08.07.2022

Energy cooperatives: Local community solutions as an answer to global energy crises

Although favorable national frameworks are missing, flagship projects developed in Eastern and South-Eastern Europe offer innovative solutions.

The stagnating energy transition, the fossil fuel price crisis, and global supply chain problems illustrate once again: the decentralised, citizen-driven energy transition is at the forefront of becoming energy-independent, providing access to inexpensive energy sources and fostering the democratic design of the transition. Energy cooperatives play a key role in this. This is also true for Eastern and South-Eastern Europe. In general, however, cooperatives are not yet represented across the board in many countries. They are confronted with difficult national framework conditions, an insufficient awareness of the need for a local energy transition, as well as a lack of financial resources and a low profile of their own.


This outcome paper is based on an online event organised by the Competence Centre "JustClimate" on 14 June 2022, in which policy experts and local practitioners assessed the opportunities and challenges for the region from a European and national perspective.

General Evidence: Why is a citizen-driven energy transition necessary?

In many countries, the expansion of the renewable energy infrastructure causes conflicts and faces problems with acceptance. Sometimes this is due to diffuse fears. But there is also the very concrete concern that the hometown or region will be redesigned against the will of the local population, while the profits remain in the hands of foreign investors. At the same time surveys show that the acceptance of energy projects in people’s front yards/neighbourhood increases when they are considered part of one’s own local living environment. Financial advantages resulting from the new infrastructure lead to an increase in acceptance. That is why the political scientist and graduate engineer Bernd Hirschl points out: “If a region visibly benefits economically from the energy transition for everyone, this promotes identity with the transformation and ultimately strengthens local acceptance.” A cooperative in which members come together to implement energy projects that could not be managed alone makes this possible. They are democratic model organisations, as they are generally based on the principle of “one share-one vote” and aim to promote the economic development of all members equally.

Cooperatives also bring social benefits to their respective community or region. Thus, many examples can be found where cooperatives have used surpluses from the production of renewable electricity to support energy-poor households. Given the price increase, this is to become even more important in the coming months and years. However, it must be taken into account that cooperatives in the former Soviet sphere of influence are perceived very differently in the individual states. Also, the political framework conditions for cooperatives differ considerably in the individual countries. This is partly due to a non-identical implementation of RED II (the Renewable Energy Directive). Let’s take a closer look at these framework conditions.

European Framework for Cooperatives

Cooperatives are usually based on a voluntary commitment from citizens and therefore need low-bureaucracy access to participation. The European Commission, as guardian of competition and climate targets, established common principles for the development of renewable energy and rules to remove barriers. According to the Clean Energy Package, the EU Member States are obliged to install an “enabling framework” for renewable energy communities. Article 22, Section 2 of the Renewable Energy Directive (RED II) specifies: “Member States shall ensure that renewable energy communities are entitled to access all suitable energy markets both directly or through aggregation in a non-discriminatory manner.” Section 3 of this article adds: “Member States shall carry out an assessment of the existing barriers and potential of development of renewable energy communities in their territories.” According to Lars Holstenkamp from the Leuphana University Lüneburg & ECOLOG Institute for Social-Ecological Research and Education, the Clean Energy Package with this objective can certainly function as a stimulator. However, this strongly depends on the practical outline of implementation in the Member States and on the monitoring by the European Commission.

Especially in countries and regions where cooperatives are still in their infancy, there is also a need for low-risk access to capital. As specified by Adela Tesarova from the DG Energy of the European Commission, the EU is trying to support the need for cooperatives to have easy access to the energy market and capital security with a split definition of energy communities (of which cooperatives are a variety): On the one hand, there is the definition of Citizen Energy Communities (CEC), which are defined in Directive (EU) 2019/944 (recast Electricity Directive). These energy communities are to be supported through a good access to financial instruments and information. On the other hand, there is the definition of Renewable Energy Communities (REC), which is contained in Directive (EU) 2018/2001. The latter communities shall be supported not only through access to financial instruments and information, but also through customised support schemes, through the removal of unjustified barriers and through support in capacity-building to public authorities.

