Funding through the Federal Reserve may be controversial, but establishing a national public infrastructure and development bank should be a no-brainer. The real question is why we don’t already have one, like China, Germany, and other countries that are running circles around us in infrastructure development. Many European, Asian and Latin American countries have their own national development banks, as well as belonging to bilateral or multinational development institutions that are jointly owned by multiple governments. Unlike the US Federal Reserve, which considers itself “independent” of government, national development banks are wholly owned by their governments and carry out public development policies.

China not only has its own China Infrastructure Bank but has established the Asian Infrastructure Investment Bank, which counts many Asian and Middle Eastern countries in its membership, including Australia, New Zealand, and Saudi Arabia. Both banks are helping to fund China’s trillion-dollar “One Belt One Road” infrastructure initiative. China is so far ahead of the United States in building infrastructure that Dan Slane, a former advisor on President Trump’s transition team, has warned, “If we don’t get our act together very soon, we should all be brushing up on our Mandarin.”

The leader in renewable energy, however, is Germany, called “the world’s first major renewable energy economy.” Germany has a public sector development bank called KfW (Kreditanstalt für Wiederaufbau or “Reconstruction Credit Institute”), which is even larger than the World Bank. Along with Germany’s non-profit Sparkassen banks, KfW has largely funded the country’s green energy revolution.

Unlike private commercial banks, KfW does not have to focus on maximizing short-term profits for its shareholders while turning a blind eye to external costs, including those imposed on the environment. The bank has been free to support the energy revolution by funding major investments in renewable energy and energy efficiency. Its fossil fuel investments are close to zero. One of the key features of KFW, as with other development banks, is that much of its lending is driven in a strategic direction determined by the national government. Its key role in the green energy revolution has been played within a public policy framework under Germany’s renewable energy legislation, including policy measures that have made investment in renewables commercially attractive.

KfW is one of the world’s largest development banks, with assets as of December 2017 of $566.5 billion. Ironically, the initial funding for its capitalization came from the United States, through the Marshall Plan in 1948. Why didn’t we fund a similar bank for ourselves? Apparently because powerful Wall Street interests did not want the competition from a government-owned bank that could make below-market loans for infrastructure and development. Major US investors today prefer funding infrastructure through public-private partnerships, in which private partners can reap the profits while losses are imposed on local governments.

KfW and Germany’s Energy Revolution

Renewable energy in Germany is mainly based on wind, solar and biomass. Renewables generated 41% of the country’s electricity in 2017, up from just 6% in 2000; and public banks provided over 72% of the financing for this transition. In 2007-09, KfW funded all of Germany’s investment in Solar Photovoltaic. After that, Solar PV was introduced nationwide on a major scale. This is the sort of catalytic role that development banks can play, kickstarting a major structural transformation by funding and showcasing new technologies and sectors.

KfW is not only one of the biggest but has been ranked one of the two safest banks in the world. (The other is also a publicly-owned bank, the Zurich Cantonal Bank in Switzerland.) KfW sports triple-A ratings from all three major rating agencies, Fitch, Standard and Poor’s, and Moody’s. The bank benefits from these top ratings and from the statutory guarantee of the German government, which allow it to issue bonds on very favorable terms and therefore to lend on favorable terms, backing its loans with the bonds.

KfW does not work through public-private partnerships, and it does not trade in derivatives and other complex financial products. It relies on traditional lending and grants. The borrower is responsible for loan repayment. Private investors can participate, but not as shareholders or public-private partners. Rather, they can invest in “Green Bonds,” which are as safe and liquid as other government bonds and are prized for their green earmarking. The first “Green Bond – Made by KfW” was issued in 2014 with a volume of $1.7 billion and a maturity of five years. It was the largest Green Bond ever at the time of issuance and generated so much interest that the order book rapidly grew to $3.02 billion, although the bonds paid an annual coupon of only 0.375%. By 2017, the issue volume of KfW Green Bonds was $4.21 billion.

Investors benefit from the high credit and sustainability ratings of KfW, the liquidity of its bonds, and the opportunity to support climate and environmental protection. For large institutional investors with funds that exceed the government deposit insurance limit, Green Bonds are the equivalent of savings accounts, a safe place to park their money that provides a modest interest. Green Bonds also appeal to “socially responsible” investors, who have the assurance with these simple and transparent bonds that their money is going where they want it to. The bonds are financed by KfW from the proceeds of its loans, which are also in high demand due to their low interest rates; and the bank can offer these low rates because its triple-A ratings allow it to cheaply mobilize funds from capital markets, and because its public policy-oriented loans qualify it for targeted subsidies.

Roosevelt’s Development Bank: The Reconstruction Finance Corporation

KfW’s role in implementing government policy parallels that of the Reconstruction Finance Corporation (RFC) in funding the New Deal in the 1930s. At that time US banks were bankrupt and incapable of financing the country’s recovery. Roosevelt attempted to set up a system of 12 public “industrial banks” through the Federal Reserve, but the measure failed; so he made an end run around his opponents by using the RFC that had been set up earlier by President Hoover, expanding it to address the nation’s financing needs.

