Municipalities are getting on with it

Public services, resilience, economic development: renewable energies can help municipalities to address the challenges they face right now – a good reason to roll up sleeves and get on with the energy transition.

At first glance, Indersdorf in Upper Bavaria, Bosbüll in North Friesland, the district of Paderborn, the Hanseatic city of Hamburg and the North Sea island of Helgoland have little in common. But they all - and many other places - have been awarded the title "Energy Community of the Month". Under this heading, the Agency for Renewable Energies (AEE) collects examples of municipalities and districts that have been particularly successful in utilising the energy transition locally. They benefit in very different ways. "Many local authorities still see the energy transition as an additional task. Yet it can be a solution to many of the challenges they are currently facing," says GP JOULE Managing Director Ove Petersen.

Wind and sun fill municipality coffers

One clear advantage of wind and solar energy is that they immediately bring money into municipalities. Revenues from power plant operations are reliable, and the municipality can use the input to plan decades in advance. In cases where the municipality itself owns the site on which an energy plant is constructed, they can benefit from lease income, for example. But even if the land is in private hands – and it often is – the municipalities are by no means left empty-handed.

The first item to consider is commercial tax, the majority of which has been going to the communities in which wind farms and solar parks are located since 2021. Many operating firms also establish subsidiaries local to their individual projects. In these cases the commercial tax is all payable to the local treasury. How much this revenue amounts to is dependent on the profit level and the local assessment rate for commercial tax.

The second income source is very easy to calculate at this almost universally accepted level: 0.2 cents per kilowatt-hour. This is the rate at which operators should share their green electricity yield with municipalities, as set out in the Renewable Energy Act (Erneuerbare-Energien-Gesetz, EEG). This new provision of the EEG clarifies the matter of payments to municipalities where green energy plants are located, which had previously been in a legal grey area. What’s more, the word “should” is to be understood as a firm recommendation by the legislator. Operators can generally request reimbursement of the amount from the Federal Network Agency. “So this is a payment that municipalities can claim with a clear conscience,” said Petersen.

For a 10-megawatt solar park with a feedin yield of 900 million kilowatt-hours, the payment could be as much as 18,000 euros a year – and municipalities are completely unrestricted on how they spend this income. A figure like this could cover the majority of the operating costs for a small outdoor swimming pool1, fund a computer course for senior citizens or subsidise a dial-a-bus service, for example.

Cheap green energy makes locations attractive

For municipalities that actively engage and understand how to make use of the opportunities open to them, the benefits can go far beyond the direct revenues they receive. “A constant supply of cheap electricity is an important factor for business and industry. People often underestimate the direct contribution renewables can make here,” explained Petersen. It is fundamentally quite simple: anywhere with a plentiful supply of wind and sun enables private individuals and companies alike to rely on a secure supply and stable prices. This is especially important for major industrial companies that want to invest large sums in a location, as Swedish battery manufacturer Northvolt is doing in Heide. Its planned “gigafactory” is expected to create around 3,000 jobs. However, the project had to be paused midway due to soaring energy prices. Northvolt has explicitly emphasised the need for electricity from renewable sources. Petersen believes that it is in precisely these types of situations that municipalities can and must take action. That said, having a high proportion of locally generated green energy does not necessarily guarantee cheap electricity. After all, if operators channel all the generated power into the grid, local people and companies will be able to access little of it.

In fact, it could even be that costs for locally expanding the grid actually cause electricity prices to increase for these users. “However, municipalities can definitely negotiate with power plant operators to secure particular benefits for the region. A low long-term energy tariff for electricity and heating is, of course, an obvious one here,” said Petersen. An offer of locally generated hydrogen to power the public transport system would also be an option, while a direct, physically proximal supply of cheap wind or solar power for specific industrial businesses would work in other locations.

The biggest bargaining chip for municipalities in such negotiations is their power over planning, which is an issue anywhere renewable energy plants have not already been prioritised. Generally this applies outside the areas earmarked for wind energy expansion. Project-related development plans and urban development contracts are proven formats for ensuring adherence to what has been agreed.

One example of this is the “Renergiewerke Fuhne” project, in the context of which GP JOULE is planning photovoltaic and wind energy installations with a total output of up to 900 megawatts, in the municipalities of Südliches Anhalt, Zörbig and Petersberg. GP JOULE has signed a detailed contract with the town of Südliches Anhalt which formalises the development of an integrated energy concept for the next few years. This includes not only a large number of heating networks in the region, with a fixed ten-year tariff of 11 cents per kilowatt-hour, but also the future prospect of a tailor-made electromobility charging infrastructure.

