FINANCING AND BUSINESS MODELS OF ENERGY AND OTHER COMMUNITY ENERGY

BMWi, Exportinitiative Energie, Informationsreise Polen – Energieautarke Gebiete & Energiegenossenschaften Berlin, 09 April 2018

Lars Holstenkamp » www.leuphana.de Agenda

—Intro: Current State & Discussions —Community Energy in Germany —Financing Community Energy Projects —Business Models of Energy Coops

BMWi - GERMAN ENERGY SOLUTIONS INITIATIVE | POLAND - Financing & Business Models 09 April 2018 2 Agenda

—Current State & Discussions —Community Energy in Germany —Financing Community Energy Projects —Business Models of Energy Coops

BMWi - GERMAN ENERGY SOLUTIONS INITIATIVE | POLAND - Financing & Business Models 09 April 2018 3 Why Community Energy?

ENERGY UNION: PIONEERS: Enable Citizens participation participate

Art. 22 RED (draft) STAGNATION/LOSS OF StromEG 1991 ACCEPTANCE: Enforce participation ENERGIEWENDE 2.0: Preserve community energy (or diversity of Lov om fremme af vedvarende energi actors) BüGembeteilG M-V

EEG 2014, 2017

BMWi - GERMAN ENERGY SOLUTIONS INITIATIVE | POLAND - Financing & Business Models 09 April 2018 4 Agenda

—Current State & Discussions —Community Energy in Germany —Financing Community Energy Projects —Business Models of Energy Coops

BMWi - GERMAN ENERGY SOLUTIONS INITIATIVE | POLAND - Financing & Business Models 09 April 2018 5 Development of Community Energy in Germany - Types 1880 1900 1920 1940 1960 1980 2000 2018

Electricity Cooperatives Energy Supply Community  Rural electrification in the 1st half of the 20th Cooperatives Energy century  Oil price shocks “Boom”  Installation and operation of local distribution => self-suply  Community grids by citizens (and municipalities) wind (KG), community solar (GbR), PV coops (eG) Few “old electricity cooperatives” left (end-1920s: >6,000) Renewable “Boom” since mid-2000s, cooperatives since 2008/9 Energy Highly diversified community energy sector since mid-2000s Various mixed types / co-investments Pioneers From socio-technical niche (“pioneers”) to securing acceptance?  Pilot projects  “trial and error”

Source: based on Holstenkamp (2012)

BMWi - GERMAN ENERGY SOLUTIONS INITIATIVE | POLAND - Financing & Business Models 09 April 2018 6 Development of Community Energy in Germany - Numbers

No. of newly funded CE companies

Source: Kahla et al. (2017)

BMWi - GERMAN ENERGY SOLUTIONS INITIATIVE | POLAND - Financing & Business Models 09 April 2018 7 Community Energy in Germany - Legal Structures

Limited Liability (GmbH & Co. KG: = Kommanditgesellschaft with LLC = Gesellschaft mit beschränkter Haftung (GmbH) as general partner) • Wind & solar parks • Large investments + co-ownership Registered (eingetragene Genossenschaft, eG) • Medium-to-large investments 3 common forms • Often PV, also district heating • Several projects, “develops over time”

Civil Association (Gesellschaft bürgerlichen Rechts, GbR) • Common for small or medium solar PV (rooftop) and pre-development • Partly combined with solar club (e.V.)

BMWi - GERMAN ENERGY SOLUTIONS INITIATIVE | POLAND - Financing & Business Models 09 April 2018 8 Community Energy in the Auction System

—Create/use support structures? • Through this: become competitive/able to participate? • Most probably only few community energy companies —Change of rules? • Problem: heterogeneity of sector • What is the core problem? How can this be targeted? —Sidesteps: develop new business models in other segments • PV business models, storage, … • Heating sector • E-mobility • Integrator/facilitator • Rural development

BMWi - GERMAN ENERGY SOLUTIONS INITIATIVE | POLAND - Financing & Business Models 09 April 2018 9 Agenda

—Current State & Discussions —Community Energy in Germany —Financing Community Energy Projects —Business Models of Energy Coops

BMWi - GERMAN ENERGY SOLUTIONS INITIATIVE | POLAND - Financing & Business Models 09 April 2018 10 Financing Tools of Community Energy Companies

—Most important components of financing structure: equity + bank loans —Different equity ratios • From 20% to >80% [Holstenkamp et al., 2018a; Debor, 2014; Yildiz et al., 2015] • Smaller in case of community wind/large-scale investments, larger for PV coops —Bank loans: • Project finance (= cash-flow related, non/limited recourse) already for small loan volumes • Often local banks, some specialized larger banks in all three sectors (public, cooperative, private banks) => “co-evolution” of both sectors, banks as “enablers” [Hall et al., 2016] • Refinancing from KfW and Rentenbank —Other “tools”: • Sub-ordinated loans (optimizing financing structure/tax effect, reduce risk, closer ties to specific projects) • District heating: grants

BMWi - GERMAN ENERGY SOLUTIONS INITIATIVE | POLAND - Financing & Business Models 09 April 2018 11 Financing Tools - Equity

—Return+ motivation: environmental protection, regional development, participation in “Energiewende”, … —North-south differences: highly profitable onshore wind projects in the North; differences between EEG regimes: “PV boom” 2009-2012 —Availability differs locally: who can afford to participate? (discussion e.g. in federal states in the East) —Be aware of financial market regulations!