The RFC Act of 1932 provided the RFC with capital stock of $500 million and the authority to extend credit up to $1.5 billion (subsequently increased several times). With those resources, from 1932 to 1957 the RFC loaned or invested more than $40 billion. As with KfW’s loans, its funding source was the sale of bonds, mostly to the Treasury itself. Proceeds from the loans repaid the bonds, leaving the RFC with a net profit. The RFC financed roads, bridges, dams, post offices, universities, electrical power, mortgages, farms, and much more; and it funded all this while generating income for the government.

The RFC was so successful that it became America’s largest corporation and the world’s largest banking organization. Its success may have been its nemesis. Without the emergencies of depression and war, it was a too-powerful competitor of the private banking establishment; and in 1957, it was disbanded under President Eisenhower. The United States was left without a development bank, while Germany and other countries were hitting the ground running with theirs.

Today some US states have infrastructure and development banks, including California; but their reach is very small. One way they could be expanded to meet state infrastructure needs would be to turn them into depositories for state and municipal revenues. Rather than lending their capital directly in a revolving fund, this would allow them to leverage their capital into 10 times that sum in loans, as all depository banks are able to do. (See my earlier article here.)

The most profitable and efficient way for national and local governments to finance public infrastructure and development is with their own banks, as the impressive track records of KfW and other national development banks have shown. The RFC showed what could be done even by a country that was technically bankrupt, simply by mobilizing its own resources through a publicly-owned financial institution. We need to resurrect that public funding engine today, not only to address the national and global crises we are facing now but for the ongoing development the country needs in order to manifest its true potential.

________________________________

This article was first published on Truthdig.com.

The post Why Germany Leads in Renewables: It Has Its Own Green Bank appeared first on P2P Foundation.

When Mauritius’ government secretly licenced Malaysian multinational CT Power to open a new coal power plant in 2013, social organisations took action, getting the plans shelved and all secret documents regarding negotiations with private sector energy companies released. Not only this, the movement pushed the government to create a National Energy Audit Commission to review Mauritius’ energy policies, and to set much higher renewable energy goals.

Realising that strong alternatives to non-renewable energy needed to be put forward, the committee set up the Renewable Energy Collective (KLR) and, together with the Centre for Alternative Research and Studies (CARES), launched the Power Shift campaign. This in turn led to the establishment of the People’s Cooperative Renewable Energy Coalition.

Supported by youth, trade unions, social movements, the progressive political party and the island’s sugar planters, the People’s Cooperative formed a plan to tackle the country’s energy and food supply problems in one stroke – by placing solar panels on the land of unemployed sugar planters to generate renewable energy to help produce food in nearby greenhouses.

Agreements have been set up with local sugar planters who have lost their jobs to use their land for solar power when the (KLR) gets a licence. The People’s Cooperative bid to enter the energy market has been stalled by the obstruction of multinationals and oligarchs, as well as government unwillingness to permit solar energy production, yet significant wins have been made.

“The participatory, solution-oriented approach of this initiative goes beyond lobbying for renewable energy to tackling environmental conservation, food security, livelihoods and redistribution of economic resources and benefits.”

– Agnes Midi Keita

Would you like to learn more about this initiative? Please contact us.

Or visit klrmoris.org

Transformative Cities’ Atlas of Utopias is being serialized on the P2P Foundation Blog. Go to TransformativeCities.org for updates.

The post Port Louis, Mauritius: Power Shift campaign to support farmers with clean energy appeared first on P2P Foundation.

Consider how odd this is: the demand for goods is used as a proxy for the relative accessibility of non-renewable resources — yet the increasing scarcity of fossil fuels isn’t showing up in the price we pay at the gas pump. Same with water and rare minerals, which are not valued according to their declining availability. Nor does eco-value appear on the spreadsheets of most stock traders, insurance companies or other businesses.

What’s causing such rampant misreporting and misallocation? I’ve come to see this now as more a problem of accountability than accounting. Frankly, the challenge is to admit our mistakes and reconceptualize the modern system of economic valuation, starting with the theory that it’s based on a fundamental law of equilibrium. Take, for example, Adam Smith’s idea that the efforts of individuals in pursuing their own interests naturally benefit society, or the notion that an organic circular flow exists between market prices and people’s incomes. Are these assumptions valid? And what do we mean by economic balance? Is it a principle of physics or biology?

Let’s begin by asking, is supply and demand truly able to manage the thresholds of resources which an environment can sustain, or to ensure that these resources are allocated sufficiently for the population living in that environment?

In both classical and Keynesian economics, the ratio between the supply of a quantity of a good or service and the demand for it is determined by the price of this quantity. What is tallied on the supply-side of this equation are production costs, which include labor, capital, expectations of future prices and suppliers, and the technology that’s used in production. The relative availability of materials and energy for production is also listed as a supply cost, although seldom in ecological terms. The rate at which people and their organizations may harvest or use a particular resource within its regenerative capacity is not normally registered on the supply side as an ecological yield, but as a financial outlay. Nor are the negative effects of pollution, waste, ill-health or risk typically included in production costs.

Conversely, the demand side of the market economy measures consumer income, tastes and preferences, prices of related goods and services, expectations about future prices and incomes, and the number of potential consumers. Rather than reflect actual human need, demand is a measure of individual consumption at the point of sale. It’s simply the price at which a person is willing to pay for something, signifying how much cash or credit is exchanged in the transaction. But what’s not measured by demand is the individual’s accessibility to breathable air, clean water, nutritious food, adequate shelter, or meaningful security, love, belonging and inclusion. Subjective expressions of need, beauty, volunteer labor, loss of commons or health and safety risks are simply not involved in the transmission of demand through the cash register, barcode scanner or wireless purchase.

