# ‘We like sharing energy but currently there’s no advantage’: Transformative opportunities and challenges of local energy communities in Europe

Bernd Bonfert

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Bernd Bonfert. ‘We like sharing energy but currently there’s no advantage’: Transformative opportunities and challenges of local energy communities in Europe. Energy Research & Social Science, 2024, 107, pp.103351. 10.1016/j.erss.2023.103351. hal-05395002

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Original research article

# ‘We like sharing energy but currently there's no advantage': Transformative opportunities and challenges of local energy communities in Europe

Bernd Bonfert*

Department of Environmental Science, Aarhus University, Frederiksborgvej 399, Roskilde, Denmark

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## ARTICLE INFO

### Keywords:

- Energy communities

- Renewable energy

- Social innovation

- Peer-to-peer exchange

- Local governance

- Citizen participation

- Public companies

## ABSTRACT

Rising energy costs expose the instability of our energy system and underline the urgency of transitioning towards decentralized renewable energy provision. Many European countries have tasked municipalities with driving this transition and the European Union has designated local energy communities to receive stronger support. Energy communities involve public, private or community actors in co-producing and distributing renewable energy. They are often praised for helping democratize, decentralize and socially embed the energy system, but remain constrained by economic and legal barriers. To what extent they can contribute to transforming the energy system thus depends on their ability to scale beyond their niche.

This article identifies opportunities and challenges encountered by energy communities, especially regarding legislation, municipal governance, and stakeholder participation. Drawing on ‘foundational economy’ concepts, it explains to what extent energy communities are governed and scaled by public, private or community actors, and discusses the transferability, social cohesion, and democratizing potential of energy innovations. The article compares qualitative findings from four energy community pilot projects in the Netherlands, Belgium, Sweden and the UK, based on interviews, observation and document analysis. It finds that while many cities are well-positioned to launch energy communities, they lack the authority and means to scale up innovations, thus having to rely on other actors. While private companies are often hesitant about adopting innovations, municipal companies are more willing to do so, yet citizen participation is lacking across cases. Findings thus underline a need for legislation to remove barriers to energy innovation and enable democratic participation.

## 1. Introduction

Rising energy prices have contributed to a cost-of-living crises in many European countries, while fuel scarcity threatened people's ability to heat their homes during the winter. These developments were amplified by geopolitical conflicts around the Russian war in Ukraine but they also expose the underlying volatility of our global fossil fuel-dependent energy system. The already urgent need to shift towards renewable energy sources is thus flanked by a need to make our energy system more structurally resilient and socially equitable. In the EU and UK, governments are pursuing these objectives to a large extent by pushing for a decentralization of renewable energy provision. They have shifted much of the responsibility for climate adaptation and energy system change to the municipal level, requiring cities to develop their own sustainable transformation plans and actions. This shift also increasingly involves triple- or quadruple-helix partnerships with the

private sector, academia, and at times civil society organisations [1]. Since many renewable energy technologies, such as solar photovoltaic (PV) panels or heat pumps, can be installed at micro level, businesses and households are expected to actively contribute to a decentralized energy production and distribution system. Indeed, the EU's 'Clean Energy for all Europeans Package' directs governments to support the development of local energy communities (LECs), in which different stakeholders can co-produce and distribute renewable energy [2].

LECs can involve various actors as 'prosumers', including households, companies, associations, and municipalities, who co-produce and distribute renewable energy with each other. They often adopt additional innovative technologies and distribution systems, such as smart energy grids, battery storage, electric vehicle charging, or peer-to-peer sharing. By giving people a higher level of control and ownership over their energy provision, LECs are often praised for prefiguring ways to democratize and socially embed the energy system, on top of making it

Abbreviations: DSO, distribution system operator; EU, European Union; FE, foundational economy; LEC, local energy community; P2P, peer-to-peer.

* Corresponding author.

E-mail address: bb@envs.au.dk.
more ecologically sustainable [3]. However, the effectiveness of LECs is often constrained by legal barriers, capacity limitations, and the monopoly of energy grid operators. Due to the involvement of private companies, LECs are also at risk of being used for profit-maximisation, undermining their potential for socially embedding energy provision [4,5]. Ultimately, to what extent LECs can contribute to the energy transition also depends on their ability to scale beyond their relative niche status, either through growth and replication, or by inspiring the adoption or institutionalization of their innovative practices [6].

This article interrogates the potential of LECs to achieve these transformative ambitions. It draws on concepts of the 'Foundational Economy', which capture how social innovations can facilitate a more socially equitable, democratic and ecologically sustainable provision of essential needs, such as energy [7]. Through this lens, the article identifies and discusses various opportunities and challenges LECs encounter, especially regarding their legislation, local governance through municipalities, and the role of different types of stakeholders in running and scaling LECs. The article draws on qualitative analyses of four different LEC pilot projects in the Netherlands, Belgium, Sweden and the UK, based on semi-structured interviews, observation and document analysis. It finds that new policies may have elevated the role of LECs but do not yet incentivize their more innovative, democratizing and socially redistributive practices. While many cities have embraced the responsibility for trialing energy innovations through LECs, they often do not have the means to implement innovations at scale, thus having to rely on other stakeholders. While many private companies appear too risk-averse to do so reliably, public companies seem not only eager to adopt innovations but also better positioned to prioritise the 'public good' over profits. Community participation, however, is marginal across cases, highlighting a lack of democratic accountability and social accessibility within LECs and the larger energy transition process.

The next section introduces LECs and the theoretical concepts surrounding the Foundational Economy, followed by a section on the methodology and cases. Afterwards, three analytical sections will interrogate, respectively, the legislation of LECs, the role of cities in driving LEC development, and the role of different types of stakeholders in running and scaling LECs. A concluding section summarises the findings and discusses implications.

