Citizens’ empowerment and participation are seen as strategic to meeting the EU’s energy targets [1]. In line with this, the new EU Renewable Energy Directive and Electricity Market Directive include definitions for “renewable energy communities” and “citizen energy communities” respectively and are expected to promote the implementation of renewable energy projects with open and participatory forms of citizen ownership in the EU Member States. Citizen ownership is already common in some EU countries, but quite uncommon in some others [2]. Furthermore, citizen ownership is very diverse. Therefore, lack of awareness about the multiple citizen ownership models that already exist and their particular qualities is normal and very understandable. In this blog post, I will introduce the diversity of citizen ownership and the importance of understanding the key characteristics of the different models. This is expected to be relevant for policy-makers, practitioners and researchers.
By ESR Leire Gorroño-Albizu– email: lga@plan.aau.dk
Why is citizen ownership so diverse?
Hicks & Ison [3] argue that “context and motivations [..] form the foundation of a project and influence decisions made in other areas, leading to a range of outcomes”. Those decisions include choices about e.g. activity, technology, scale of project, governance structure, legal form, financial models, distribution of benefits, level of engagement of local community, etc. [3–7]. Moreover, van Veelen’s analysis about Scottish local ownership of energy [4] shows the ability of citizen ownership to adapt to changes in contextual factors and address new motivations. As result of the multiple and changing contextual factors and motivations, citizen ownership is very diverse.
Why is it relevant to understand the key differences between the diverse citizen
ownership models?
Citizen ownership of energy (often referred to as community energy) has been associated with multiple qualities that may support energy transitions (e.g. local acceptance of new energy infrastructure) and address some social challenges (e.g. regeneration of the local economy and affordable energy prices for consumers) [8–13]. Therefore, citizen ownership has attracted remarkable attention internationally and literature on the phenomenon is rapidly increasing. However, not all citizen ownership models provide all the benefits usually associated to community energy. Consequently, overlooking the key differences may lead to ineffective policies or project strategies.
What citizen ownership models exist and what are their key characteristics?
The citizen ownership models that are introduced in the following are based on an analysis of the Danish wind turbines and district heating companies’ ownership for the period 1976-2016. The analysis discerns three distinctive key characteristics for the citizen ownership models presented in Figure 1: (1) local − distant, (2) inclusive − exclusive and (3) common good – limited private profit – unlimited private profit.
Figure 1: Danish citizen ownership categories and their connection with Danish citizen ownership models. The ownership of energy infrastructure and utility companies may consist of several citizen ownership models. Consequently, the ownership may be formed by a combination of different citizen ownership categories. Note that prosumers traditionally have been individual owners, but opportunities for collective prosumers are emerging and will create changes to this ownership model [14]. When reading the diagram, note that the categories are represented in boxes and that there are no axes with units showing a higher or lower degree within the category.
- Distant ownership and local ownership allude to whether the owner (who may be a natural person or a company) resides or develops his/her main economic activity outside or inside the local area where the energy infrastructure has been built. In the Danish context, local refers to the municipality. This is a merely geographical distinction. Note that distant ownership and local ownership are not incompatible as shown by the three ownership models that lay in between these two categories in Figure 1.
- Inclusive ownership is that in which all citizens within a predetermined geographical area have an equal opportunity to benefit from the energy project; this may be the result of open ownership (either as shareholder or as consumer with direct or delegated decision power) or spread distribution of profits through financing of development projects (e.g. through local foundations). Exclusive ownership is that in which the project promoter(s) decide(s) to keep the possibility to benefit within a selected group of people, excluding the rest of the community or society from the ownership. The benefits mentioned here omit environmental protection and all derived benefits as these are inherent to the technology and independent of ownership.
- Unlimited private profits are possible in investments where non-profit regulation does not apply (e.g. in electricity generation technology) and there is no regulative restriction in the size of technology (unlike e.g. in household wind turbines). Limited private profits are possible in investments where non-profit regulation applies (e.g. district heating companies or distribution system operators) or where consumers are the owners (e.g. consumer-owned utilities). In these cases, with appropriate top-down regulation and bottom-up governance, consumers will earn profit in the form of lower energy bills [11,15]. The private profit of consumers is considered limited because it may only be reduced from what is initially paid to zero. Limited private profits are also possible in companies that voluntarily set a cap on profits to be gained by shareholders or where there is regulatory restriction on the size of technology. An investment is considered for common good when benefits are reinvested in development projects.
Inclusiveness is a characteristic that has commonly been associated with community energy and is a core value of cooperatives [16]. However, the idea is often implicit and not explicit in the discussion about ownership, which the authors of [17] see as problematic. Collective is not a synonym of inclusive −more than 60% of the wind companies with a collective citizen ownership in Denmark have five members or less [18]. The differentiation has relevant policy implications, i.e. when pursuing local acceptance or local development [8,12]. In this regard, it might be more relevant to ask what percentage of the local residents are involved in the ownership of a given project, rather than what percentage is owned by local residents; in other words, to focus on inclusiveness rather than on (collective) localism.
Special attention should be payed to some considerations about inclusiveness. First, distant inclusive ownership may exclude local communities if they are not engaged beyond what is required by law. An example is the case of distant municipal companies who invest outside their municipality. Excluding the local community may have negative implications for e.g. local acceptance. Second, not all citizens have the resources to invest in shares, which automatically excludes a part of society. Therefore, the open ownership of wind cooperatives is not completely inclusive. All in all, consumer cooperatives, local municipal companies and foundations are seen as the most inclusive citizen ownership models. To ensure the inclusivity of these models, boards ought to be formed carefully to guarantee proper attention to the interests of consumers and the local community.
To conclude, the citizen ownership categories presented in this post provide a new vocabulary to refer to citizen ownership and highlight distinctive key characteristics to be considered when analysing benefits of ownership or developing ownership specific policies.
The above text (with minor modifications) and the figure are extracts from the scientific article “The past, present and uncertain future of community energy in Denmark: Critically reviewing and conceptualising citizen ownership” produced by L. Gorroño-Albizu, K. Sperling and S. Djørup and published by the journal Energy Research & Social Science on 2019, volume 57. DOI: https://doi.org/10.1016/j.erss.2019.101231. The article is published under the Creative Commons Attribution 4.0 International License (CC BY)
If you have any questions of queries, please direct them to the author Leire Gorroño-Albizu or the ENSYSTRA Project Manager Dirk Kuiken or Deborah Groeneweg.
If you are interested in the specifics of the 15 research projects, you can find summaries and video explanations from the researchers here.
Our project is supported by 23 industry partner institutions.
More about the Blogger of the month