A similar structure for market equilibrium is applied in banking and finance. Just as the supply-demand formula in microeconomics is based on a functional connection between producers and consumers, the supply-demand ledger is used in macroeconomics to express a similar type of relationship between lenders and borrowers. Here, the equilibrium between the money supply and the demand for money is adjusted through an interest rate, which represents the price that is charged for money.

Once again, this represents a certain kind of transactional balance within the marketplace, but does not reflect the broader relationship between the ecology and its population. When all that’s expressed in the standard supply-demand equation is the price of a particular commodity or good, or an interest rate which signifies the price of money, neither resource preservation and replenishment rates nor specific measures of the human need for this resource are accounted. Nor does the supply-demand equation convey the underlying costs of social harm or environmental damage that may be incurred.

This disequilibrium in value has also led to deep political biases in how the supply-demand model should be applied in society. On one hand, classical and neo-classical economists say that ‘supply creates its own demand’. They promote strong policies for investment and production through individual initiative and limited government intervention in the economy, while rationalizing endless resource extraction, production, growth and waste. In using supply-demand for their scale of balance, these analysts rarely question why the exponential values in the economy are so disjointed from the biological growth rates which occur in the natural world.

On the other hand, Keynesian economists say that boosting wages and purchasing power generates demand. They promote policies of shared investment and production through intervention by a government in its economy, while ignoring the destructive competition which this creates between available resources and the needs of a population for these resources. Here, Keynesians are little different than classical economists: both schools assume that meeting human needs is dependent on extractive production, expanding population, continuous demand, increasing personal income, rising consumption and the unintended but inevitable byproducts of manufactured pollution and disposable waste.

Neither choice is correct because the basic theory of market equilibrium ignores environmental and social costs, deeply misinterpreting the dynamic link between ecological support systems and the people who depend on them. This vital connection is seen simply as a ‘supply chain’ through which a quantity of something demanded by consumers or borrowers is delivered to them based on the quantity that firms or banks can supply. Neither the classical or Keynesian approaches to supply and demand reflect the constraints to the productive capacity of Earth’s resource base or the maximum size of a population which can be maintained indefinitely within that environment.

Our economic proxies for environmental balance are directly to blame for these fateful miscalculations. As a subsystem of a larger ecosystem, the supply-demand model does little to equalize the natural sources of productive input with the natural sinks of consumed output or waste, leading to massive market failure. Under the illusion of supply-demand equilibrium, human population is now using the basic resources of food, water, energy and minerals faster than Nature can replenish them to meet the needs of its people. To reverse this critical overshoot, we’ll have to transform our epistemology, our ideologies, our institutions and rules, as well as our methods of accounting.

All of this requires a clearer understanding of the interactions between the biosphere and human society. The ecological threshold of available resources and the allocations of those resources to meet the needs of a population are actually opposing forces which continuously counteract one another. This dynamic principle exists between every species and its environment: living organisms react to changes in their ecosystem and make adjustments to survive.

Through this constant interplay between natural and physical forces, instead of supply creating its own demand through prices or demand being dependent on income, the signaling of need by an organism routinely triggers the creation of its own supply. These self-regulating forces work in Nature and within the biology of the human body; they must also work in human societies. Measuring the replenishment of renewable and non-renewable resources will enable a society to sustain their yield relative to the offsetting needs demonstrated by the size and growth of the human population.

These divergent forces must be given an empirical basis in socioeconomic policy beyond the inept framework of supply-demand. Counterbalancing the needs of a population with its resource support systems requires a major readjustment. Here’s how this might work. What’s now included on the supply side as extraction, production and waste is redefined as the self-organization of resources within the ecological limits of the planet for their regeneration. And what’s now reported on the demand side as a measure of income is redefined as the  of people in meeting their daily requirements through the common use of these resources.

When supply becomes an ecological value and demand becomes the value of human need, ‘build it and they will come’ is transformed into ‘demonstrate the need and it is met’. Now, instead of a crude approximation for economic equilibrium, we have an actual measure for the cooperative activities of people managing their resources to meet their needs — a measure based on the level of regenerative output which their ecology can optimally ‘carry’ or sustain.

The term for this dynamic equilibrium between people and their environment, which points the way out of our supply-demand matrix, is biocapacity. Biocapacity expresses the intrinsic value of sustainability within an ecosystem. It is based on the thresholds of resources which can be sustained in an environment as measured against the allocations of resources sufficient to meet the needs of its population. Through this ecosystem value, biocapacity offers direct indicators and guidelines to help us organize our own sufficiency through the steadily fluctuating, self-adjusting metabolism of society as a living system.

