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Generation kWh by citizens

Posted by Gijsbert Huijink in Self Sustaining
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 SOM ENERGIA SpainIt all started with 157 people, founders of Som Energia, in December 2010 with the aim to jointly produce and consume their own renewable energy. In January 2011 work started to obtain all necessary permits for selling electricity started and by October  the service was launched, initially for just a few hundred clients.

How the projects started

At the same time, new production projects were reviewed. This turned out to be relatively easy. Due to the economic crisis and the legal uncertainties for renewable energy projects in Spain, many project developers were looking to sell some projects, developed on paper, waiting for construction. As hardly any buyers were around, banks were not financing anything, negotiations were relatively easy. Finally a first PV project of 100 kW on an industrial building in Lleida was selected. Building started early 2012 and by April it was fully functional. Consequently 8 other projects were selected and build leading to a portfolio of 732 kWp solar and a 500 kW biogas plant. The total investment amounted to 3.5 million Euro. Around 1100 of our members participated. Collecting the money started in June 2012 and within 10 months we were fully funded. All these investments kept us pretty busy until the beginning of 2014. At that time we were less than 10 people in the office for all the tasks on hand.

Power to the people in Spain

The goverment changed the rules during the game

Then, the government decided that Spain had more than enough renewable projects and could not afford paying any more Feed Inn Tariffs, so no more projects were going to be accepted, leading to a full stop in new project development, continuing up to today. Also, despite a unanimous parliamentary (taken a few weeks before the 2012 election….) decision to quickly implement self consumption legislation , nothing is still in place, almost four years later.  There is a small legal loophole so it is not impossible but reality is that only a few hundred pioneers have put solar panels on their roof. The government tactics have been to delay coming up with anything practical and fair. So we are currently (Summer 2015) looking at legal proposal #3, with no net balance and a ´solidarity tax´ which makes you pay for all kWh you produce yourself, even the ones your use yourself instantaneously and so never enter the grid!  So this road to increase self production for our members which has created so much enthusiasm and citizen participation in other countries was firmly closed.

With the two main mechanisms for increasing renewable production basically blocked we started to look around for inspiration at other initiatives in Europe. What other ways would there be to increase renewable production?

One initiative that stood out was the model from De Windcentrale in The Netherlands. We liked their model where people directly invest in a windturbine and get a return in kWh with the financial return depending on the difference between a standard price and their own production price. We met with the founders of De Windcentrale in Amsterdam, exchanged information and got a feel of where we needed to go. This was December 2013.

So how could we create a model :

  • To set up new RES projects (and not re-finance existing projects)
  • Give a minimum return to our investors
  • Not promise things we can not deliver
  • Make it easy for people to participate
  • Create confidence for people to invest in projects with a life-time of 25 years (this in a Mediterranean country where 5 years is about as long term as things get)
  • Allows everybody in Spain to participate, not just the people who have their own house and have a suitable roof for solar PV, but also people who rent an apartment with little practical possibilities to set up their own project
  • Which is legally and fiscal sound

We came up with a Spanisch energy Cooperation

Generation kWh or shared self consumption. These are the main characteristics of the projects we work with:

  • With a mix of these solar, wind and hydro projects around Spain we try to simulate the typical demand curve of our members as good as possible.
  • As there are not FITs, all projects have to compete in the ´market´ and even pay a 7% electricity production tax to the state.
  • Only the most efficient projects guarantee that the money invested will return, so we´re looking at solar project in the south of Spain with 1600 full-load hours, in very windy spots with over 2700 full-load hours and re-powering of hydro projects where the civil works are still in a good state and we ´only´ have to put in a new turbine.

From an administrative, legal and fiscal point of view, it works like this:

  • Any of the 21.000 members we currently have can participate by making a special, 25 year, loan to the cooperative at zero interest.
  • Your investment is in the system and not in one specific technology. We all share the advantages and disadvantages of each project.
  • For each 100 Euro participation, participants will get an estimated 170 – 200 kWh/year compensated on their electricity bill with Som Energia.
  • The compensation is at a cost price of roughly 3.5 – 4 c€/kWh, compared to a current market price of 4.5 – 5 c€/kWh. The financial advantage comes down to 200 kWh X 1 c€ or 2€/year per 100€ participation.
  • Of course if market prices will go up or down, the advantatge will increase or decrease.
  • Participants keep paying taxes, grid access fees, etc.
  • The cost price is more stable as the main component is the amortization of the installation and the other components (maintenance, rents, insurance, etc.) are covered by long term contracts.
  • Each project will be a limited company owned by Som Energia, selling its production via a bi-lateral contract to the cooperative who then redistributes the kWh to each participant.
  • Starting at the end of year 2, each year there will be a linear pay back of the amortization. This return of the loan is guaranteed by Som Energia.
  • Overall ROI is expected to be between 2-6%, with relatively conservative developments of the market price and costs in line with 1% average inflation over 25 years.Spanje

The project was approved by our members in May 2015 and launched by the end of June 2015. We are now at the end of August and just reached the 1 million Euro with 1100 people participating already.  Average participation stands at 930 €. Our aim is to obtain 5 million Euro over the next 18 months. This would allow us to build:

  • 2.16 MWp solar project in Alcolea de Rio (Sevilla), contracts signed and waiting for building permit
  • 50% of a 2.7 MW wind Turbine in Pujalt (Barcelona) waiting for confirmation of grid connection
  • 500 kW recovered hydro central near Lleida or Toledo (ungoing negotiations)

The solar project should be operational by the end of this year.

Why do our members participate and loan us their money for 25 years without a guarantee of a return of investment?