There are a few differences between CEC and REC that need to be considered. In the case of a CEC, non-regional companies can invest in the energy community. CECs are limited to the electricity sector, while RECs can cover any energy sector. In return, the scope of RECs is limited to the production, consumption and sale of renewable energy. In a REC, it is furthermore required that local citizens hold a majority over potential investing local companies. However, Member States have now at least three options to transfer this differentiation into national law:

  1. The Member States could give one single definition for energy communities (which would kind of limit the acting possibilities for those communities);

  2. They can define two different types of energy communities in accordance with the understanding given by the Commission; or

  3. It is possible to define a CEC with additional criteria installed if a CEC wants to be considered a REC.

As the practicability of distinguishing between CEC and REC in the individual Member States is only now just being tested, the Commission should follow the implementation very closely. However, just like the European Commission, Dörte Fouquet (Partner of Counsel at BBH law firm, member in Horizon project on community energy (COME RES) and Director of the European Renewable Energy Federation) regards member states as being primarily responsible for the progress of the cooperative energy transition. Low-threshold access to the national energy market that does not entail a major investment risk is the decisive criterion from her point of view. At the EU Level she sees the possibility for expanded assistance in accessing funding from the EU either through opening up the Regional Structure Fund to cooperatives and other energy communities, or through the European Investment Bank, which could improve access to funds for small businesses. So far the European Investment Bank allocates funds to member countries through which companies can then access the money, which in practice is handled very inconsistently. She points to specific good practice outcome under the current Horizon project, showing practicable ways forward for citizen and community energy and on the other hand underlining insufficiencies in Member States' enforcement of the EU Directive on the promotion of renewable energies (REDII) especially concerning  enabling community and citizen energy through clear legal instruments.

What are the experiences of cooperatives in individual countries in Eastern and South-Eastern Europe?

A look at the experiences of cooperatives and other actor networks in Eastern and South-Eastern Europe shows that they differ greatly. With ZEZ, Goran Cacic (ZEZ, Croatia) presented a pilot project in Croatia. Initially, they tried to implement a project in which the plant would be owned by the cooperative. However, this failed due to high capital hurdles. So the cooperative shifted its focus towards raising awareness and finally crowd-funded a Photovoltaics project on a school roof in Croatia. ZEZ is exchanging expertise with other cooperatives and energy community networks in Croatia, but also abroad, for example via REScoop, the European federation of energy cooperatives. ZEZ is also negotiating with political actors and ministries to broaden the scope for participation of cooperatives in Croatia. From Goran Cacic’s perspective, more and more bottom-up initiatives and cooperatives are emerging in the Balkans. However, this is still happening too slowly. He sees a great danger in the failure of projects due to bureaucratic or financial constraints. “If a project fails because of the conditions, nothing will probably happen in this region for up to ten years.” The situation will change after a critical number of community energy projects are implemented and cross-financing between the communities will be possible.

The Bulgarian cooperative izgrei is also a kind of pioneer project, a start-up that has established a cooperative to create the first energy community in the country. According to Tsvetan Georgiev of izgrei, they did not want to wait for a legislative framework, before implementing the project.

Instead, they are trying to reach and work with various local networks, for example with the Sofia University of St. Kliment Ohridski, EVN (Energie-Versorgung Niederösterreich), Greenpeace and more to further implement energy communities in Bulgaria. izgrei would like to grow and include more members. They are also interested in exchanging knowledge in transnational European projects, which seems to be a key element in a phase where cooperative networks are growing bottom-up and the legislative framework is not yet finally defined.