Note: James Quilligan presented these comments at the Global Thresholds and Allocations Council (GTAC) Kickoff Meeting at the Royal Dutch Federation of Accountants in Amsterdam, convened by Reporting 3.0 on 31 January 2018, in a session on Allocation Approaches with fellow speaker Mark McElroy of the Center for Sustainable Organizations, moderated by Bill Baue of Reporting 3.0. The 35+ global experts gathered at the meeting sat in rapt attention while James spoke, and broke into spontaneous applause when he finished. Please see the GTAC Landing Page on the Reporting 3.0 website for links to the GTAC Concept Note, Meeting Presentation Deck, and Meeting Program (with abstracts by all speakers, including GRI Co-Founder Allen White, Johan Rockström of the Stockholm Resilience Centre, Doughnut Economic author Kate Raworth, Future Fit Foundation CEO Geoff Kendall, International Integrated Reporting Council Managing Director Neil Stevenson, and many others.)

This article was first published in Sustainable Brands.

Photo by steinertree

The post Beyond Supply and Demand: The Dynamic Equilibrium Between Global Thresholds and Allocations appeared first on P2P Foundation.

Before introducing those peculiarities, first some background: If people could own their energy, they’d be more secure – both financially and infrastructurally. We could save money and increase our ability to bounce back after natural disasters by producing clean, decentralized energy in our own communities. If ordinary people could put their money toward renewables, instead of investing in fossil fuels on Wall Street, we’d also speed up our response to climate change.

But as we began working toward this vision for community-owned renewable energy, strange things started turning up. We found that you can’t share power with your neighbors even if your roof could produce enough solar power for the both of you. And it’s legally very difficult to pool resources to build and access energy from a neighborhood solar project. Ultimately, most people aren’t able to access local solar energy because they are renters, have poor credit scores, or don’t have enough sun exposure on their roof for solar panels.

Stranger yet, there is a lot of money incentivizing solar for some people, but not as much for low to moderate-income households. Solar tax credits are available for homeowners and wealthy investors, but what about everyone else?

We’ve been working to address those strange things. For example, thanks in part to our advocacy, it’s now at least possible to develop shared solar energy projects with your neighbors. Unfortunately, because of opposition from entrenched interests, it’ll cost a premium for most people to take advantage of that policy. But while there are barriers to sharing energy, we believe we have found a path forward with a new legal model: the Permanent Community Energy Cooperative.

This model allows everyone to join a cooperative that strives for permanent access to and control of renewable energy for all of its members. We recently were awarded a grant from the California Energy Commission through the CalSEED program to further develop this model. Exciting! It may be just strange enough to work! If you’d like to learn about some our stranger thoughts behind it, check out this cartoon.

Let us know if you want to learn more and stay informed on community energy updates — such as jobs or volunteer opportunities, social events, and hopefully one day, memberships in an energy cooperative.

We haven’t been spooked by the strange things we’ve run into — we’re energized by the emerging opportunities and hope you are too!

Photo by National Renewable Energy Lab

The post A Permanent Community Energy Cooperative model to fight climate change and wealth inequality appeared first on P2P Foundation.

Wolfgang Hoeschele: The energy infrastructure that we inherited from the 20th century is one dominated by fossil fuels and uranium, mined in relatively few localities in the world. The distribution and refining of these fuels is tightly held by a few large corporations. Electricity generation typically occurs in plants that hold local or regional monopolies, with vast profit potential. While gasoline is burned in millions of vehicles, the distribution system remains within the control of a few corporations, which often have regional or national oligopoly or monopoly control. The environmental impacts of the energy industry are staggering. It is high time for change.

On the positive side, the need for change to a 21st century energy system based on renewable sources of energy is widely recognized, the necessary technologies exist (and are often cheaper than conventional forms of energy provision), and considerable progress has been made. We can build locally-based renewable energy infrastructures. Renewable energy from the sun, wind, water, organic waste, and geothermal heat can be found everywhere on the planet. Hence, every city and town can make use of available renewable energy sources that offer economic opportunity and enhance resilience in the face of global economic crises and environmental change. On a regional level, localities can exchange energy in order to even out seasonal or daily imbalances in supply and demand.

A locally based vision of renewable energy generation could eliminate global- or national-level domination of the energy infrastructure by a few large players, and thus the concentration of profits in the hands of a very few. It could also reduce our greenhouse gas emissions to very low levels, comparable to the emissions before the industrial revolution. But the local orientation alone would not ensure that the benefits would be shared among all sectors of the local population, and therefore it would not guarantee widespread and active support. This is where sharing solutions come in. Shared energy infrastructure means that people together own and operate both the distributed energy generation facilities and the infrastructure to deliver that energy from where it is generated to where it is used.

In a sharing vision of a local renewable energy system, many households will generate their own renewable energy (as in solar photovoltaic or solar thermal systems on their rooftops), but many more, for whom this is not an option, will share in the ownership and operation of off-site renewable energy generation infrastructure such as wind turbines. The distribution systems by which energy is delivered to households will belong to cooperatives, municipalities, or trusts that are accountable to their customers and therefore do not take advantage of the potential of supply monopolies to generate economic rents (unearned income, extraordinary profits). The energy infrastructure is built by companies controlled by their employees, ensuring equitable sharing of the economic benefits. The construction and maintenance of this entire infrastructure is financed in such a way that it benefits the producers and consumers (and often prosumers — people who both produce and consume what they produce), rather than simply providing growth opportunities for the finance “industry.” Consumers use their buying power to ensure that they obtain renewable energy that is produced under fair conditions.

