Our analysis shows that Lusatia’s high energy transition potential can advance regional economic development. However, unlocking the associated regional value added in a structurally weak region like Lusatia—a coal region in transition with higher unemployment rates and relatively lower-income households—will require the long-term participation and pro-active involvement of a broad range of local stakeholders. In the following, we discuss how our assumptions for regional transition potentials affect the obtained results and how to reduce barriers to participation in the regional energy transition as a prerequisite for regional economic development.
4.1 Energy transition as a long-term economic development strategy
It is important to note that the conclusions made in this paper cannot automatically be applied to all former or present coal regions. The specific geographic and socio-demographic context, respective policy framework and economic profile will all influence and determine which social innovations emerge and which local stakeholders are able to contribute to the energy transition. In a region of higher population density and higher economic prosperity, for example in the Ruhr area (Germany) and in Upper Silesia (Poland), we are likely to see a different account of energy transition potentials and regional economic effects (Reitzenstein et al.
2021). At the same time, given that factors such as insufficient funding or planning capacity, as well as a lack of skilled workers are commonly cited in the literature as challenges to a successful energy transition in coal regions (OECD
2017; Reitzenstein et al.
2021), we do consider our results to be transferable to other regions, but with some limitations we want to address in this section. The British coal regions, for example, experienced a long transformation process with partial success in generating new jobs and some continuing imbalances in the labour market. One of the key lessons from the UK is that the economic transition of former coal communities is not a quick fix. In the UK, the transition required forward planning and a mixed-strategies approach based on other regional economic potentials, public support and funding of the transition process (Fothergill
2017). We agree that structurally weak regions need more target-oriented strategies accounting for both location-dependent and location-independent development challenges.
Although there has been an overall positive economic development in Brandenburg in recent years, particularly in municipalities near Berlin, the majority of the region Lusatia has a regional GDP per capita below the national level as well as a below average local business tax capacity and infrastructure expenditure (Lenk et al.
2021; BRAVORS
2022). Economically marginalised municipalities are often unable to implement costly climate protection measures as these are not part of the primary services they are responsible for providing (Heinbach et al.
2020). Additionally, in regions with lower incomes, private households potentially lack the upfront capital or access to credit to invest in regional RE projects (Statistisches Bundesamt
2022)—a situation that we took into account when developing the regional economic scenarios. This may also be a structural obstacle in other regions in eastern Germany, where the average net wealth of adults (older than 17) was measured to be less than half of the average in western Germany in 2017 (bpb
2020). We set a moderate level of direct RE investment in the
Current Policies scenario, whereas we assumed that sufficient financial and policy support for private households, municipalities and business actors would enable a significantly higher share of regional investment capital in the
Climate Neutral 2045 scenario.
Other coal regions suffer from structural weaknesses similar to those in Lusatia, namely the challenge of demographic change due to an ageing population and emigration, as well as relatively low income levels (OECD
2017; Reitzenstein et al.
2021). The former coal and steel producing regions in the U.S. and their specific challenges were analysed by Bartik (
2019;
2020), who also focuses on low-income households and policy measures for economic stimuli. Amongst other things, Bartik (
2019) concludes that financial incentives should focus on specific problem areas and not be widely spread, advocating funding and direct investments in infrastructure and high-tech cluster areas. Bartik (
2019) also warns against long-term aid of large companies, because it may cut financial opportunities for large-scale economic development strategies. This is in line with Richwien et al. (
2018) who indicate that large companies have the potential to bring significant economic development, but there is also the risk of closure or relocation from the region if, for example, global price changes adversely affect a monostructural regional economy. Against this background, a political focus on small and medium-sized enterprises seems more sustainable and resilient. To realise local job creation, Bartik (
2020) recommends targeting the local level, allowing for the installation of development policies at affordable costs due to location-specific resources and the insights of state and local governments rather than exclusively introducing federal regulations or grants. These recommendations are in accordance with the energy democracy movement that advocates the decentralisation of economic and political power in renewable energy systems by means of new energy companies, ownership models and financial investment systems under social and public control (Burke and Stephens
2017). Accordingly, we will take a closer look at the preconditions for implementing and designing a participatory energy transition process with a focus on community energy.
