Municipalities and citizens: key energy agents thanks to LECs

Eduardo Brunet, Founder and CEO of Greenward Partners

Greenward has been working for some time so that Spain’s Government incentivises, accompanies and enhances the participation of citizens in the energy system. Specifically, this should take place within the municipal environment, due to its proximity to its residents, through a global strategy that includes information, training and technical assistance. In the case of communities with low income zones, this involves a well-designed subsidy and funding policy to incentivise the entry of private investment without which the processes involved in adapting homes and buildings to make them energy efficiency is a very complicated task.

So it is very good news that the Ministry for the Ecological Transition and Demographic Challenge (MITECO) has opened a public consultation process for the roll-out of Local Energy Communities (LECs). Including their regulation in Spain will provide a wide margin for guaranteeing and facilitating the rights of consumers to take part in projects, under which they can produce, consume, store and sell renewable energy, as well as sharing that energy with the rest of their community.

In our opinion, LECs will play a decisive role in the transformation of our energy system towards a decentralised, democratic, distributed and digitalised model, with the citizen and municipalities at its core. They are moreover designed to be a highly effective tool to combat energy poverty. Accompanied by additional tax incentives such as, for example, the Italian Super Ecobonus, tax credits could be structured around the amount of investment made in renovation and self-consumption that are transferable to private investors, making these projects viable and reducing the need for public equity.

It is therefore necessary that a clear, swift and uniform approach is applied to the whole country for LECs -as well as the consequent regulatory implementation, currently non-existent in Spain. This must include the greatest possible number of alternatives and initiatives originating from private equity, creating an effective and single domestic market and facilitating the process by eliminating the obstacles that usually emerge in public contracts.

In addition, LECs must also take steps to access public funding, addressing their role as an energy agent from a perspective that takes three variables into account:  the social, economic and environmental impact. This means that they must include aspects regarding energy efficiency, circularity and accessibility in their action plans. Clearly this initiative goes beyond installing solar panels and increasing battery use.

Eduardo Brunet, Founder and CEO of Greenward Partners

We are talking about effectively contributing to the decarbonisation and energy transformation objectives of our economy, as well as taking steps also towards eradicating energy poverty which, according to a recent study draw up by Eurostat, affected 7.5% of the population (3.52 million Spaniards) in 2019. This figure will increase over 2020-2021 due to the COVID-19 pandemic and its economic and social consequences.

In addition to regulatory implementation, activating municipal intervention is vital to make progress towards standardising LECs in Spain, as the town halls themselves are the entities that need to help with the whole entire labyrinth of licences, permits and the management of land rights and public spaces. On this point, the local administration must recognise its regulatory capacity through bylaws which, for example, can integrate these projects into the structure of the PACE loans (the Programme to Activate Ecological Equity in buildings), currently handled by Greeward as an amendment to the Climate Change Act. This mechanism, linked to the LECs, would be a powerful enabler and a vehicle to attract the massive amount of private equity needed to address the considerable investment costs required by such projects.

The LECs must not only be the owners of self-consumption and local storage systems, but also intervene as energy agents in the deployment of and investment in renewable generation projects anywhere in Spain. Thanks to Blockchain technology and the increasingly more sophisticated certification of origin systems, incorporating the KWH of different territories into the energy management of the LECs, which can even form groups of communities, is perfectly feasible. Economies of scale would be made available and greater potential given to the monetisation of grid flexibility and demand services.

There is still a long way to go and effective legislation is the first step that must be taken to advance towards new energy generation, sharing and consumption models. Undoubtedly, these are the foundations of a better future.