All the elements of this locally-based, sharing vision of a renewable energy infrastructure already exist. Some have even been brought to considerable scale, as for example in Denmark, where a large proportion of the wind energy generation is accomplished by local wind cooperatives. The challenge is to bring all these elements together into mutually supportive networks, and to establish such networks essentially everywhere.

In many countries, much of the grid is owned by municipal authorities, which is an excellent solution as long as democratic accountability of these authorities is ensured. Unfortunately, there has been a trend in recent years to privatize electric distribution grids, on the basis of the argument that private control is automatically more “efficient.” However, this argument is only valid if there is true market competition, which is not the case in most energy distribution systems.

In this context, the best way to ensure that a business serves its customers is for the customers to take over the business. There are different models to do this: in rural areas — as in much of the U.S. — rural electric cooperatives have long played a large role in running the local grids. In large urban areas, however, this model has not been as successful. At the urban scale, municipal ownership or trusts are more prevalent.

Finally, it is important that the workers installing all this equipment get a good deal — and this works best if they themselves own their own companies and make the important decisions. The challenge now is to bring all these elements together and help them to grow, in order to build an energy infrastructure that allows all of us to live well, while ensuring good living conditions for all the other species on this planet.

The post The Case for Local, Community-led Sustainable Energy Programs appeared first on P2P Foundation.

In other words, Ostrom and the commons movement have yet to define the dynamic equilibrium which they seek as the balance between two opposing forces – population and resources – which continually counteract each other. Instead, the commons movement is more focused on counteracting the Market and the State than on measuring the replenishment of renewable and non-renewable resources and managing them to sustain their yield. In short, the commons movement does not seem to be producing alternative indicators for the production and provisioning which can be used to guide policy.

The book, Secular Cycles, made me realize that the commons, as Ostrom viewed it and as others are now envisioning it, is too informal and small-scale to work in a way that establishes empirical targets that will bring down exponential growth to arithmetic growth levels; and thus organizing society according to the dynamic equilibrium between population and the availability of food, water and energy. Instead, what we get in the commons movement is a general opposition to quantitative analysis because it reminds people too much of the metrics of unbridled capitalism.

My point is that if we don’t know how to develop evidence-based policy for a soft landing toward a reasonable level of subsistence — and I’ve seen very little of this in the commons movement — then I don’t know how we expect to create a long-term system for meeting human needs through sustainable yields. I would hope that the commons movement begins to create the basis for a viable new society by actually focusing on the optimum rate at which a resource can be harvested or used without damaging its ability to replenish itself. That would be something.

Let me put this in more structural terms. First, the carrying capacity rate for renewable resources follows a carefully guided policy of maintenance and sustenance to ensure that resources are replenished sustainably in meeting the needs of people in the present. This requires that social policies are made more equitable to ensure that everyone’s needs are met. Meanwhile, the needs of people in the future are in no jeopardy, so long as renewable resources continue to be replenished and provisioned within their carrying capacity. Hence, the carrying capacity rate of renewables is geared toward market coefficients for provisioning resources, goods and services for people at the current time, and will continue to be sustainable far into the future. This carrying capacity rate, based on renewable resources, in no way precludes (in fact, should be accompanied with) the creation of taxes toward a universal basic income and for maintenance of renewable resources.

Second, the carrying capacity rates of non-renewable resources are much more challenging and must be treated very differently. Society must decide scientifically how much non-renewable resources to use in the present and how much to save for the future. By guaranteeing that valuable resources will be ‘left in the ground’ or put away securely into a tamperproof lockbox, as it were, this formula has a benefit which, in one way, is similar to how gold used to function as a guarantee of reserve asset values and as a disciplining measure for currency exchange rates. Since a certain percentage of non-renewables are held in strict reserve for future generations, adherence to this process creates a value which is entirely *independent of the market* and is based on a relative scarcity index of non-renewable resources. This fraction (how much non-renewables to use for people now / how much non-renewables to set aside for people in the future) provides for a fixed and stable monetary rate that is tailor-made for the valuation of currency in the present.

In a society which is facing net energy loss and steep declines in non-renewable resources, this would be an extremely stable, strong, treasured, desired, sacrosanct and entirely non-marketized value. Instead of looking at productivity indices, commodity market rates, price inflation or unemployment indicators, monetary economists really ought to be turning their attention to the long-term carrying capacity of the planet’s non-renewables and their sustainability rates. I am in no way suggesting that the world should return to a gold standard; but to generate a system in which currency values are fixed to a meaningful measure of non-renewable resources, similar in some ways to the way that gold used to function. If this is done, the correlation of ecological sustainability with monetary sustainability will become a primary way of steering the world’s economy on a middle path between exponential growth and arithmetic growth, ensuring the sustenance and safely of society during a period of economic decline (originally posted to Facebook, August 2017).

Photo by optick

The post Carrying Capacity as a Basis for Political and Economic Self-Governance Discussion appeared first on P2P Foundation.

Wolfgang Hoeschele: The establishment of a carbon-neutral energy system requires massive investments in infrastructure such as wind turbines. Because distributed energy systems do not fit the business models of the old energy utilities, they continue to invest far too little in this sector. Meanwhile, many individual electric power consumers are interested in investing in renewable power infrastructure, but these investments are too large and require a level of expertise too advanced for individual households to be able to support them. How can consumers take matters into their own hands?