## 2. Theory and concepts

### 2.1. Local energy communities

Energy systems can vary in their distribution of energy production, ownership, control, consumption, and economic valuation. While sustainable energy production has become increasingly decentralized in part due to the affordability of solar PV and heat pumps, energy distribution remains highly dependent on the services of distribution system operators (DSOs), who effectively enjoy monopoly status [8]. Visions of a more decentralized and sustainable alternative often involve the development of independent smart energy grid systems, virtual power plants, or (non-commercial) peer-to-peer (P2P) energy exchange [9].

In *local energy communities* (LECs) different actors, including households, businesses, third sector organisations, and municipalities, have begun prefiguring such alternatives from the bottom up [10]. Their motivations are manifold, from trying to reduce their energy costs and environmental footprint, to increasing their energy security and gaining more democratic control over their energy system while becoming more independent from the central power grid [9]. LECs are normally relatively open and horizontally governed [11] but otherwise highly varied in their composition, business model, and technical set up. Businesses are the main drivers in some LECs, while others have a relatively even distribution of participants [10]. Consequently, some engage in trading and investment or provide services, while others focus more on collective energy consumption [12]. Larger LECs in particular are often based on limited partnerships that can afford to install wind farms, whereas

smaller LECs usually utilize solar PV, bio energy, or heat pumps and are more likely to be organized as cooperatives or associations [13].

LECs have been shown to help involve citizens in planning and designing their energy systems by creating transparency over energy use and pricing. Especially P2P schemes require them to become active prosumers who collectively determine their production volume and prices [3,10]. This can also help reduce consumption and costs and, conversely, share profits from renewable energy production that can be reinvested into community development. Social and ecological benefits gained from this can include fostering community trust, self-sufficiency and empowerment, deepening technological learning, reducing environmental emissions, and promoting green practices [14]. To the extent that LECs involve local businesses, they can also contribute to local economic development, creating jobs and raising tax revenue. Collaboration with external parties from the private, public or third sector also raises LECs' ability to expand and multiply [10,15]. Given the growing participation and policy attention around LECs (see Section 4.1), some authors have thus concluded that they 'are set to become a powerful instrument of transformation and of coordinated action, across a variety of cities in Europe and beyond' [16].

However, LECs also face certain barriers. They are limited in their accessibility, both financially due to the costs of installing energy equipment and practically due to the level of technical and administrative skill necessary to organize a P2P scheme or monitor a smart energy system. Consequently, LECs tend to primarily involve people with higher incomes and technological affinity, limiting their ability to develop a more grassroots solidarity-based energy system [17]. Many of them also become centralized around dedicated experts, while most participants remain passive consumers [15]. Even in relatively well-functioning LECs, fair cost and benefit allocation can be a continuous organizational challenge [9], which is exacerbated when trying to expand such communities across scales and stakeholder groups [3,18]. The sheer complexity of LECs thus makes it challenging to compete with the relative comfort of a more centralized energy system [19]. Addressing these challenges may require policy support for LECs through subsidies and promotion, which many countries lack [6,20].

Moreover, scaling LECs beyond their niche status carries its own challenges. Since most countries have privatized their energy production and distribution infrastructures, they cannot directly initiate the adoption of innovative practices, having instead to rely on indirect incentives such as subsidies. These primarily target private companies and DSOs, which are often viewed as key actors needed for expanding LEC practices. However, the profit orientation of the private sector is inherently at odds with many of the sustainability- and solidarity-based aims of LECs, creating a risk of greenwashing and misappropriation of the 'community' label by commercial energy suppliers [10]. Conversely, practices such as P2P exchange, energy storage or grid balancing are often not financially competitive with selling off surplus energy and also lie far outside the practical repertoire of DSOs [19]. At the same time, LECs that address these shortcomings by promoting their own benefits in regard to renewable energy production and grid stability have been shown to do so at the cost of de-emphasizing the need for energy democracy and addressing energy poverty [21]. Financial subsidies or tax breaks alone may be insufficient remedies for these challenges, given the inherent unpredictability of switching to new energy sources [5], on top of which continuous state support would also undermine LECs' ability to develop and scale independently [22]. Some inspiration for how LECs could be embedded in a comprehensive approach to local renewable energy transition can be gained from *foundational economy* scholarship.

### 2.2. A *foundational economy* approach to local energy communities

The foundational economy (FE) framework conceptualises a social, ecological and democratic transformation of the capitalist economy by focussing on essential reliance systems. It identifies certain key economic activities that are indispensable for meeting people's basic needs,
thus providing ‘the infrastructure of everyday life.’ ([23], p. 319). These include a ‘material’ dimension of daily consumable resources, such as energy, food, water, and housing, a ‘providential’ dimension of welfare services, such as health, care and education, and a ‘discretionary’ dimension of time- and group-specific necessities such as furniture or clothing [7]. These are distinguished from a ‘traded’ economy of non-essential and primarily profit-oriented activities, and a ‘core economy’ of domestic and community labour.

As a foundational sector, the energy system has undergone signifi-
cant changes in recent decades. During the period of Fordism and
Keynesian economic policy, energy production and distribution were
overwhelmingly under public ownership and centralized within large
state-run coal, oil and gas companies and grid operators [24]. After the
1980s, widespread neoliberalisation simultaneously led to the privati-
sation of public energy infrastructures and increasing government sup-
port for renewable energy production by private companies and
households, using tax breaks, feed-in tariffs and other subsidies, as well
as public-private partnerships [5]. Due to their scale and the essential
nature of their services, many energy companies and grid operators
retained a ‘natural monopoly’ after privatisation, thus requiring
enhanced government regulation [25]. Where public ownership over
core energy infrastructure was maintained, ‘new public management’
strategies were introduced to orient public energy companies more to-
wards market needs as well [26]. While this period was characterised by
a growing share of renewables, especially in countries led by leftwing
governments [27], it also marked an increase in household energy costs
due to the commercialisation of electricity and continued oligopolistic
market share of non-renewable energy suppliers [28,29].

