The energy crisis calls for speeding up the energy transition, but to make the process sustainable it is necessary to decentralize and democratize the energy sector, namely to engage citizens and small and medium-sized businesses. “Citizen energy” is the right model to decarbonize consumption, and RESET highlights its critical role in ensuring the sustainability of the energy sector’s transformation in the Western Balkans.
The current situation
An analysis of the causes of the current energy crisis in Europe and measures proposed to mitigate its impact suggest it is necessary to accelerate the energy transition considerably. In the Western Balkan countries, the impact of the crisis is reflected in record energy prices, especially electricity. If the crisis in Europe were to deepen, the security of electricity supply in the Western Balkan region could be jeopardized.
These trends have stimulated investments in renewable energy sources, led by privately-owned foreign companies that are working on projects to develop large-scale wind farms and solar power plants. Energy from these facilities is mostly intended for export to the European Union (EU) market. At the same time, local private firms are stepping up investments in smaller, distributed solar power plants, mainly for self-consumption.
This means that the development of renewable energy sources is currently driven by profit, while citizens’ participation in investments in renewables is negligible, mainly due to low, subsidized electricity prices.
Besides decarbonization, a sustainable energy transition also requires a decentralized and democratized energy sector, where local stakeholders – primarily citizens, small and medium-sized businesses, and local communities – would have a significant share of the ownership of production capacities. Ownership in generation capacities (e.g. in a solar power plant) encourages energy efficiency, electrification, and energy management efforts. It is only in this way that citizens can become active participants in a sustainable energy transition.
Why did citizen energy emerge?
Laws and secondary legislation aimed at encouraging citizens to participate in the energy transition in the Western Balkan countries are in the early stages of implementation. Even where there is a regulatory basis, citizen energy generation projects are faced with numerous obstacles. One of the reasons for this is pushback from public power utilities, which wield a de facto monopoly over electricity production.
Despite the barriers, however, decentralized generation is growing fast, especially by small and medium-sized businesses, and is not motivated solely by financial benefits, but also the need to increase the security of supply and reduce risks from future fluctuations in electricity prices.
Power utilities would benefit from supporting the development of distributed energy generation
Declining costs of renewable energy technologies, primarily photovoltaic systems, have enabled citizens, local businesses, public institutions, and local communities to produce their own energy in a relatively simple and affordable way, while storing, exchanging, or selling the surpluses. The concept allowing these categories to engage in energy generation, consumption, distribution, supply, aggregation, and storage is called “citizen energy.”
Given the low, subsidized electricity prices for households and small businesses, power utilities in the region should benefit from supporting the development of distributed energy production. Montenegro’s state power utility Elektroprivreda Crne Gore (EPCG), with its projects Solari 500+ and Solari 3000+, and the Republic of Srpska’s power company Elektroprivreda Republike Srpske (ERS), with a similar project, have demonstrated their interest in taking an active part in this decarbonization concept.
Although, according to available information, these projects are based on the “rent-a-roof” model and cannot be classified as citizen energy projects, they should be welcomed as an effort that contributes to accelerating the energy transition process in the distributed renewable energy segment.
The two main models
Citizen energy falls into two main categories:
– Prosumers and
– Energy communities (renewable energy communities).
The prosumer model – a citizen, business, public institution, or local self-government unit can produce energy for self-consumption, while storing or supplying to the grid, under certain terms, any surpluses.
The energy community model – the abovementioned actors can join together in various combinations to jointly produce energy for self-consumption, storage, aggregation, exchange, sale, or purchase, making them active participants in the market. Such communities can take various organizational forms, including energy cooperatives, business enterprises, residential communities, etc.
Citizen energy is the most sustainable and effective model for decarbonizing domestic consumption
Prosumers and energy communities have a major role to play in decarbonizing, democratizing, and decentralizing the energy sector and establishing local energy and energy services markets. Citizen energy is also the most sustainable and effective model for decarbonizing domestic consumption, given that most of the produced energy is consumed at or near the generation site.
The benefits of citizen energy production for those who participate directly in that process include reduced reliance on external supply sources (which strengthens the security of supply) and reduced or eliminated risk from future fluctuations in energy prices, as well as immediate financial benefits, or savings (after the return on investment period) that producers achieve by consuming their own free energy.
Moreover, investors in an energy community can benefit from additional financial gains, depending on the community’s performance, targets, and ownership model.
Benefits for power utilities and society
Power utilities in the region can expect only positive impacts from the development of citizen energy, as it reduces their public supply obligations and the need to invest in new renewable capacities, helps cut distribution and transmission losses, creates opportunities for additional earnings through electricity off-take and sale, and opens up a whole new range of services they can offer to participants in citizen energy production, providing a basis for revenue stream diversification. These business models are already widely applied by leading European power utilities.
Stepping up the implementation of the citizen energy concept in the Western Balkans brings numerous benefits to society as well, mainly by improving the security of supply through diversified and increased domestic generation as well as by helping decarbonize domestic consumption.
Additionally, it helps countries that are net energy importers to reduce their need for imports, while creating additional amounts of energy for export in countries that are net exporters. In both cases, it has a positive impact on the balance of payments.
Increased investment in renewables through the citizen energy concept mobilizes untapped funds of citizens and businesses (various forms of savings) in a productive way, helping to create new jobs and fuel economic development and GDP growth.
Citizen energy is critical for the Western Balkans’ energy transition
Given the above, RESET highlights the critical role of citizen energy in ensuring the effectiveness and sustainability of the transformation of electricity systems in the Western Balkan region.
To support the activities initiated in this field in 2022, RESET has prepared four policy analysis reports on the following subjects: a) Models of financing the energy transition in Bosnia and Herzegovina, b) Citizen energy and the energy sector democratization in Bosnia and Herzegovina, c) Integration of distributed generators and distributed energy resources and d) Reducing energy poverty in Bosnia and Herzegovina – the first step in the energy transition.
These documents provide an analytic basis for advocating the citizen energy concept and implementing RESET’s energy transition projects at the local level.
 https://www.iea.org/reports/a-10-point-plan-to-reduce-the-european-unions-reliance-on-russian-natural-gas https://www.iea.org/reports/a-10-point-plan-to-reduce-the-european-unions-reliance-on-russian-natural-gas