In 2009 the city of Munich set itself two ambitious targets for electricity from renewable sources. The first was to produce enough green electricity through its municipal utility company Stadtwerke Munchen (SWM or Munich City Utilities) to meet 100% of household demand by 2015. The second was to generate enough electricity from renewables to meet all the electricity requirements of the entire municipality of Munich by 2025.

Three years later SWM is on course to meet both targets and is looking to achieve the first a year early.

This would make the capitol of Bavaria the first city in the world with more than one million inhabitants (the population is around 1.4 million) to free itself from reliance on fossil fuels – no small feat for an economic powerhouse that is home to a host of major companies from Siemens to BMW and where energy requirements currently stand at around 7.5 TWh per year.

While Munich’s plans are exceptional even by German standards, SWM is a flag-bearer for the wider movement towards ‘recommunalised’ and decentralised energy, which places local utilities at the centre of Germany’s plans to consign electricity generated from nuclear and fossil fuel sources to history.

Nuclear power accounted for 22% of electricity in Germany in 2010 but following the March 2011 Fukushima disaster in Japan, Germany’s troubled relationship with the technology finally reached an impasse. Under renewed opposition, Chancellor Angela Merkel decided to close her country’s eight oldest reactors immediately.

The remaining nine nuclear plants will be phased out by 2022, meaning the need to install new renewable capacity is urgent.

In 2011 one fifth of Germany’s electricity supply came from renewables, largely due to solar panels, wind turbines on agricultural land and biogas plants fed by local farms.

The government’s policy of Energiewende – energy transformation – aims to cut overall energy consumption by 50% and electricity consumption by 25% by 2050.

By the same year Germany wants to meet 80% of its electricity demand and 60% of its total energy demand from renewables. An earlier target is for 35% of electricity to come from renewables by 2020.

According to Germany’s Ministry for the Environment the country is on track to achieve this, with production of solar and wind power 40% greater in the first three months of this year than in the same period of 2011.

There was further welcome news with the announcement that solar power produced around 10% of Germany’s electricity in May due to a boom in installations and good weather. At one point during the month, Germany’s solar plants were producing a world record 22 GW of electricity and meeting nearly 50% of national needs, according to the Institute of the Renewable Energy Industry think-tank.

Municipal Utilities’ Renewable Plans

The German Association of Local Utilities (VKU) represents more than 1400 stadtwerke, including around 800 involved in energy supply and generation, which are increasingly turning to renewables.

They include more than 60 new municipal utilities involved in energy which have been established since 2007, including those in major cities such as Hamburg and Stuttgart. Furthermore, the sale of at least 19 existing municipal utilities has been averted following public opposition.

Municipal and regional utilities already control more than 50% of the electricity and natural gas consumer markets by sales, according to VKU. The proportion of Germany’s total electricity generated by local utilities is only around 10% – a figure the VKU wants to double to 20% by 2020.

Already, the municipal utilities represented by VKU have more than 3 GW of capacity under construction or in the process of approval. More than a quarter of the projects being built (27%) and more than half of those awaiting approval (54%) involve renewables compared to just 8% of those already run by utilities.

Many Germans feel a close attachment to their local stadtwerke, which provide jobs for young people and can finance loss-making services such as swimming pools and public transport.

The popularity of the model recently led to a citizens’ co-operative in Berlin expressing an official interest in buying the city’s electricity network, currently under concession to Vattenfall Europe until 2014.

But the success of stadtwerke cannot be put down solely to public preference. A Datamonitor study also found that they were well run and post above-average profit margins and energy volume returns.

SWM is applying hard-nosed business principles to a major renewable energies expansion programme, encompassing onshore and offshore wind, water, solar, biomass and geothermal projects, designed to lift it towards its targets.

According to Dr Florian Bieberbach, CFO and designated CEO of SWM, the most important of the utility’s criteria is simply that the projects must be profitable to generate revenue which can be used to fund further investments in renewables.

But SWM has also actively sought a diverse portfolio of interests and works only with proven companies.

Projects already implemented or currently under development will take SWM’s production capacity for green electricity up to approximately 2.4 TWh – enough to supply all 800,000 households in Munich plus the electric underground and tram systems.

But the greater challenge will be to fully meet the area’s industrial power needs, including large-scale engineering, manufacturing and computing bases.

SWM anticipates its total investments by 2025 will hit €9 billion.

The expansion campaign already includes 17 plants in Munich being acquired, developed or modernised (12 hydropower plants, a share in a hydropower plant, two biomass plants, a geothermal cogeneration plant and a wind plant).

At an early stage, an analysis by the Öko-Institut e.V. revealed that the required volume of 1.5 TWh per year could not be achieved solely through local renewable resources.

As a result SWM has also invested in projects elsewhere in Germany (two solar photovoltaic plants, two onshore wind parks and two offshore wind parks) and in other parts of Europe. The latter include the Andasol III parabolic trough solar thermal plant in Andalusia, southern Spain.

In terms of wind, Global Tech I, one of the largest offshore parks in the North Sea, is expected to produce 1.4 TWh of electricity per year from 2013. SWM has a 25% stake.

And the Gwynt y Môr wind farm being built off the coast of North Wales by SWM (which has a 30% stake) in partnership with RWE and Siemens is scheduled for completion in 2014, after which it will output 576 MW, generating 1.95 TWh of electricity per year.