This development has largely continued to this day and still informs
EU climate policy. Yet, the urgency of reducing climate emissions, the
cost of living crisis, and the volatility of both energy grids and fossilised
carbon sources, are fuelling a governance shift towards more decen-
tralized and resilient renewable energy production and distribution – as
reflected in the EU's 'Clean Energy for all Europeans Package' [2]. Local
governments play a key role in this process by generating public
renewable energy and involving companies and communities in devel-
oping and expanding renewable energy innovations [3].

The FE framework can help investigate the energy system's ongoing
development, including its social, economic and political drivers and
impacts across society [30]. It can also explore social innovations and
alternative trajectories [31] that hold the potential for replacing profit-
oriented energy provision with a more socially equitable, sustainable,
and democratic alternative. Such a *foundational* alternative would not
only have to re-establish the universal provision of essential energy
needs previously guaranteed under Fordism ('FE 1.0') but also secure
the wellbeing of future generations by ensuring ecological sustainability
within planetary boundaries ('FE 2.0') [32]. To what extent such an
alternative would need to civilise, socially embed, or outright transcend
the capitalist market economy is heavily debated [33,34], making it all
the more necessary to analyse the scalability of different prefigurative
innovations such as LECs.

## 2.3. Beyond local innovation

FE scholarship routinely investigates place-based social innovations and regards local governments as having a key role in fostering foun- dational transformation, both by supporting the development of inno- vative projects themselves and by promoting and institutionalizing their innovations at scale. In contrast to notions of ‘experimentalist gover- nance’, which focus on processes of institutional ‘learning by moni- toring’, FE conceptions of local governance emphasise dynamics of public provisioning, active citizenship, and democratic participation [35,36]. As such, local governments are discussed in terms of their ability to adopt a *grounded city* approach by re-establishing public con- trol over foundational production and distribution infrastructures ('remunicipalisation') and 'insourcing' jobs into municipally-owned

companies that serve as local ‘anchor institutions’ [37]. Since such
municipal companies experience tensions between their political ob-
jectives, community commitments, and market pressures [38], holding
them accountable to the ‘public good’ rather than the market requires
sharing control between politicians, workers and communities, as in the
case of citizen energy boards such as the ‘Energietisch’ in Berlin [39].
Moreover, cities can run ‘public-common partnerships’ in collaboration
with cooperatives, non-profits, think tanks or charities, thus ensuring
their non-market orientation, as in the case of the ‘Plymouth Energy
Community’ [40] and in numerous German municipalities that are
formal members of local energy cooperatives [41]. Deliberative demo-
cratic forums such as citizen juries and energy boards can empower local
communities to engage in active citizenship and exercise democratic
control over their energy systems as well [3]. Thus, in addition to pro-
moting energy innovation, a foundational grounded city approach can
contribute to democratizing and decommodifying the energy system
[3].

Moreover, while public and community-based anchor institutions
could provide these foundational needs, cities could invest into other
‘accelerators’ of growth and value, such as innovation and (digital)
infrastructure, prioritizing smaller local businesses over larger external
companies [40]. This transcends conceptions of the ‘entrepreneurial
state’, which is framed mainly around its capacity to nurture and steer
the knowledge economy through ‘mission-based’ research, development
and innovation policy [42] by broadening the perspective around all
essential reliance systems. In doing so, it also enables ‘local wealth
building’ by retaining economic value in the local community, poten-
tially raising tax revenue and improving employment [43].

Although highlighting the importance of place-based social in-
novations, the FE also inherently transcends geographical and institu-
tional scales. FE scholars seek to overcome widespread reductionist
notions of both methodological nationalism, which underemphasizes
the structural importance and political agency of cities and regions [44]
and the ‘local trap’ of falsely considering municipal governments to be
inherently more just, sustainable and fully capable of solving all of their
own problems [36,45]. Local bottom-up engagement, for instance
through ‘commons’ networks [46], can be crucial for initiating inno-
vation and ensuring active citizen participation, but a holistic trans-
formation of essential reliance systems requires changes in institutional
governance and economic redistribution on a large scale [47].

Thus, examining the role of LECs through an FE lens involves not
only identifying their place-based achievements and shortcomings, but
also assessing their ability to drive large-scale transformation by
inspiring replication and advocating for changes in energy policy. While
the purely economic weight of LECs may remain limited even within a
foundational governance approach, their importance for promoting
(socially and technologically) innovative practices and fueling active
citizen participation could be crucial. Conversely, to what extent LECs
are given both the necessary support to trial innovations and the polit-
ical attention to share their experiences depends heavily on climate and
energy policies at multiple scales. For municipalities this means a
grounded city approach must reach beyond their own territory and
involve, for instance, horizontal exchange with other city governments
to share knowledge and best practices, as in the ‘Fearless Cities’ network
[45], as well as vertical policy advocacy at regional and national level to
achieve a more supportive funding environment and address cross-city
and -regional inequalities [48].

## 3. Methods and cases

The article draws on a qualitative comparative study of similar cases
[49] by examining LEC projects in the cities of Amersfoort
(Netherlands), West Suffolk (United Kingdom), Malmö (Sweden) and
Mechelen (Belgium). The four cases are similar by representing experi-
mental LEC pilots launched by their respective municipalities to trial
energy innovations intended for scaling. At the same time, they offer
contrasting insights from different political economic contexts, including between Northern European countries within and outside the EU, and cities with and without trial experience, public ownership over major infrastructure, and involvement in international climate pacts. Thus, comparing them allows us to identify place-specific differences in LEC development.