We think their reasons are diverse and we are about to ask the first participants to send a short video explaining why they participated which we will transform in a collective video which should convince the next wave of participants. For the moment, let me explain why I participated.

The electricity consumption of my family is 2600 kWh/year. We just switched to an electric Nissan Leaf which will roughly double our consumption to 5200 kWh/year. The car is charged over night, so our consumption is well distributed during the 24 hours of each day.

Participating in Generation kWh makes sure that our yearly electricity need is covered not with certificates of origin from already existing projects (usually the case with green electricity sold by most companies) but from new renewable projects, owned by the cooperative of which I am an active participant. In order to cover our relatively high yearly consumption an investment of 2600€ is enough. If I would invest the same amount in solar on our roof it would only pay for 1.5 kWp (at 1700€/ kWp for a small home solar system) with an estimated yearly production of 2000 kWh (I live in Girona, northern part of Spain, with around 1400 full-load hours) or less than 40% of the production obtained via Generation kWh.

Additional benefits:

Making the investment in Generation kWh took me 5 minutes, although I do have to wait for a year to get my first ´delivery´ of kWh as it takes time to invest the money.

If we ever move house, we can take our Generation kWh production with us (as long as we stay in Spain).
The money goes to a mix of technologies on different locations it goes a long way in covering our real demand curve, something which would not be feasible for an individual homeowner. It takes a big bite out of the argument that you´re profiting from the back up services of other technologies.

Don´t take me wrong

As soon as it become legally possible and administratively easy in Spain, we might still put solarpanels on our house but for the moment this is the best there is.

We realize this model is not easily replicated. Also, if your market has easy and favorable conditions for self consumption and/or FITs, we suggest you focus on those first and build your cooperative business model around it. There are many ways to do this successfully. You might want to look at this REScoop website for inspiring examples around Europe.

Sustainable power by citizens

Realize

But… do realize that what has happened over the last years in Spain can and probably will happen to other countries. Already it is clear that FITs will disappear (see See this publication if you want to know more) in all EU countries and will be replaced with ´competitive tenders´ (more on this in this clear report)which, if not designed specifically for the benefit of small, local cooperatives and citizen groups, will usually favor big players. Also the wide application of self consumption in various countries has already lead to discussions over its ´sustainability´, referring to its impact on profits of the current oligopolistic market players. Already several restrictions on its use are on the horizon.

Change

What is clear is that in order to facilitate the transition from our current fossil fuel based centralized production system in the hands of a few big corporations towards a renewable energy, decentralized, citizen owned  system, lots of things will have to change. Many companies and activities have to disappear. They won´t go voluntarily. They still make big money on digging up, distributing and burning fossils and have enormous social, political cloud. Alternatives have to be created and more and more people should become involved and vote with their investments and their consumption and at some point, this will also transfer towards political power.

We hope our journey inspires yours. Please do contact us in case you have any questions.


Girona, September 2015
Gijsbert Huijink

www.somenergia.coop

2 Responses to “Generation kWh by citizens”

  1. Henk Daalder Pak de Wind Says:

    In every country, groups of people struggle with local regulations, to advance renewable energy generation. What they all have inb common, is that these groups of people, behaev as investors, the same behaviour as investors in coal mines and power plants.
    At SOMenergy or GenerationkWh people have to give their money for 25 years.
    This will only be done by idealists, 1% of the population.

    But society has to make the transition to 100% renewable within 20 to 30 years. So a massive movevent is necessary.
    This will only happen when not power, but the generation equipment, is sold as a consumer product.

    The family size piece of a wind farm as a popular consumer product. In a renewable world.
    This needs a consumer market for power generation, not power by itself.
    The windfarm share, willbe a popular consumer product, because it generates cheap power, 2 to 3 cents per kWh, for 20 years.
    A family typically buys a piece of a wind farm of 2 kWh for 2400 EUR. This will generate 4000 kWh per year, for 20 years.
    In most countries this will give the ovwner an advantage over buying commercial power which costs about 6 cents.

    Of course the power need will vary in the future, so more physical shares of a windfarm must be bought, or sold, on the consumer market for shares of a wind farm.

    As the example of GenerationkWh shows, local regulations often block consumers to generate their own power, because the local regulations were originally set up to protect the early power plants, often paid for by governments. Because having power is important dfor a society.
    But today having clean power is more important that dirty power.
    So every country should review its regulations, and enable the mass consumer market, for local power generation, in shared wind farms. Because wind farms generate the cheapest power. Do this automatically and do niot need any busiens being involved, impsong a commercial margin on the automatically generated powewr.
    The only utility service is balancing the output of renewable sources with real time demand. This means that fossil power plants will have to adapt to a completely different business model.
    Now, fossil power plants are losing the competion with renewable generators.
    When most power consumers generate their own powert in shared wind farms, the fossil power plants also wil become shared resources. owned by power users, and only work when there is not enough wind or sunlight.

    This is when the power market has made the transition to mass, shared generation market. Owned by consumers, not investors with their expensive money.
    Consumers have the cheapest money thatis available, that is why consumers will own the generation power they need, for appliances, heat pumps and their car.

  2. Gijsbert Says:

    Thanks for your comments, Henk.

    Can agree with almost all your comments. The only addition I would like to make is that wind is not necessarily the cheapest. Depending on where you live and the resources available either wind or solar or hydro could be the most cost-effective option. In Spain, where good resources are available for all three technologies, the costs are pretty similar.

    But production cost is only one aspect. In order to have a more secure supply during all moments of the day and all days of the year a balanced combination of technologies is necessary.

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