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Local Development through Community-Led Renewable Energy

Many people who consider themselves supporters of renewables still doubt the feasibility of 100 percent in the near future. In times of economic crisis and budget cuts in most parliaments, people are mainly concerned about jobs and price increases in their daily lives. But the evidence shows that investments in renewable energy actually tackle these issues. The deployment of renewable energies results in local development and the energy transition is indeed the best response strategy to many of today's challenges.

Converting our energy system is about more than replacing fossil fuel with sun and wind as new energy sources. Our current fossil fuel-based energy system is characterized by complex centralized infrastructures where a) the fuel is transported to the plant and b) energy production and distribution are typically owned by the same people. The supply chain is vertical and the benefits are shared among only a few stakeholders. By nature, renewable energy technology is typically more decentralized, has a horizontal supply chain and requires a completely different infrastructure and market. New ownership models are needed, as different stakeholders are directly involved in this transformation. A true energy transition must ensure the participation of all stakeholders - because history has proven that people-centered solutions are the quickest and most efficient way to change society.

What Makes Success?

Looking at countries like Denmark, Germany and Austria that are successfully moving towards 100 percent renewable energy, we see that high citizen participation and regional value creation from decentralized renewable energy production are key success factors.

In Germany, renewable energy deployment has already resulted in more than 380,000 jobs. Especially in 2008 - the year of the global economic crisis - the sector proved its importance for growth and employment with an increase of more than 10 percent. By reducing costs for energy imports by  €6 billion in 2011, renewables enabled politicians to spend their limited resources on local development. A study from the German Renewable Energy Agency calculates that German municipalities can expect at least €1.2 billion per year in tax revenue from the use of renewable energies by 2020. The more job-intensive a system technology or a value creation chain is, the more tax revenue municipalities can expect from their share of income tax.

The successful development of renewable energies has been a decentralized phenomenon in Germany. In almost every municipality in the country, a wide variety of stakeholders has brought thousands of renewable energy systems into operation in recent years. Currently, over 80,000 citizens hold shares in collectively run systems for the generation of regenerative electricity and heat. Over 500 of the energy co-operatives founded in recent years have already invested a total of around €800 million in renewable energy sources.

Across the country there are over 100 regions that have implemented - and even, in some cases, already achieved - a 100 percent renewable energy (RE) target. These so-called 100 RE regions encompass about a quarter of the country's population. Municipalities have played an important part in the development of renewable energies in Germany and will continue to do so in future. They have far-reaching instruments of control with regard to authorization and installation. They partially fund the installation of renewable energy systems and may even be involved in their operation as lessors through their departments of public works. Increasingly, they are adopting their own renewable energy development goals and trying to attract companies active in the industry to invest in them.

One may wonder how this is linked to the problem of empty coffers. The fact is that municipalities profit from positive regional economic development generated by the use of renewable energies by saving fossil fuel costs, creating jobs and obtaining tax and lease revenues. Germany has undoubtedly raised the bar in terms of strategizing energy sourcing, and setting the pace for renewable energy policies. Feed-in tariffs (FiTs) brought the country on this track, acting as a connecting policy linking people, policy, energy and economy.

Committing to 100 Percent: Denmark

However, Denmark is the only European country that has committed itself to 100 percent renewable energy in the electricity, heat and transport sectors. Since the first oil crisis in 1973, the main objectives of Danish energy policy have been security of energy supply, diversification in the use of energy sources, environment and climate, and cost effectiveness of energy supplies. The Danes obviously understood even back then that renewable energy technology can drive local development. In 2002, the Liberal-Conservative government tried to cut renewable energy programs. However, renewable energy is so deeply rooted in the psyche of the Danish population as the only realistic long-term solution that, six years, later the Prime Minister declared that Denmark would be a fossil fuel-free society by 2050.

In this small Nordic country, €16 million from local residents is being invested in renewable energies. Over 100 wind turbine cooperatives have a combined ownership of three-quarters of the country's turbines. The price per kWh for electricity from community-owned wind farms is not only competitive with conventional power production, but is actually half the price of electricity from offshore wind farms. As electricity and heat are, by law, not-for-profit goods, this enabled local community-based cooperatives to lead the energy transition in the country.