The West Suffolk LEC is run by the local council, which produces renewable energy through a nearby solar farm, and involves local companies in a business park, as well as P2P energy exchange through a third-party service provider. Both LECs in Malmö and Mechelen are sustainable mobility hubs in parking garage buildings, using PV, battery storage and electric vehicle charging infrastructure. The hub in Malmö is run collaboratively by the municipality and a municipally-owned parking company and the city holds public ownership over major energy-relevant infrastructure. The hub in Mechelen is run by the municipality in collaboration with a private housing company and includes P2P energy sharing between two businesses renting space in the building. Mechelen is also a signatory of the European 'Covenant of Mayors' and thus committed to implementing EU climate and energy objectives. Finally, the Amersfoort LEC is run by the municipality in collaboration with private energy service providers and consists of smart energy systems in two residential sites, using solar PV, heat batteries, and energy storage. In contrast to the other four cities Amersfoort has no major prior experience running sustainability trials.

Informed by the FE framework and grounded city concept, the case study analysis focused on three key dimensions: the LECs' political economic context, represented by energy policies and infrastructures, the role of municipal governments in leading LEC projects, and the participation of private, public and community stakeholders in running LECs and scaling transformative energy practices. To examine these dimensions, multiple qualitative methods were combined, including document analysis, semi-structured interviews, and participant observation.

The document analysis was conducted by analysing local and national policy documents related to energy and climate governance, including action plans and evaluation reports, to map the four cities' energy transition strategies and current renewable energy infrastructure, as well as characterise existing legislation on LEC practices. This offered key insights into the political economic context of the four LEC cases.

To identify the role of municipal governments and other stakeholders in running LECs and scaling energy practices, 17 semi-structured interviews were conducted with LEC participants, including local administrators working on sustainability issues, local politicians involved in the pilots, business representatives providing technical equipment or participating in P2P exchange, and network operators (Table 1). Interviews took place between October 2022 and April 2023 and lasted an hour on average. Questions revolved around the respondents' work within the LECs and wider energy transition process, including their experiences of working with local government and different stakeholders. Questions also teased out their subjective assessment of the LECs' achievements, challenges, and lessons, and their views on the key needs and barriers of scaling energy innovations to achieve a wider renewable energy transition. Interviews were recorded and transcribed

<table><caption>**Table 1**
Interviews.</caption><thead><tr><td>#</td><td>Respondent function</td></tr></thead><tbody><tr><td>R1 – R3</td><td>Council administrator, UK</td></tr><tr><td>R4 – R6</td><td>Business representative, UK</td></tr><tr><td>R7</td><td>DSO, UK</td></tr><tr><td>R8 & R9</td><td>City administrator, Belgium</td></tr><tr><td>R10</td><td>Local politician, Belgium</td></tr><tr><td>R11</td><td>Business representative, Belgium</td></tr><tr><td>R12 & R13</td><td>City administrator, Sweden</td></tr><tr><td>R14</td><td>Public company representative, Sweden</td></tr><tr><td>R15</td><td>City administrator, Netherlands</td></tr><tr><td>R16 & R17</td><td>Business representative, Netherlands</td></tr></tbody></table>

and transcripts were analysed using qualitative open coding.

Finally, participant observation was conducted by co-organising four workshops co-organised between researchers and each LEC pilot team, which revolved around sharing the perspectives and needs of (potential) LEC participants and developing common plans of action for addressing the local energy transition. This offered significant hands-on insights into the practical engagement between municipal governments and other stakeholders within LECs, greatly adding to the data uncovered by the interviews. Written fieldnotes were taken based on the observation and analysed using qualitative open coding.

Through this combination of qualitative methods, the research design offers unique and in-depth insights about the facilitating conditions, practices, motivations, needs and challenges of different LEC projects. The comparison across cases also allows for a distinction between common and place-specific findings. At the same time, the generalisability of the study is limited by its small-n scope [50] and its focus on Northern Europe, which is somewhat overrepresented in the literature [51], underlining the significant potential for additional larger-scale or longitudinal research to follow up on its findings.

# 4. Results and discussion

## 4.1. Legislating energy communities

The EU has recently begun promoting a decentralized renewable energy transition, partly rooted in developing LECs, but its effectiveness is highly uncertain. Through its 2019 'Clean Energy for all Europeans Package', the EU directs governments to support the creation of renewable energy communities and citizen energy communities [2]. The former are defined as communities of local stakeholders (including households, small or medium-sized enterprises, and municipalities) who collectively produce, consume, store or sell renewable energy to provide environmental, economic or social benefits. The latter do the same but may involve non-local participants and engage in additional electricity efficiency and charging services using non-renewable sources [12].

Although this framework contains important elements, it remains relatively vague and open to interpretation. Member states are free to determine how exactly they support the creation of energy communities, as well as how they define the 'local' scale that distinguishes renewable from citizen communities. Many countries decided to only demand the majority of community participants to be locally rooted [2], thus creating a loophole in favour of larger commercial actors to benefit from ostensibly community-focused support. Although the European Commission proposes various socially redistributive measures, such as requiring energy communities to utilize cooperative models, P2P sharing, and low-income subsidies, none of these recommendations are binding. Consequently, according to the European federation of energy cooperatives REScoop, only six member states (including Belgium) have made 'good' progress towards implementing the EU's framework, while the majority show 'substantial deficiencies'. Sweden's performance is even categorized as 'bad' [52] In some countries, such as Serbia, the transition to local small-scale hydropower is even enforced through 'state-sponsored violence and coercion' ([53], p. 1), which the EU framework does little to address.

Respondents in all four selected cities thus identified significant national policy barriers inhibiting the adoption of LEC practices such as P2P sharing, energy storage, and grid balancing. Current energy taxation systems were considered unfit to incentivize the storing and sharing of surplus renewable energy, compared to simply selling off any surplus right away. As one city administrator from Mechelen explained:

> We like the idea of energy communities and we also like the idea of being able to share together. [...] But as it is today, there's no advantage to do it. (R8)

While some households may still decide to adopt P2P schemes under these conditions to benefit from price stability, profit-seeking businesses
are repelled by the absence of significant financial gains. Additionally, in the UK, Sweden and (until 2022) Belgium, large sections of older building stock remained historically protected, thus preventing owners from constructing solar panels or new heating systems in the first place (R3, R11). This is exacerbated in Sweden, where the new right-wing government coalition (appointed in 2022) phased out subsidies supporting greater energy efficiency in residential apartments (R13).