Wind cooperatives allow multiple households to pool their funds to collectively build one or more wind turbines. As co-owners, they make investment decisions and negotiate the terms with operators of larger electric networks. An urban example of this is the Middelgrunden Wind Turbine Cooperative, formed in 1997, which partnered with the Copenhagen municipal utility to build 20 wind turbines of 2MW capacity each, off the shore of Copenhagen. Københavns Energi, the municipal partner, has since then merged with several other companies to form the private energy company DONG Energy. The cooperative owns 10 of the turbines, while the other 10 are owned by DONG Energy. Over 8,500 people who mostly live in or around Copenhagen own the 40,500 shares of the co-op. The cooperative is organized as a partnership, and each partner has one vote, regardless of the number of shares. One wind turbine is a “children’s wind turbine” — shareholders have had their children vote on their behalf and thereby participate in the decision-making process, learning how to organize a sustainable future as cooperation between people.

The cooperative benefits from the support of the Danish association of owners of wind turbines (founded in 1978 as Danske Vindkraftvaerker, later renamed Danmarks Vindmølleforening). This association has successfully lobbied the national government to create favorable conditions for the expansion of wind energy. In part due to its activities, cooperatives accounted for around 50 percent of Danish installed wind energy capacity in the 1980s to early 1990s, and 20 percent of installed capacity today.

Results:

• The wind turbines were completed by 2001, and the output of the cooperative’s turbines has been varying from 40-45,000 MWh in the last several years.

• This is one of many examples in Denmark of wind power being produced as a result of the collective efforts of individuals interested in wind power.

• There is high public support for wind power in Denmark, due in no small part to the fact that ordinary people, not just some distant shareholders, are direct beneficiaries.

Additional Resources:

FEASTA report on Denmark’s wind cooperatives

Middelgrunden cooperative bylaws

English translation of Danish Promotion of Renewable Energy Act of 2008

This piece is an excerpt from Shareable’s upcoming book, “Sharing Cities: Activating the Urban Commons.” Keep an eye out for the public release of the book this summer. 

Photo by Stephen Braund

The post Danish Energy Cooperative Lets Consumers Collectively Build Wind Turbines appeared first on P2P Foundation.

Image: Advertisement for the municipal electricity utility in Hamburg (round 1900)

In Germany, there is a strong movement to claim the gas, electricity and heating networks back from private corporations. Initiated by civil organisations, they are pushing the political arena to take action towards a remunicipalisation of the energy system. After setting the theoretical background (in part 1), we will look into two cases: Hamburg and Berlin. These examples provide crucial insights into the interplay between civil initiatives and the political arena and allow to draw important conclusions. 

A municipal utility in Hamburg: good try, no cigar

As we saw in the first part, the referendum in Hamburg pushed the municipality to buy the electricity, gas and heating networks back from Vattenfall. Therefore, things seem to be on the right tracks there. However, a more careful observation shows that the model is missing a crucial part: the democratic governance.

In order to understand where the step was missed, we have to go back in time. During the phase preceding the referendum, several local actors created an energy cooperative, which aim was to apply to the concession for operating the electricity grid. It’s name is Energienetz Hamburg. They made a deal with a Dutch TSO, Alliander, which pulled out at the last moment.

Unfortunately, although Energienetz succeeded to attract a large number of members who commited to a common capital of 50 million euros, the municipality did not include them in the deal for the concession.

This is a missed opportunity, which could have seen a new type of civil-public partnership and the implementation in a state-run company of the cooperative decision-making model: one member (one user) = one vote.

On the brighter side, this energy coop. is now playing an important role in Hamburg, by organizing debates (called Wärmedialogue) to promote and push the municipality to investigate alternative sources of district heating. One solution for instance would be to recuperate the heat from a copper furnace on the South East side of the city instead of using fossil-fuel power plants. As mentioned in this video (to watch absolutely if you have 12 minutes to spare!), district heating is crucial because this represent a large number of homes (>450 000), which generally do not have other choices (e.g., renters who de facto have district heating). Therefore, prices and heating sources become central issues.

In Hamburg, an advisory board was created and adjunct to the Energy Agency of the city. As explained in this article: “Members of this new Board include a broad range of 20 representatives from society, science, business, industry and most importantly all local grid companies, also including Vattenfall and E.ON, which still remain main shareholders of the district heating and gas distribution grid until the purchase options has been exercised.” However, the board exert a mere advisory function and has limited decision-making power. As the article states, this is one of the main challenge that Hamburg faces: “avoid [that] the board becom[es] a toothless tiger”.

Twists and turns in Berlin

In Berlin, the story started in a similar fashion as in Hamburg but developed very differently. A dynamic campaign to remunicipalise the networks was launched in 2013, orchestrated by the civic initiative Berliner Energietisch. The referendum attracted more than 600 000 people but unfortunately, failed short of 20 000 “Ja” votes.

The actors are pretty much the same as in Hamburg:

• private utilities (e.g., Stromnetz Berlin, belonging to Vattenfall) are running the show at the moment,
• a municipal energy provider, Berliner Stadtwerke, daughter of the water utility and a minicipal grid operator Berlin Energie were created as a result of the campaign in order to apply for the concession to operate the grids. Berlin Energie is investigating interesting concepts, like the combined networks (link in German).
• an energy cooperative, Bürgerenergie Berlin, alive and kicking, aims at buying back and operating the grids.