Considering regional loops

The example of the Renergiewerke Fuhne sustainable energy plant demonstrates that renewable energies can deliver much more than just electricity. But to take full advantage of the opportunities they present, an overall concept is essential. Though the German government only requires full municipal heating system planning for municipalities that have more than 10,000 residents, the approach is generally helpful for smaller towns as well, explained Petersen. “Many municipalities have no idea that they have local heat sources which they can use,” he said. Determining what local opportunities exist requires a survey of heat sources and consumers. Does the sawmill have residual leftover heat after burning its waste wood? Will the local school’s heating requirements increase or decrease? Addressing these questions collectively is the only way to establish an overview and develop the foundation to make sound decisions. What data and investment stages are required in small municipalities is likely to differ from one federal state to another. However, irrespective of legal regulations, it is always a good idea to collect any data that is important for practical planning. “Investing two months in a survey of heat sources and heat sinks in and around a development area is not the same as complete heat planning, but it is certainly a large step in the right direction,” Petersen continued.

If the energy concept also includes hydrogen production, the planning process can go even further. After all, an electrolyser provides clean hydrogen, which can be used to power buses for example, as well as warmth that can be used to heat houses. In addition to these, however, it also produces pure oxygen as a byproduct of sorts. This can be used in aquacultures or to increase the efficiency of wastewater treatment in local treatment plants, because both fish in aquacultures and bacteria in treatment plants need oxygen to conduct their metabolic processes. Where oxygen is not in its pure form, it is necessary to pump large quantities of air through the reservoirs – an energy-intensive and therefore expensive process. So here using oxygen produced as a “byproduct” from electrolysis helps to save energy and cut costs.

It is important to clearly communicate all of these benefits. “The clearer and more visible the local connections are, the more strongly people identify with the project and often also with the region itself,” said Petersen.

Creating profit possibilities for everyone

The financial participation of residents also offers a means of strengthening identification with a project. Indeed, this is an obligation for anyone planning a wind farm in Lower Saxony2. The models that can be used for this vary widely. One simple variant is the subordinated loan with a fixed term and interest rate, which GP JOULE offers via its Invest Crowd platform. Currently, for example, people can invest in a heating network in the small towns of Hohenstadt and Bad Boll in Baden-Wuerttemberg, which is currently in the completion phase and set to provide heating for 65 households in the forthcoming 2023/24 heating period. Citizens’ savings certificates (Bürgersparbriefe), which are processed via local banks, are another similarly uncomplicated option.

However, loans and savings certificates do not entitle people to influence the decisions made by the project company. In some cases residents opt to become involved in the project enterprise itself – for example by means of an energy cooperative. This energy cooperative is then able to implement projects either independently or with an experienced partner. “The appeal of a cooperative is that every member has exactly one vote – regardless of how much they have contributed,” said Petersen. There are also legal advantages for energy cooperatives – for instance, they can build solar parks with an output of up to six megawatts without having to take part in an EEG tender process as other companies have to. That said, establishing and managing a cooperative is much more complex than concluding a loan agreement. “As such it is important we don’t commit to the cooperative as the one true model – otherwise, an entire project could fail on this point,” Petersen pointed out. That is why the Beteiligungsgesetz (Participation Act) in Lower Saxony allows people to choose between the two options.

Participation is about more than money

The energy transition is changing landscapes at a local level and possibly also everyday life. Large-scale projects in particular are often met with a level of mistrust which can rarely be allayed with a savings certificate. “In places with a lot of sceptics, it’s hard to get started. This is all the more true in small municipalities where politics is particularly influenced by those involved in voluntary activity,” noted Petersen. In places like these, it is especially important to have a presence from an early stage by means of information events, and to answer people’s questions. GP JOULE did this in the town of Südliches Anhalt, just as it did for the Energiepark Lausitz project. The latter includes multiple large-scale photovoltaic plants located on the site a former open-pit mining waste dump. Today the site is frequented by numerous deer and wild boar. Locals were initially concerned that the fence surrounding the solar park would prevent animals from moving around freely, and that they would end up in gardens and farmland searching for food. The inclusion of culverts and corridors has prevented this, as they make it easy for wild animals to cross the site of the photovoltaic plant. The delivery of components was also a concern – people feared that hundreds of trucks would be rumbling through the village during the construction phase. In response, from the outset an alternative route was agreed for component deliveries. It was all about listening and compromising. “It is also important to be straight with people and to work out what is feasible in a spirit of honesty. After all, if you make a promise, you have to be able to keep it,” said Petersen. Then, the energy transformation can not only strengthen local value creation and public services, it also boosts people’s confidence in democratic processes.