Other legal barriers curtailed the ability of municipal governments to directly participate in LECs. In Mechelen, legal restrictions prevented the city from creating its own publicly owned heating network, forcing it to outsource (R9). In Amersfoort, GDPR restrictions prohibited the municipality from gaining access to private households' energy use data, thus making it unable to run their P2P sharing scheme (R15). In Malmö, public procurement law required the use of open tenders for any service requested for the LEC, leading to the contracting of 13 different suppliers for separate technical components. This delayed the LEC's development by creating an overly complex installation process and causing miscommunications between partners (R14). Moreso than causing technical problems, however, these legal barriers inherently constrained the ability of municipalities to engage in public-commons partnerships, as open tenders and data privacy restrictions reinforced their dependence on professional businesses who could position themselves as the only actors capable of easily fulfilling formal requirements.

Overall, the EU's recent directives may have elevated the role of LECs by raising attention to their value for the energy system transformation, but to what extent their specific innovative practices receive any concrete support is entirely determined by national governments. Given the lackluster track record of national implementation and the remaining policy barriers pertaining to P2P sharing and public-commons partnerships, there is a significant risk of LEC legislation remaining largely cosmetic and unable to guide the energy transformation onto a more socially equitable, democratically accountable, and decommodified path. The contribution of LECs to the energy transformation is therefore anything but guaranteed, cautioning us against overly optimistic forecasts of their 'powerful' potential [16].

Significant policy change is necessary for alleviating these shortcomings and uncertainties. Indeed, several respondents underlined that policy change beyond the local level should have priority over other more administrative adjustments to overcome the barriers to energy transformation and the shortcomings of LECs:

> 'With one [piece of] legislation we can change much more than 60 people working very hard in the field can ever do.' (R8).

Concretely, respondents called for national legislation to provide more financial incentives for LEC practices, such as removing energy taxes for P2P energy sharing or offering compensation for services such as storage and grid balancing. Other changes could be done through multi-scalar collaboration between national, regional and local levels, such as changing building codes and making renewable energy a mandatory dimension across all sectors of urban planning (R9). Respondents also called for the grid to be more easily accessible for flexible solutions, which would require DSOs to help enable alternative and distributed energy practices, rather than solely focusing on capacity building. Since this is not in the immediate interest of DSOs, national-level policy could create the necessary leverage to facilitate change. As niche practices such as P2P sharing expand in scale, they could eventually become significant enough for DSOs to support voluntarily (R14). Additionally, national governments were called on to invest in upgrading their digital systems for energy data reporting, thus making governing an increasingly decentralized energy system more feasible (R6).

Within the EU, these changes would also need to be driven by supra-national institutions such as the European Commission, which could provide stronger policy guidance through its directives on energy communities to specify which organizational and social practices should be supported, what kind of subsidies and legal changes should be

enacted, and which roles local governments, communities, and other actors should play [6,17,22]. While the UK would need to implement its own legislation, such changes in EU policy could nevertheless serve as an important benchmark and provide inspiration for UK policy-makers as well.

## 4.2. Cities as leaders of transformation?

Local governments played a key role in both governing the LEC pilot projects and laying the groundwork for their successful upscaling. With the exception of Amersfoort, the selected cities had already developed reputations as sustainability 'pioneers' by regularly trialing innovative solutions in the past. An official from Mechelen explained that their city had the 'ideal size' for studying the effects of urban development programmes, thus being regularly invited to run trial projects (R10). Local administrations in the three pioneer cities therefore had relatively high levels of internal organizational experience and external networks of collaboration partners among local businesses and community groups, whom they could rely on for aid and expertise.

Municipalities exercised leadership within the LEC pilots by helping secure funding, inviting different stakeholders and coordinating tasks between them, drawing up tenders to procure necessary equipment, and ultimately promoting the projects' achievements and lessons. In most cases this work was done by small teams or individuals working within their cities' environmental departments, but the strategic involvement of local politicians also helped accelerate their progress. In Mechelen, for instance, the involvement of the 'alderman' for mobility, civil rights and animal welfare, helped quickly move the pilot's funding application to the top of the local agenda (R9). Similarly, being able to embed their work in an ambitious municipal energy strategy was highly beneficial for the project team in Malmö (R12). By contrast, local administrators in Amersfoort struggled with gaining political support for their LEC project, as the municipality's relative lack of innovation experience made city officials hesitant to sign off on new practices. Project coordinators thus had to rely extensively on the support of private energy service providers, whose involvement was itself initially contested by local decision-makers (R15).

The role of municipalities in driving the energy transition at scale proved relatively uncertain and contradictory across cases. Lacking direct control and ownership over their local energy infrastructures, as well as being constrained by fiscal austerity frameworks, cities needed to rely mainly on their limited policy authority, subsidies, and social power to incentivize primarily the private sector to upscale renewable energy innovations. The municipality in Amersfoort expressed this directly by framing itself as an 'early adopter' of energy innovations, whose performance as sustainability role model should inspire other actors to follow suit [54]. Similarly, administrators in the UK perceived their role as two-fold: provide 'direct leadership' by trialing energy innovations, building energy infrastructure (to the extent that it is affordable), and using planning policy to guide implementation, as well as engage in 'indirect support' by facilitating communication and collaboration between stakeholders, educating the public, and offering community services (R2). Malmö pursued a different 'mission-based' strategy, inspired by Marianna Mazzucatto's writings [38], framing local governance around thematic missions rather than departmental silos in order to incentivize cross-departmental collaboration. This approach also placed heavy emphasis on involving private and community stakeholders in transition activities. Looking more towards the translocal scale, Mechelen was particularly engaged in knowledge exchange with other cities, for instance through the European 'Covenant of Mayors'. One policy-maker considered this inter-urban exchange an effective way to engage in 'friendly' competition and diffuse innovations and best practices between cities, thereby raising everyone's ambitions collectively (R9).