BMWi - GERMAN ENERGY SOLUTIONS INITIATIVE | POLAND - Financing & Business Models 09 April 2018 12 Agenda

—Current State & Discussions —Community Energy in Germany —Financing Community Energy Projects —Business Models of Energy Coops

BMWi - GERMAN ENERGY SOLUTIONS INITIATIVE | POLAND - Financing & Business Models 09 April 2018 13 Two Dominating Business Models among Energy Coops

—Roof-top solar PV • Often on top of public buildings, feed-in tariff • Fast development, medium investment volumes, low risk – relatively high returns under EEG 2009 • Many energy coops initiated or co-initiated by local cooperative banks • Alternative revenue models: local electricity label + market premium model, tenants’ electricity (“Mieterstrom”), contracting, sale & lease-back —Biomass-fired district heating (“bioenergy villages”) • Grant-based financing • Local private or municipal initiative • Often use of heat from biogas power plant (alternatively or additionally: solid biomass)

BMWi - GERMAN ENERGY SOLUTIONS INITIATIVE | POLAND - Financing & Business Models 09 April 2018 14 Business Model Innovation Necessary

—Diversification of business models of recently founded energy coops —Planned new business models: • often distribution/retail —Challenges: • Complexity: changing legal environment, longer lead times and/or more intensive acquisition process • Human resources development: mostly older, well-educated men => right education/skills? succession? —Qualification: • Gaps: especially marketing & sales • No compensation through complementary networks —Cooperation strategies: • Cooperative of cooperatives, service cooperatives • External partners: ecopower companies, developers, municipal utilities

BMWi - GERMAN ENERGY SOLUTIONS INITIATIVE | POLAND - Financing & Business Models 09 April 2018 15 Contact

Leuphana University of Lüneburg Institute of Finance and Accounting Dipl.-Volkswirt Lars Holstenkamp Universitätsallee 1 21335 Lüneburg Germany

Fon +49 4131.677-1931 Fax +49 4131.677-2169 [email protected] » www.leuphana.de

BMWi - GERMAN ENERGY SOLUTIONS INITIATIVE | POLAND - Financing & Business Models 09 April 2018 16 References Bauwens, T. (2016). Explaining the diversity of motivations behind community renewable energy. Energy Policy, 93, 278-290. Debor, S. (2014). The socio-economic power of renewable energy production cooperatives in Germany: Results of an empirical assessment. Wuppertal Papers, 187. Wuppertal: Wuppertal Institute. Hall, S., Foxon, T. J., & Bolton, R. (2016). Financing the civic energy sector: How financial institutions affect ownership models in Germany and the United Kingdom. Energy Research & Social Science, 12, 5-15. Holstenkamp, L. (2012). Ansätze einer Systematisierung von Energiegenossenschaften. Arbeitspapierreihe Wirtschaft & Recht, 11. Lüneburg: Leuphana Universität. Holstenkamp, L. (2014). Local investment schemes for renewable energy: A financial perspective. In M. Peeters & T. Schomerus (Eds.), Renewable Energy Law in the EU: Legal Perspectives on Bottom-up Approaches (pp. 232-255). Cheltenham & Northampton: Edward Elgar. Holstenkamp, L. (2018). Die Geschichte der Elektrizitätsgenossenschaften in Deutschland. In L. Holstenkamp & J. Radtke (Eds.), Handbuch Energiewende und Partizipation (pp. 403-419). Wiesbaden: Springer VS. Holstenkamp, L. (forthcoming). Akzeptanz durch finanzielle Beteiligung? In C. Lautermann (Ed.), Die Energiewende der Bürger stärken. Marburg: Metropolis. Holstenkamp, L., Kahla, F., & Degenhart, H. (2018a). Finanzwirtschaftliche Annäherungen an das Phänomen Bürgerbeteiligung. In L. Holstenkamp & J. Radtke (Eds.), Handbuch Energiewende und Partizipation (pp. 281-301). Wiesbaden: Springer VS. Holstenkamp, L., Centgraf, S., Dorniok, D., Kahla, F., Masson, T., Müller, J., ... & Yildiz, Ö. (2018b). Bürgerenergiegesellschaften in Deutschland. In L. Holstenkamp & J. Radtke (Eds.), Handbuch Energiewende und Partizipation (pp. 1061-1080). Wiesbaden: Springer VS. Holstenkamp, L., & Kahla, F. (2016). What are community energy companies trying to accomplish? An empirical investigation of investment motives in the German case. Energy Policy, 97, 112-122. Kahla, F., Holstenkamp, L., Müller, J.R. & Degenhart, H. (2017). Entwicklung und Stand von Bürgerenergiegesellschaften und Energiegenossenschaften in Deutschland. Arbeitspapierreihe Wirtschaft & Recht, 11. Lüneburg: Leuphana Universität. Yildiz, Ö., Rommel, J., Debor, S., Holstenkamp, L., Mey, F., Müller, J. R., ... & Rognli, J. (2015). Renewable energy cooperatives as gatekeepers or facilitators? Recent developments in Germany and a multidisciplinary research agenda. Energy Research & Social Science, 6, 59-73.

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