Market failures and public ownership options in the European municipal energy transition

Published On: October 5, 2020Categories: ArticlesTags: , , ,

by Andrew Cumbers

There is a paradox at the heart of Europe’s ambition to achieve a municipal energy transition. On the one hand, there is recognition of the importance of municipal and community action to tackle climate change. It is widely recognised that the local level – the scale of everyday life – is a critical policy space for developing strategies for achieving an energy transition. From our work on the MPOWER project, however, it is evident that while municipalities are keen to set ambitious targets and goals, without supportive infrastructure and policies at national and European levels that are not driven by marketisation imperatives, they will struggle.

Much is expected of municipal public authorities in both developing local plans and engaging citizens. But EU energy policy – as with so much of its broader public policy approach – remains stubbornly committed to market solutions to critical social, economic and ecological problems. The EU enthusiasm for ‘local energy communities’ in its Winter Package proposals in 2017 can be contrasted with its continuing adherence to single market rationalities and a consumer-centred ideology as evidenced by the following key statement from its 2019 Directive, revising rules for its internal energy market:

“Community energy offers an inclusive option for all consumers to have a direct stake in producing, consuming or sharing energy. […] Community energy also enables certain groups of household customers to participate in the electricity markets, who otherwise might not have been able to do so.” (EU Directive, 2019, L158/130).

There is a greater priority evident here in helping Individuals to participate in energy markets rather than to finding collective solutions to radically accelerate the energy transition.

What is also striking in the official EU policy literature is the failure to recognise the renewed potential of public ownership, particularly at the local level, in helping to drive the energy transition. This is despite the substantial evidence from countries like Denmark and Germany that the most significant advances in shifting towards a post-carbon energy system have been achieved by a combination of local, decentralised forms of municipal ownership with considerable higher state support through non-market based mechanisms such as feed-in-tariffs (FITS).

Hamburg demonstrates the clear link between a locally integrated system of public ownership and the capacity for municipalities to set ambitious energy transition goals. It became an iconic remunicipalisation case when a local grassroots citizen’s movement successful mobilised against the main establishment political parties to win a referendum to take back public control and ownership of the city’s energy grid from privatised operator Vattenfall in 2013. It has also subsequently remunicipalised its district heating system. Having heat and power generation under local public control has meant that the city can develop a ‘game changer’ strategy of converting 400,000 of the city’s homes away from coal and gas fired heating toward renewables and CHP, which will have a massive impact on reducing CO2 emissions.

Hamburg shows how the aspiration of local energy communities can be achieved and emulated elsewhere across Europe where local public ownership and capacity, allied to non-market policy levers and financial support, is able to generate a meaningful municipal energy transition.

This is the summary of a key argument in Cumbers, A. and Traill, H. (forthcoming) Public ownership in the pursuit of economic democracy in a post-Neoliberal order. In P. Arestis and M. Sawyer (eds) Economic Policies for a Post-Neoliberal World (Palgrave Macmillan).