Many experts are asking themselves the question: How can renewable energy systems be financed away from state subsidies? And many citizens in urban areas would like to do their bit for climate protection locally, but don’t know exactly how. One answer to both questions could be: setting up a regional electricity product together with committed people from one neighborhood.
This is currently the case in Broich, a district of Mülheim, where the “Climate Quarter Broich” initiative is developing a joint electricity product together with dynamis. The local idea behind it: to locally generate 40 percent of the electricity required with solar systems on roofs of companies based in Broich. At best, the remaining electricity can also be obtained from local suppliers. If not, at least be produced by green electricity suppliers. dynamis has been working on the question of how to implement such projects in urban areas for some time now. “It is much more complicated to generate electricity in the city than in the countryside, where there is enough space available,” says project manager Friedrich Horn. Apart from location, also the financing presents the project with a challenge.
Power Purchase Agreements – long-term electricity supply contracts
The end customer electricity price is hedged against price increases by means of so-called Power Purchase Agreements (PPAs), i.e. long-term purchase agreements. This is an absolute novelty in Germany, as electricity suppliers have so far been able to rely on state support in the form of renewable energy tariffs (known as EEG subsidies). Horn explains: “This support system has existed for more than 20 years and is no longer desired by politicians in the long term. It is important to look for alternative financing models. In North America, PPAs are already being used by companies with large data centers – and we want to convince small companies of this as well.”
PPAs work similar to insurance: the customer takes out a 10-year electricity tariff at a certain price, which is then guaranteed for the period. Since relevant forecasts predict an increase in electricity prices, price-conscious customers can use this to secure their future. At the same time, the plant operator receives a guaranteed remuneration for the electricity he produces – without any EEG subsidies or tenders. The financing of his investment can be better planned, which reduces his risk. And electricity customers are more than just consumers: With their decision, they support local climate protection and the local economy. They do not have to finance their own plant or make an investment. Their obligation to purchase electricity over a period of ten years is sufficient.
BroichStrom breaks new ground – decentralised renewable energy plants
dynamis and the Climate Quarter Broich are thus breaking new ground and creating a pilot project that has never existed before in Germany. The overriding objective is to test a new and transferable instrument for financing decentralised renewable energy plants outside existing marketing and financing possibilities. It should be a profitable alternative to EEG projects for citizen, regional and neighbourhood electricity projects. Thus contribute to making the energy transition economically and ecologically sustainable in the long term.
Contact: Friedrich Horn