In any case, city administrators were hesitant to label themselves as 'leaders' of the local energy transition, instead viewing their role as
initial innovators, coordinators, and promoters. While they would
certainly keep launching small trial projects, such as LECs, they gener-
ally did not expect to be involved in the practicalities of scaling
renewable energy innovations themselves, relying instead on private
companies and DSOs to do so:

So, this is mostly what we do. We coordinate, we start up, we sub-
sidise, or we try using rules to make things happen, but we're not
really doing it ourselves mostly. (R15)

Yet, many respondents from small and medium-sized companies were eager to keep municipalities on board, as their political authority and socio-economic stability made them uniquely reliable allies and placed them in an ideal position to steer the overall energy transition process (R11). Especially their ability to set the local agenda, legislate, and engage in urban planning were considered highly valuable for giving other stakeholders planning security. As one business representative explained:

We in the in the private sector complain a lot about public sector. But the city of Mechelen, I think it's thanks to their very clear vision of where we want to go. That's like a train that has started and left the station and they all know where they're going. Not only the politics and the mayor but also the administration. [...] Their vision was clear from the beginning, and if you know this is the framework and this is what the city needs or wants, then you can anticipate it. (R11).

Overall, what role cities can play in driving the renewable energy transition depends on the interplay of contrasting institutional and societal interests under conditions of severely limited fiscal and administrative capacity. Due to their resources, policy authority and innovation experience, three of the four local administrations were easily accepted as leaders by other stakeholders. However, as they already held a reputation of being sustainability pioneers, they enjoyed relatively privileged conditions for introducing and scaling innovative solutions, which other cities may be ill-equipped to emulate (R3). This 'front-runner paradox' [55] may inherently limit the transferability of energy innovations to other local contexts. At the same time, all four cities lacked sufficient resources and high-level policy authority to pursue fully autonomous renewable energy strategies or remove entrenched policy barriers, irrespective of their innovation experience.

Thus, the trend towards involving different stakeholders in local energy transformation strategies has been as much an attempt to cope with the public sector's limited capacities, as it is a way of engendering societal participation and generating democratic legitimacy. While this does not constitute a significant break with neoliberal 'new public management' approaches [26], there appears to be a growing acceptance of the state as effective leader and planner of economic transformation – belying any narratives of a fundamental anti-statist perspective among businesses. Consequently, scaling renewable energy innovations developed in LECs depends not so much on *if* cities and other stakeholders can collaborate, but *who and what* that collaboration involves.

4.3. *Private, public or community participation?*

Both theoretical and legal definitions of LECs stress their openness to all types of stakeholders. In practice, however, they are highly uneven in composition and often dominated by specific types of actors. In the UK, for instance, 30 % of LECs are run by DSOs and 27 % by private companies, while only 19 % are based on partnerships with local community groups [8]. This can have significant implications for the social, ecological, and political ambitions of LECs themselves, as well as whether and how their innovative practices are being scaled.

4.3.1. *Private companies*

Three of the four cities investigated in this study (Amersfoort, West-
Suffolk, Mechelen) collaborated closely with private companies within

their LEC pilots, while also relying extensively on the private sector for
eventually upscaling energy innovations. Malmö presented a contrast by
cooperating closely with municipally-owned mobility and housing
companies, whom the city also relied on for upscaling energy in-
novations. As such, their different experiences exemplify the contrast
between a more market-centric approach to running and scaling LECs,
versus a public sector-rooted approach using municipal companies as
public anchor institutions.

Municipal administrations in Mechelen and Amersfoort relied on housing companies in their LEC projects to, respectively, construct the parking building and install renewable energy infrastructure in their residential buildings. They also cooperated with engineering companies and technological consultants to help design the technical infrastructure for their pilots and plan the procurement of equipment. Especially in Amersfoort, these consultants were deeply involved in running the LEC and facilitated collaboration among other contractors themselves (R16). Mechelen also involved two businesses not as partners but end users in P2P sharing, as they were renting office and retail space in its parking building. In West-Suffolk, a private energy service provider was tasked with facilitating P2P energy sharing between LEC participants, all of whom were local businesses themselves (R6).

While the three administrations were highly appreciative of the expertise and practical work they received from their private sector partners, involving them in the first place represented a significant challenge. In both West-Suffolk and Mechelen, building the energy infrastructure itself worked relatively well, but incentivizing businesses to join P2P exchange was largely unsuccessful. Mechelen eventually involved its two local businesses at the end of the project, while West-Suffolk did not exchange energy with any of the 50 businesses involved in the LEC. The primary reason for this was the companies' inherent profit orientation, as they overwhelmingly refused to adopt innovative practices, such as energy exchange, as long as their financial benefits were not fully guaranteed. This strong risk-aversion was evident across cases and in line with other critical research demonstrating the general unwillingness of private companies to invest into innovative practices even when subsidized [5]. At the same time, P2P exchange in West-Suffolk was facilitated by a private company and various small sustainability-minded businesses outside the LEC had joined its scheme (R6), underlining that a strong value-commitment could motivate some companies to accept the risk.

Conversely, what level of generosity was necessary to bring other
more traditional companies on board was evident in West-Suffolk's
'Solar-for-Business' scheme, through which the local council fully sub-
sidized the installation of solar panels for companies, who then owned
and profited off the generated energy (R4). Since different municipal-
ities are not equally capable of implementing such schemes, local ad-
ministrators were generally cautioned against promising 'non-viable
commercial elements that [they] cannot backtrack from' (R3). Com-
bined with the high risk-aversion of most businesses, this demonstrates a
strong disparity between different cities' abilities to attract private sector
partners.