Interestingly, everyone though that the game was over after the failed referendum but this was forgetting the importance of the political game. Indeed, the municipal vote in 2016 saw the formation of a new “Red-Red-Green” (SPD-Die Linke-Die Grüne) coalition in Berlin, which put back the remunicipalisation process on the agenda.

And here are the different options that are being evaluated presently by the municipality. We find applicants like in Hamburg: In white, the fully municipal operators (Berlin Energie) and in grey, the fully privatised actors (NBB Netzgesellschaft and Stromnetz Berlin). But we also find more funky applications: in white-grey hashed, either classical public-private partnership for the gas networks or more a complex civil-public-private partnership for the electricity grid. A new field of possible has been open. We are all very curious what will happen now!

This is interesting as it points out the joint role of the civil society and of the political arena in creating new spaces. It starts by a strong civic movement and is enabled by a favorable political landscape.

To finish, here a second little video that we did with TNI at the occasion of the conference “Against the NAM”. I had to answer the question “Why should we treat energy as a commons?”.

The post Remunicipalisation of energy systems – Part 2 appeared first on P2P Foundation.

Image: Advertisement for the municipal electricity utility in Hamburg (round 1900)

In Germany, there is a strong movement to claim the gas, electricity and heating networks back from private corporations. Initiated by civil organisations, they are pushing the political arena to take action towards a remunicipalisation of the energy system. This is a very interesting process, which allows to explore key concepts such as the right to energy and democratic governance as well as the interplay between politics and the civil society.

I presented this story during a conference on about the potential remunicipalisation of the Groningen gas field at the beginning of January (see previous article). You will find here all the slides from the presentation, which you can download and reuse (but please, cite me!). All sources are indicated at the end of the post.

Energy is a commons

Firstly, I will quickly lay some theoretical foundations to the relationships between energy and the commons. The following slide is an illustration of the differences between energy used as a commodity or a common good.

• Energy is a commodity: it is produced to make profit (even green): we are clients/consumers and our decision power is to chose between different companies. The incentive in this case is to produce as much energy as possible (or raise the prices) to increase the profits. The prices are set either by the producer (the owner of the power plant) or by the market.
• Energy is a commons: it is produced to respond to a need and we are producers and consumers at the same time, this is called “prosumers”. We can decide together with our neighbours on the system we want to have. The incentive is to produce what is needed and save it. Being a commons does not mean that energy becomes free of charge but that the prices can be adapted to our needs (we control it and use it to foster social and climatic justice). Think of water, which is also a common good: it still has a cost for the consumer. But you don’t make profit out of it because it is considered as a human right. We should look at energy in that way.

Cooperatives and municipal utilities to foster energy democracy

When we think energy democracy, one thing that comes to mind are cooperatives. There are many throughout Europe, which can have very different financial structures and sizes. But they have one thing in common, which makes them very particular: their ownership and governance modes.

The infrastructure is owned by the members, who each have a vote. Decisions are taken on the model “one member, one vote”.

The other form of organisation that holds great potential for energy democracy are municipal utilities. They are known in Europe for the water utilities and used to play a large role for energy as well. But the wave of privatisations in the 1990s put them in the hands of private corporations. Since a few years, some cities are taking a reverse path and buy their networks and utilities back. This is very interesting because municipal utilities, which inherently belong to all, have potentially one crucial advantage over cooperatives: as all inhabitants/users can be considered as members, they might prove more inclusive structures. However, this is only true if the governance mode is copied on the coop one: “one member one vote”. We will see that it is not necessarily the case.

Hamburg in the driver seat

First, here are a few basics on the structure of the energy system in Germany:

• On the one hand, there are the grid operators (TSO): they own and operate the local electricity, gas and heating networks. They get concessions of 20 years, given by the federal states: these are quasi-monopolies. They compete to get the concession but once the get it, they have no competitors.

• On the other hand, there are the energy providers, who operate the power plants and commercialise energy (they are the users of the grid). Here it can be anyone producing energy, from the very big to the very small.

In Hamburg, the concession for the networks was hold by Vattenfall and ran out in 2013. People then decided to regain control on the grid. So the city of Hamburg grounded a municipal utility (called “Hamburg Energie”), as a daughter of the water utility. It is now an energy provider, which focuses on producing and selling local green energy (mostly electricity but also some gas).

Next to that, a collective of citizens founded the initiative “Unser Hamburg Unser Netz”. They ran a campaign and had a referendum, during which people voted in favour of a full remunicipalisation of the networks. Therefore, the electricity network was bought back in 2014 and the gas and heating networks should get back in the public hand by 2018/2019.

So things seem to be on a right track in Hamburg, and it was indeed experienced as a tremendous victory for the supporters of energy democracy. But… something is missing in the Hamburg model: the citizen participation, based on the cooperative model. Indeed, both the municipal energy utility and municipal TSO are run as companies and users are not taking an active part in decision-making (they are merely consulted).

That’s it for now. Next time, we’ll have a look at energy cooperatives in Hamburg and at the story in Berlin. Stay tuned!

In the meantime, you can watch the whole presentation, that was recorded by TNI (whom I thank very much!).