4.2 Financial participation as a key challenge for an inclusive energy transition
To achieve the assumed participation level of the
Climate Neutral 2045 scenario and the calculated regional economic effects, it is of utmost importance to address the barriers that community energy is confronted with in general and specifically in structurally weak regional economies. We understand community energy as an auspicious socio-technical innovation for a democratic transition pathway. At the same time, we are aware of the varying political, institutional and socio-economic contexts in which community energy projects develop (Burke and Stephens
2017). Community energy projects typically require sufficient “practical capacities”, i.e. time, money and expertise in light of complex and often costly preparatory activities (Park
2012; Tarhan
2022). Since economically marginalised communities in Lusatia may be poorly positioned to follow “localist approaches” (Catney et al.
2014), we recognise “community energy” as an umbrella term covering a range of actors and business models, e.g. regional RE suppliers, local financial institutes, RE cooperatives and renewable energy communities (REC). In line with RED II provisions (European Parliament and Council of the European Union
2018), we view citizens, local small and mid-size enterprises and public authorities including municipalities as potential community energy members and/or shareholders.
The following section outlines possibilities to widen the often limited scope for municipalities and citizens to engage in RE expansion. In case municipal land areas are not used for the operation of RE plants, the municipalities are left with the local business tax revenues, which, according to the legal regulations, are to be paid for the most part (90%) to the municipality where the RE plant is located (§ 29 GewStG). The hitherto voluntary payments of the plant operators to the municipalities according to § 6 EEG should become mandatory in the future. Thereby, the regulation can unfold its intended effect to offer financially weak municipalities a financial participation opportunity. In case municipal land areas are used for the operation of RE plants, there are not only opportunities for the municipalities to participate in the plant revenues through lease income, but also to actively shape the RE expansion in the municipality. For instance, municipalities can decide which actors are granted access to the land and negotiate participation opportunities for themselves and local citizens (LEA LandesEnergieAgentur Hessen GmbH
2022). Ideally, municipalities can secure a higher regionally embedded share of the value added by RE plants through their own initiative. With the planning processes in their own hands, their own investment funds and a planning and financial participation of the citizens, they can achieve their own objectives for the RE expansion, benefit economically and strengthen acceptance among the population. One best practice example is the municipality of Hünfelden in the state of Hesse which has established three sources of income out of community energy: the lease income from the local wind farm on municipal land, its own profit sharing through co-ownership of the farm, and the tax income from the local citizens’ energy association (Hildebrand et al.
2023).
When developing new innovative funding instruments for RE installations, there should be a focus on participatory policy design processes and close community consultation with marginalised communities (Tarhan
2022). In a case study of Ontario, Tarhan (
2022) recommends explicitly addressing practical capacity inequities between and within communities to ensure just outcomes of community-led RE investments and emphasises the importance of engaging marginalised groups in the policy design processes. At the moment, community energy projects in Germany lack diversity and representativeness, as members are mainly affluent men with university degrees (Yildiz et al.
2015; Radtke and Ohlhorst
2021). One possible mechanism to enhance the financial inclusion of private households with lower incomes and/or savings is to reduce the minimum deposit for equity investments in community energy projects, such as RE cooperatives in Germany do (DGRV
2022). This can be done by specific arrangements in the company statutes or by interposing a financial intermediary such as a local cooperative bank that issues low-threshold bonds for financial participation in local RE and/or other sustainable projects. This can also serve to minimise investment risk—another investment barrier (Holstenkamp et al.
2018). Moreover, innovative on-bill financing and on-bill repayment programs (utilities supply capital with low-to-zero interest rates to customers which is repaid through regular payments on existing utility bills e.g. for electricity) could be tested in cooperation with public sector entities and supportive local utilities (Burke and Stephens
2017). There is some experience in Germany with discounted regional electricity tariffs, but there is no public support for such schemes to date (IÖW, IKEM, and BBH
2020). In the Netherlands, regional energy strategies were developed with the aim of realising 50% local ownership in wind and solar projects by 2030 (Palm
2021). To achieve this target, an incentive program known as the Postal Code Regulation (
postcoderoosregeling) was introduced in 2014. It provides a tax rebate to consumers for local investments in community energy (Wagemans et al.
2019). The postal code scheme was designed for citizens without their own installation site but with a willingness to participate in local community energy projects and can be considered a collective form of net metering (Meitern
2022). Besides addressing specific regulatory barriers (see Burke and Stephens
2017), it is important to establish transparent processes and to inform local stakeholders at the earliest stages about their participation opportunities including ownership (Burke and Stephens
2017; Hübner et al.
