaic system has consistently outperformed the predictions of theoretical models by 16% to 30%. This is not good news, because it suggests stakeholders can’t really realize, and thus plan for, the full potential of the technology. Consequently, they fail to properly prepare the grid for this evolution.

In parallel, private investment in the sector remains low. In 2016, an MIT study warned us: “Venture capital firms spent over $25 billion funding clean energy technology (cleantech) startups from 2006 to 2011, and lost over half their money; as a result, funding has dried up in the cleantech sector ... By 2013 funding had dropped to $2 billion and has remained roughly constant since.” It’s significant to see that, even for professional investors, the field is tough. This could be because traditional investment tools don’t work, or because they are too short-term.

Both cases are two sides of the same coin. First we lack the relevant framework to understand the economic and sociological impacts of different policies. Second, we need to integrate a more diverse set of actors to provide long-term financing mechanisms. Both problems can be approached by truly integrating social bodies. The more renewable, the more decentralized, the more social. The lack of impact from financial organizations can be relieved through the rise of new collectives from civil society and local public organizations. Likewise, the need for insights can be supported by grassroots social organizations.

We need to profoundly re-evaluate our social structures to welcome future technological change. The aim is to foster communities in action: social groups sharing values, using common means to leverage new forces, benefits and risks, and leading to general-purpose innovation. This must be done through dedicated legal entities, energy cooperatives or energy communities, to make members accountable to each other, and public and private institutions accountable to citizens’ interests in a democratic way. Promoting active structures like these is more powerful than simply waiting for participation and consultations based on private services and products. Cooperatives are crucial to initiating the re-appropriation of our collective future. They are the missing piece of the future of energy, able to catalyze the best solutions and engage us in sustainable, long-term transformation.

Energy communities

The cooperative system is a legal structure deeply rooted in our modern industrial society and strongly linked to social issues. It was originally created to give more power to farmers and workers, in order to negotiate better prices and working conditions. It first appeared during the Industrial Revolution, as part of the labour movement. It was designed to cope with hard working conditions and help individuals to control businesses for themselves. Similarly, farmers’ co-ops were set up as a legal entities, in which farmers pooled their resources. They were able to supply their members with inputs for production, and undertake outputs such as transportation and distribution.

Energy communities are the products of this legacy. They were mandatory in the rural electrification of the US in the 1930s. In the absence of a strong federal government, local energy co-ops helped the development of the electrical infrastructure as we know it. Even without private investors, the 1936 Rural Electrification Act provided low-interest loans and technical support to empower local populations and update the infrastructure of the nation.

Today more than ever, cooperatives – mutant entities that can adapt to pretty much any context – are still relevant. By their very nature, they turn members into decision-making citizens able to unlock the full potential of a decentralized network. They develop projects through local partnerships and secure investments via local share offers to members, as well as matching debt finance, institutional investment and/or co-investment. This capital can be used to build green installations that would otherwise be out of reach for individuals, and long-term it becomes a source of hundreds of millions of euros of investment in the energy sector.

The business plan is designed to secure income via the sales of exported electricity. Then the goal is to operate and maintain its own assets in order to re-invest surplus profits in an energy community fund. The structure is flexible and has the huge advantage of being compatible with current utility companies, private investors, city councils, etc. while establishing transparent governance adapted to local situations. It’s a platform that could assist the collaboration between four main groups:

  • Energy communities wanting to lower the cost of energy and turn to 100% renewables;
  • The public sector, which supports the rise of this social network with low-interest and long-term financing in return of new energy infrastructures;
  • Start-ups proposing state-of-art technologies at lower prices, in exchange for experimental playgrounds and access to data;
  • Distribution system operators, who give the new legal entities relevant access to the grid, helping them pilot smart installations and aggregate energy capacity and demand for the network.

The cooperative system is a universal framework to foster civil engagement, leverage citizen capital, initiate fruitful innovation and ultimately accelerate the transition to renewable energies. More generally, the development of energy communities is the cornerstone of the future of energy. It’s a social contract we need to sign right now if we want a sustainable society.

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