Additional reasons for companies abstaining from P2P exchange in particular included cases in which local branches were tied to larger collective energy contracts via their head office, which either prevented them from joining local schemes entirely or required them to hire their own consultants first (R9). The multi-scalar structure of many companies thus raised difficulties for involving them in *local* energy communities. Additionally, as explained above, procurement law made the process of contracting businesses long and arduous, increasing the costs and complexity of innovative schemes, and frustrating both administrations and companies (R16). Finally, DSOs were generally uninterested in supporting decentralized energy provision or sharing and thus did not become involved in the LECs until the very end of their trial period. Even then, only the DSO in Mechelen enabled LEC participants to engage in easier P2P exchange by lowering grid fees (R11).
### 4.3.2. Municipal companies

By contrast, in Malmö large municipally-owned companies were quite prominent in running the LEC pilot. The city ran its pilot in partnership with a municipal parking company, which was responsible for building and maintaining Malmö's parking infrastructure. Its CEO was credited for actively pushing to make the pilot as innovative as possible, resulting in its unique combination of energy production, battery storage, smart charging, and wood-based architecture (R14). The city and parking company also closely communicated with a municipal housing company, whose tenants were the primary users of the parking building. Both companies also took active responsibility for scaling the energy innovations trialed in the pilot, planning to install battery storage and invest in smart energy solutions in their other buildings and future constructions (R12). While Malmö's energy grid remained under the control of the large private DSO E.ON, which did not lend any support to trialing or upscaling the LEC's energy sharing practices, respondents pointed out that other Swedish cities had their own municipal energy companies and public opinion was gradually turning against E.ON's monopoly position (R14). This may open a window of opportunity to advocate for remunicipalisation of the energy grid.

Unlike the private companies in the other three cases, Malmö's municipal company partners (indeed municipal companies in general) were praised for their inherent orientation towards the 'public good' as opposed to profit-maximisation. As one respondent explained, Malmö's administrators preferred working with public companies, as they could 'make sure the company actually works in line with the best of Malmö [and is also] a sustainable company [that is] not focusing on economic growth so much' (R13). Since these companies were thus inherently oriented towards sustainable city development rather than short-term profits, they did not share the same risk-aversion as private companies, making them much more reliable at scaling innovative practices.

Malmö's strategy exhibits some of the qualities of a *grounded city* approach, as the city used municipal companies as public anchor institutions to trial and scale innovative practices at the intersection between the foundational reliance systems of energy provision, housing and mobility. In doing so, the city could retain a higher degree of control over these essential systems, shielding them against market competition. However, Malmö does not fit the mold perfectly, as energy distribution was still firmly in the hands of a private DSO, making the scaling of LEC innovations partially dependent on its collaboration. The two municipal companies involved in the pilot also exhibited traditional top-down organizational models and did not rely on co-decision-making with workers or local residents. Thus, despite being committed to values of sustainability, good working conditions, transparency, and social accessibility [56], they were not inherently more democratically accountable than their private sector counterparts.

### 4.3.3. Communities

Finally, the above-mentioned lack of community participation in LECs was highly evident in the four cases as well, confirming previous research that demonstrated how LECs may de-emphasise questions of energy democracy in favour of more output-oriented goals [21]. While this was unsurprising in the cases of West-Suffolk and Mechelen, given their focus on local businesses, the absence of grassroots participants in Amersfoort and Malmö was notable.

Despite revolving entirely around private households, Amersfoort's pilot did not engender citizen participation, relying instead on the company owning the residential buildings to represent its tenants. Consequently, communicating the purpose and plans of the LEC to residents posed occasional challenges, for instance when they were inconvenienced by the installation of energy storage infrastructure. As one administrator explained:

> They were bothered because they couldn't place their bikes anymore and the elevator didn't work for a few hours. So, although we didn't want to get them involved, they were involved anyway. (R15)

In Malmö, respondents explained that community energy groups were almost entirely absent from the city in general (R13), underlining why the city's reliance on municipal companies as public anchor institutions could not be flanked by a similar reliance on public-commons partnerships. This seemed to be a self-fulfilling prophecy, as city administrators tautologically explained the niche role of community participation as a result of its marginal contribution to the energy transition. At the same time, respondents were conscious of the need for community participation to ensure democratic legitimacy and empowerment:

> I've done a bit of work with energy communities and the conclusions we drew from that was that it wasn't the largest factor for the energy transition as a whole. It was more the other values connected to community-driven solutions, such as empowerment and energy democracy. But it doesn't really have a large influence on the energy transition as a whole because that's driven by much larger investments and those are made by large companies, whether they are publicly owned or privately owned. (R13)

Other respondents argued similarly that participatory practices, such as P2P sharing, were not necessarily essential for shifting energy provision to renewables, but were needed to ensure social cohesion and accessibility within this shift:

> I think it's important if you can get social cohesion around your energy, obviously that would be the better way. That's the benefit. But it's a benefit that today is maybe underestimated as well. (R8)

Ultimately, neither individual LECs nor the process of scaling their innovations involved a significant level of community participation, thus confirming some of the criticisms against current LEC policy frameworks illustrated in previous sections. Naturally, this problem is not unique to LECs but affects social innovations in general, many of which face co-option and watering down through institutionalization [57]. It also reflects a general trend among municipalities to emphasise outcomes and experimental innovations while 'deemphasising reflection and attention to democratic procedures and protection of the public good' ([1], p. 1596), again showing that the local scale is not automatically more sustainable or democratically accountable [45].