Denmark has also found an answer to the key challenge of integrating variable wind energy. Its solution is to combine heat and electricity generation or power (CHP) and implement a decentralized district heating infrastructure, tripling energy efficiency and achieving decentralized storage. Solar and wind therefore do not stand alone. The Danes have managed to combine and integrate district heating and cooling, CHP and renewables to create truly autonomous systems.

The idea of district heating systems has a long history in the country and was first developed in the 1950s. The majority of district heating loops in Denmark were owned by communities, giving control to the people and ensuring that energy was distributed to the communities at fair prices. In addition, the savings due to the increase in efficiency could be reinvested in the community or given back to energy consumers in the form of lower heating costs. Local CHP creates the basis for a decentralized energy structure. In many countries this infrastructure is already in place. With modest investments district heating can easily be changed from fossil fuel to local renewable energy sources. With high total efficiency and two energy products from the same fuel source, costs for power and heat can be reduced.

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As an example, in 2007 Denmark had the fifth lowest consumer power prices (before tax) per GWh in Europe according to Eurostat, trailing behind only Sweden, Norway, France and Finland.

Another example comes from the town of Hvide Sande on the Danish west coast, which shows how investments in renewables can result benefits on the local level. In December 2011 three wind turbines were erected at the Hvide Sande harbor. By Danish law, 80 percent of the turbines is owned by the Holmsland Klit Tourist Association foundation, a local business fund which initiated and financed the project. Hvide Sande's North Harbour Turbine Society I/S pays an annual rent of  €644,000 to the local harbor. The other 20 percent is owned by local residents living within a 4.5 km radius, as per the guidelines set out by the Danish Renewable Energy Act. This wind co-operative has 400 local stakeholders, and with an annual return of 9 percent-11 percent the turbines are expected to pay for themselves in 7-10 years. The fund is used to initiate new business initiatives for the benefit of the harbor and the local municipality.

The Way Forward

As we have observed in Denmark, Germany and other countries, the cooperative enterprise model is highly successful, allowing people, local communities and regions to be the driving force behind perhaps the biggest transformational process in the European sector energy to have occurred since the industrial revolution.

But in order to see these developments elsewhere in Europe, we need national political frameworks that enable citizens and municipalities to profit from this transition. Austria provides a good example of another best practice here. The country already has more than 80 climate and energy model regions encompassing almost 900 municipalities and some two million people. With the support of the national Climate and Energy Fund, which has provided €17 million since 2009, these model regions set the course for energy autarky or self-sufficiency.

A study from October 2012 by the Austrian Institute of Economic Research shows that these investments and instruments for energy efficiency have a positive long-term effect on the local economy. The data show that the Austrian GDP could grow by 0.3 percent in the short term (no change of capital stocks) and even by 2.3 percent in the long term (taking change in capital stocks into consideration). Furthermore, according to the report, the local economy in all provinces has benefitted in the short term, with the exception of Lower Austria due to falling demand for petroleum products. The model Steiermark region could see its GDP grow by 0.6 percent, and Upper Austria by 0.5 percent, the analysis continues. However, in a scenario without the implementation of these policy measures, the national as well as the regional GDPs actually decrease, the study concludes.

Powering a region with 100 percent renewable energy has been technically and economically feasible for a long time and is becoming reality all across Europe today. Our task now is to adapt policy frameworks on all governance levels to this reality and to further develop best policies.

In order to set the scene for 100 percent renewables, several policy principles are needed. For example, governments must provide market access for newcomers like citizens; provide investment security to enable people to invest their money on the right technology; ensure direct benefits to communities; increase efficiency of the energy system by combining heat and power production; and create a level playing field between the renewable energies sector and the incumbent fossil fuel industry.

Knowledge transfer and exchange between policymakers is vital Networks between trailblazing countries must be established all over the continent to realize the implementation of a European energy transition to one sourced from 100 percent renewable energies. Despite numerous good practices and successful policy instruments, this message does not always get through to policymakers. We need to facilitate dialogue so that many more countries can learn from the invaluable experiences of these and other nations in order to avoid wasting scarce resources.

Anna Leidreiter is policy officer for climate and energy at the World Future Council.

Lead image: Alternative energy via Shutterstock

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