Photo by Pacific Northwest National Laboratory – PNNL

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Step 1. Start now

Don’t wait. That’s rule #1 for living in a world where we’re already feeling the impacts of climate change; millions of lives and livelihoods are at risk — or stand to benefit from solutions — in this and future decades. We needed a just transition of our energy economy yesterday. And while there are challenges to universal access and equitably shared benefits from clean energy, there are steps we can take today to start building projects, jobs, and improved health in local communities.

Step 2. Appreciate the puzzle, and don’t let barriers stop you

As we described in our Community Energy Puzzle post, community-owned renewable energy has the potential to expand opportunities for ordinary citizens to put their money toward community-controlled energy facilities so neighbors can share in both electricity and the economic, social, and health benefits of clean energy. However, because our current legal system favors the wealthiest sectors of society, it’s not legal in most states to share electricity from solar panels with your neighbors, and it’s almost impossible for renters, nonprofits, or cooperatives to benefit from the tax incentives that exist to promote solar and wind energy projects.

Our team has spent two years mapping the legal landscape of community-owned energy, and we have not found a community-owned energy model in the U.S. that appears to be scalable. Existing successful projects provide much to learn from, but also benefit from unique regulatory environments, financing opportunities, the wealth of higher income communities, or institutional support that may not be available to most communities. Further, we’ve uncovered legal barriers in the realms of securities, tax, and utilities regulation. Combined, those barriers prevent ordinary people from 1) putting money into, 2) receiving tax benefits from, and 3) directly purchasing energy from their own renewable energy projects. From this exploration, we hatched an idea: the Permanent Community Energy Cooperative.

Step 3. Build today and plan for tomorrow

Based on our research of existing models and legal barriers, we’ve come up with an energy development and ownership model called the Permanent Community Energy Cooperative (PCEC), a scalable model that gives communities permanent access to and control over their power.

The model’s key innovation is to leverage existing, but little-known, collective finance mechanisms for cooperative entities. Initially, PCECs will be more like energy investment cooperatives than consumer cooperatives. Until laws change, members may not be able to receive energy directly from the cooperative, so the PCEC will have a built-in and legally enforceable adaptation mechanism to enable members to receive energy when regulations make it viable. Meanwhile, as described below, a PCEC can drive energy development by meeting other essential needs for members: 1) money, 2) community, 3) good jobs, and 4) a just, sustainable, and secure future.

1. Divestment and Investment Opportunities:

The PCEC provides a rare opportunity for low- to moderate-income people to invest in their local community and earn a modest return. In 2015, our team drafted and passed a California bill that essentially legalizes equity crowdfunding for cooperatives. We believe the growing movement to divest from fossil fuels will drive community capital toward PCECs. By harnessing the consumer and investor dollars of ordinary people, we believe we can overcome barriers to community-owned energy, activate a demand-driven market transformation nationwide, and accelerate a just transition to renewable energy.

2. Decentralized Community-Building:

The model is designed to fuel project development by harnessing existing social connections and communities of interest. As with traditional “barn raising” and fraternal insurance societies, this strategy is tried and true. Food, drink, music, sports, and other social activities are built into the practical management of common resources around the world. In the energy context, pairing renewable development with social activity lends cohesion and commitment to project development.

Relatedly, the model will rely on a decentralized organizational structure. Each PCEC is designed to scale rapidly, in part because the financing model depends on building a large membership base. A decentralized structure can retain the tight-knit quality of communities by supporting people to come together in small groups and build community around launching each energy project. Decentralized organizations represent both innovation in organizational design (see the book “Reinventing Organizations”) and yet another tried, true, and timeless structure for human activity.

3. A New Workforce:

A decentralized, democratic, and mission-driven organization requires a particular kind of workforce. Each PCEC employee will be a steward of the cooperative’s mission, tasked with nurturing community projects and managing technical and administrative logistics. Governance among staff will be relatively nonhierarchical to remove inefficiencies of bureaucracy, place each worker in a position of direct accountability to community groups, and tap fully into workers’ intrinsic drive to push projects forward. Since PCECs are designed to scale, a PCEC movement could rapidly create jobs and fulfill a craving for meaningful and sustainable work for tens of thousands of new workers and create a path to transition workers in the fossil fuel economy.

4. Building Movements Toward a Rapid and Just Renewables Transition:

If investing opportunities, community-building, and good job creation are not enough of a driver for member engagement, then a desire for equity and sustainability may seal the deal. A PCEC is a vehicle for building a broad-based movement, setting into motion widespread renewables development, and ensuring that the transition to renewables enables communities to own and control their power in the long run.

A PCEC can address many of the current barriers to community-owned energy:

We believe the PCEC model represents a breakthrough and has great potential to be replicated by grassroots communities everywhere, particularly if we can demonstrate it with a successful pilot. A pilot can also catalyze policy change by demonstrating to lawmakers that current laws are preventing innovation and equitable development.

Permanent Community Energy Cooperatives are an opportunity to start healing the planet and communities today through equitable energy development. They’re also “fun-work” that can bring people together, create results to celebrate, and build stronger bonds for more resilient, thriving communities.

Subin Varghese is the Community Renewable Energy Director at the Sustainable Economies Law Center. Contact Subin at [email protected].

Photo by woodleworm

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