The challenges and best practices for community energy development in the Baltic Sea Region – conclusions and policy recommendations

Energy policy, project related factors and actors’ characteristics and role play an important role in the diffusion of community energy initiatives. In Co2mmunity project, we conducted eleven case studies of community energy initiatives from seven countries in the Baltic Sea Region.

The main results show that community energy projects face numerous challenges in most of the countries, even including those with more favorable policies like Germany and Denmark. In line with previous research, we found that policy, regulatory and financial barriers hinder the diffusion of community energy in the Baltic Sea Region. Furthermore, our study demonstrates the importance of cultural barriers especially for the countries on the eastern side of the Baltic Sea. However, we also found that community energy actors do not remain idle but try creative ways to overcome barriers; for example, through collaboration with external partners, experimentation, and business model innovation.

Apart from the cases of Germany and Denmark, community energy initiatives have a marginal role in most of the countries in the Baltic Sea Region. To promote a broader diffusion of community energy initiatives we consider the following actions to be crucial:

Create a stable policy framework for renewable energy investments. Many community energy projects make investment decisions for several decades. It is essential that they can operate within a stable policy framework. For example, the community energy district heating company in Marstal on Ærø in Denmark lost two million Danish crowns (DKK) overnight when a feed-in tariff for electricity from their CHP plant was slashed.
Eliminate regulatory barriers. The three housing association cases from Finland, Estonia, and Poland show that current metering regulation prevents residents from benefiting from solar PV. Self-consumption of solar electricity in apartment buildings is only limited to the electricity needed to power the common parts of building, excluding the apartments. Moreover, simplifying and making quicker building permit and grid connection procedures are other crucial steps.
Promote training and access to information. With the advancing of the energy transition, new competencies are needed for energy advisors and experts to explain the possibilities and benefits of renewable energy and retrofitting projects to local residents. Additionally, it is crucial in ensuring that energy communities have access to technical information and guidance.
Provide early stage funding. National or regional governments should introduce dedicated finance support schemes for energy communities to help them during the planning and project set-up phases. Early stage funding is essential for conducting feasibility studies and accessing specialist consultancy services that can transform an idea into an easy implementation of the project plan.
Provide long-term and low-interest investment funding schemes. The experiences of Germany and Denmark, who are two of the leading community energy countries in Europe, show that community energy projects need dedicated financing instruments such as those provided by the KfW in Germany. These might include low-interest loans guaranteed by the state to secure inexpensive financing and low-cost capital for community energy groups.
Support community energy projects considering the benefits for society. Investment grants and/or preferential low-interest loans should be provided to community energy projects that promote local economic development and social regeneration. community energy projects are often considered as initiatives that depend on subsidies. However, community energy initiatives also provide numerous benefits in terms of job creation, tax income, and local socioeconomic development. These benefits should be taken into account. Thus, supporting community energy should not be seen merely as an energy policy issue, but also as a matter of industrial policy. In addition, as community energy projects contribute to renewable energy acceptance, a minimum quota for community energy ownership in large commercial projects should be established to reduce local opposition to renewable energy projects.
Promote cultural change. This study demonstrated that although some countries have introduced more favorable policy and regulatory frameworks for community energy projects, this alone is not able to trigger a broad diffusion of community energy initiatives. Especially in the countries on the eastern side of the Baltic Sea, cultural factors prevent them from developing suitable conditions for community energy development. A cultural change is also needed in the mindset of policymakers. Community energy is an expression of a different set of values and needs, which may not be fulfilled with the same policy instruments employed to promote commercial projects. Policymakers need also to realize that without citizens’ participation in the energy transition, ambitious climate goals may not be achieved due to local resistance to renewable energy projects.
Establish the right conditions for support organizations to operate. The example of Ærø shows that a lot of community energy projects can be made possible if intermediary organization exist. People in the municipalities often have more trust in these knowledgeable actors or institutions if they are not directly linked to authorities such as the municipality. National funding programs can enable municipalities or regions to establish these kinds of actors.

More information:

Salvatore Ruggiero, Aljosa Isakovic, Henner Busch, Karoliina Auvinen, Fabian Faller. 2019. Synthesis report: Developing a Joint Perspective on Community Energy: Best Practices and Challenges in the Baltic Sea Region. Available: http://co2mmunity.eu/wp-content/uploads/2019/03/Co2mmunity-working-paper-2.3.pdf