Yet, the unique urgency of transforming our energy system to avoid climate collapse intensifies the contradiction between the need to rapidly scale energy innovations and the desire for doing so in a democratically participatory and socially redistributive way. Municipal governments across Europe have strict energy transition targets to comply with over the next two decades, so most of them are forced to implement the shift to renewables through whatever actions and partnerships they can develop. Unless they can already draw on active networks of community energy groups, their transition strategies are unlikely to involve significant community participation. This does not necessarily diminish the technical effectiveness of their energy transition, as evidenced for instance by the rapid, centralized and top-down shift to renewable energy implemented in countries such as Norway [58]. However, an energy transition without significant citizen involvement is highly at risk of lacking democratic accountability, sparking resistance to innovations, and reproducing social inequalities across communities.

A foundational strategy rooted in the notion of a 'grounded city' cannot avoid addressing this contradiction and needs to find ways to transform the energy system quickly and sustainably (the aim of the FE 2.0) while not abandoning its ambitions to democratize and socially embed it (the 'original' FE 1.0). Certainly, not all citizens can be expected to actively participate in LECs, but their ability to choose to access such energy innovations and to have a say in the development of municipal energy infrastructures are key indicators for both the democratic and socio-economic inclusivity of the energy transition. This also further underlines the need for higher level policy change to not only incentivize the adoption of innovative energy practices but also make them more widely accessible to low-income households [17].
# 5. Conclusions

This article has illustrated how the transformative potential of LECs is informed by legislation, municipal governance, and the contrasting interests of participating stakeholders. It has shown that, although the role of LECs is amplified through EU legislation, national policy idiosyncrasies and loopholes constrain them in their ability to democratize and socially embed renewable energy provision. Thus, the article points to the need for widespread policy change to more directly incentivize the innovative practices of LECs, such as P2P energy sharing, storage and grid balancing. This would also generate leverage for pressuring unwilling businesses and DSOs into adopting those practices. Such changes would need to be implemented at least at national level to overcome the structural unevenness between municipalities and should ideally inspire reforms within the existing EU policy frameworks.

Moreover, the article has shown that while municipalities lack the financial and administrative means to organize the transformation of local energy systems on their own, their growing responsibility can enable them to engage in more proactive political economic leadership. By launching and engaging in LECs, cities can trial innovations and fuel ongoing collaboration between different stakeholders more well-equipped to scale those innovations. Yet, by also engaging in planning policy around urban development, and promoting energy innovations at higher institutional levels, cities also play a key role at multiple other stages of the energy transformation process. To integrate these diverse activities effectively, cities need to overcome barriers to institutional learning, such as silo structures and high staff turnover, and establish lasting collaborative connections, both internally and with external actors. Adopting a mission-based approach to local governance [42], as in the case of Malmö, can be a good starting point for this, as it enables cities to share knowledge and tasks across departments, as well as invite stakeholder participation in governmental actions.

However, stakeholders are not made equal. An energy transformation process driven largely by private companies risks being not only socially inequitable due to businesses' profit-orientation, but also potentially slow-moving and volatile due to most companies' risk-aversity and dependence on generous subsidies. Conversely, where significant infrastructure is run by municipally-owned companies, these have proven to be quite eager to both lead LECs themselves and adopt their innovations at scale, making them reliable public anchor institutions. At the same time, bottom-up community participation has been shown to play a marginal role across cases, despite being recognized for its crucial contribution to making both LECs and the larger energy transformation process more democratic and socially cohesive.

Ultimately, a foundational transformation of the energy system needs to be rooted in collaboration between state institutions, public companies, and communities to ensure its own social accessibility, democratic accountability, and innovation. At the same time, it also needs to reflect the urgency of addressing climate change by pushing hitherto risk-averse private companies towards decarbonisation. This requires finding the right balance between exercising state control, reconciling different stakeholder roles and interests, and ensuring a sufficient level of citizen participation – which may well differ between contexts.

The notion of a *grounded city* can offer municipalities some guidance towards finding this balance. Even cities with an already strong emphasis on cross-stakeholder collaboration, such as Malmö, can benefit from relying less on highly professionalized (public or private) companies in favour of more meaningful participation by workers and citizens. They could, for instance, develop *public-community anchor institutions* rooted in collaborative decision-making and community participation, such as municipal energy cooperatives or citizen energy boards. While not all citizens can be expected to participate in LECs, having optional access to such anchor institutions would significantly enhance the democratic legitimacy and social accessibility of the energy transition. More research is needed to investigate and spotlight cases in

which such alternatives are already in place, such as the UK's *Plymouth Energy Company* [40] or *Samsø Island* in Denmark [59], while also being mindful of how socio-economic inequalities between cities limit their ability to emulate such 'frontrunner' cases.

Finally, the recent legislation on LECs, while insufficient, could conceivably be used in favour of such a strategic shift by enabling governments to provide targeted support for municipally- and community-driven energy communities and subsidise energy innovations for low-income households. Again, further research needs to identify and assess governance modes and policy contexts conducive for such shifts in LEC development [60]. In any cases, the effectiveness of such policy transitions is, naturally, a question of social and political power relations.

# Declaration of competing interest

I hereby declare that I have no known competing financial interests or personal relationships that could have appeared to influence the work reported in this paper.

# Data availability

Data will be made available on request.

# Acknowledgments

I would like to express my gratitude to all the partners of the ACCESS project for their great work with the pilots and to Helle Ørsted Nielsen, Anders Branth Pedersen, and Lars Kjerulf Petersen for their collaboration within the project. I would also like to thank the participants of the Critical Political Economy Research Network conference for their insightful comments and feedback on the manuscript. Finally, I would like to thank the editors and reviewers for their helpful comments and suggestions for finalising this paper.

# Funding

This work was supported by a grant of the European Union through the European Regional Development Fund and the Interreg North Sea Region Programme 2014-2020 (reference no. 38-2-18-18).

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