The Serbian cooperative Elektropionir is playing an important role in raising awareness for the need of local climate action in Serbia. Currently they are working on their first project, in which a decentralised network of rooftop solar power plants and solar parks collectively owned by citizens is to be realised. They had expected more restrictions and strong opposition against the cooperative model due to memories of the times of self-governance in former Yugoslavia, but this turned out not to be the case. This is particularly due to the first “quick adopters”, frontrunners which directly embraced the idea and also approached the cooperative. Elektropionir saw the cooperative nevertheless confronted with numerous legislative obstacles, while from their perspective citizens are becoming increasingly impatient due to the level of pollution and destruction of the environment in Serbia. Elektropionir wants to focus on virtual power plants in the future, which will further strengthen and activate the cooperative members in their role as prosumers. Short Term Target is organising  a new course for how citizens can become prosumers and launching crowdfunding campaigns for first power plants, which shall be owned by the cooperative in Serbia. Long Term Target is then to integrate the prosumers into a community-based virtual power plant and to establish Elektropinonir as a significant actor on the Serbian electricity market on the basis of more cooperative-owned power plants.

Kostas Komninos from the DAFNI Network (Network of Sustainable Greek Islands) presented the special case of energy communities on islands. Since for many islands there is no immediate prospect of full interconnection with the mainland system, social acceptance of the renewable energy infrastructure is very important. This is all the more so as conflicts can easily arise on islands with regard to energy infrastructure due to the fact that space is limited. Projects on Islands face higher costs due to transportation needs and a lack of economies of scale. Kostas Komninos therefore summarised that these are niches in the roll-out of renewable energies that can be perfectly filled by cooperatives and other energy communities.

 

Recommendations

  • People in Eastern and South-Eastern Europe are becoming increasingly concerned about environmental damage and the threat of climate catastrophe. Civil society organisations, politics and the media should now raise awareness that local climate protection is possible through cooperation between cooperatives. They can also contribute to regional energy independence and favourable electricity prices.

  • It must be borne in mind that the term “cooperatives” evokes very different associations in the various countries of the former Eastern Bloc. Continuous information about the work of modern energy cooperatives can be helpful. It could also be a supportive element in public relations work to make “energy community” the more widely used term.

  • Many countries still lack a sufficient legislative framework for citizen participation in the energy system. This makes it all the more important for committed energy and climate networks to join forces in order to be able to implement projects on the ground despite bureaucratic hurdles. It makes sense that these networks are not only organising themselves nationally, but also exchanging ideas transnationally.

  • The more openly cooperatives offer participation opportunities, the faster the cooperatives in Eastern and South-Eastern Europe can grow. These networks must also use their influence to make existing cooperatives better known in the respective countries.

  • In addition to awareness of cooperatives and local opportunities for action, money also plays a crucial role in promoting the cooperative energy transition. This holds true in two ways. The cooperatives themselves need easy and low-bureaucracy access to credit in order to start projects. Later, when the first projects have started and are generating income, cooperatives can refinance themselves and repay loans. However, the expensive project start-up phase can otherwise become a problem in countries with lower incomes. Proposals to ease the access to money from the European Investment Bank for local cooperatives should be taken into account. However, money also plays a critical rolein people’s access to cooperatives. If a share in a cooperative costs more than 500 euros and in some cases even more than 1,000 euros, this is not affordable for many people. Solutions for this can be, for example, instalment payments for shares.

  • Local information events should be organised to explain the work of cooperatives. Many people are not aware that investing in a cooperative is a low-risk investment. Some cooperatives already provide information about their activities.

  • In order to enable cooperatives to strengthen their public relations and networking activities, they should be subjected to as little bureaucracy and as few requirements as possible by the state during project implementations.

Timo Karl is Policy Advisor at FES Just Climate. He works towards modern climate and economic policy and their social opportunities. Previously, he was an advisor for community energy at the World Wind Energy Association and a research assistant at the University of Bonn. At the beginning of 2022, he submitted his dissertation on modern negotiation management in the international climate negotiations to the University of Bonn.

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