2019).
Scientific studies in non-EU countries confirm that an unsupportive national institutional and policy framework is a major challenge for community energy projects (McMurtry
2018; Klein and Coffey
2018; Raupach-Sumiya
2019). Since energy policy is generally designed for centralised systems and in need of profound structural reforms, changing the institutional setting on multiple levels is as important as it is challenging (Cantarero
2020). Italy, for example, has few existing community energy projects to date; however, it is among the frontrunners in transposing the EU RED II provisions for community energy (Palm
2021; Krug et al.
2022); November 2021 saw the completion of a regulatory framework with a set of promising policy measures and incentives that have contributed to the emergence of new community energy projects throughout Italy (Krug et al.
2022). A key element of the enabling framework are fiscal incentives for new community energy plants up to 1 MW
p and a feed-in premium of € 110/MWh for energy sharing (ibid.). Furthermore, Italy is an early adopter of smart meters and allows net metering, thereby supporting a rise in storage facilities at the community level (ibid.). As part of the Italian Recovery and Resilience Plan, a fund of € 2.2 billion has been set aside for the promotion of collective self-consumption in municipalities below 5000 inhabitants, substantiated by the quantitative policy target of 2 GW capacity installed by RECs by 2026 (Krug et al.
2022). Alongside favourable legislation at the national level, regional governments have started to create their own support frameworks that can account for specific local conditions and serve to create an effective multi-level governance (ibid.). A lack of supportive local institutions can otherwise act as a barrier to social innovations such as community energy (Ecker et al.
2018, pp. 21–24; Davies, den Hoed, and Michie
2020, p. 19). While regional funds have now started to emerge throughout Italy, in Germany, only the state of Schleswig-Holstein has taken any steps in this direction, introducing a revolving fund providing risk capital for community energy (Krug et al.
2022). The mobilisation and coalition-building of existing political, economic and civic institutions, organisations and networks at the state level and below is a key strategy to boost community energy (e.g. Ministerium der Justiz des Landes Brandenburg
2022).
Establishing a level-playing field with big energy suppliers is an essential factor for a decentralised transition. A major challenge for community energy projects, particularly for wind energy projects, is the replacement of feed-in tariffs and premiums with auctions, as this tends to worsen their refinancing perspectives (Lowitzsch and Hanke
2019; Meister et al.
2020). A phase-out of feed-in tariffs without compensatory support measures does nothing to create a non-discriminatory market, making it instead more difficult for community energy projects to compete with the big energy suppliers in light of differing economies of scale and learning. High taxes and fees that are often raised indiscriminately for larger energy suppliers and small-scale citizen-led projects, as well as administrative barriers regarding planning and authorisation, impose further challenges for community energy initiatives (Horstink et al.
2020; Palm
2021; Schwarz et al.
2022; Krug et al.
2022). In reaction to the collapse of citizen energy efforts in Germany, the current federal government has introduced exceptions for citizen-led wind energy projects in auctions (the so-called
de minimis regulation, § 36g EEG
2021). Moreover, access to the grid, financial support and cost-efficient energy sharing are considered essential if community energy is to compete on a level playing field with large energy suppliers (Krug et al.
2022; DGRV
2021). Tailor-made policies and subsidy mechanisms in terms of financial aid and technical expertise are needed for community energy projects to blossom and to tap their full potential.
The potential value-added contributions of new employment opportunities emphasise the need for a skilled workforce throughout the value chain (Kapetaki et al.
2020). Therefore, drawing on the skills of former coal workers as well as on the capacity of the local industrial network should be combined with broader education and (re-)training measures (Davies, den Hoed, and Michie
2020, p. 19). Access to a highly skilled workforce is a key challenge for Lusatia in light of its demographic development (see Sect. 1). Another crucial factor lies in the debate about the crowding-out of coal-industry jobs (see Wörlen, Keppler, and Holzhausen (
2017) and Rinscheid (
2018) for socio-economic studies and Deutscher Bundestag (
2020) as an example of the controversial parliamentary debate on the national level). Besides the need for a coal phase-out as a strong climate protection measure, there are indications that a strategy to promote sustainable energy generation in former coal-regions can indeed replace a high share of the crowded-out coal-industry jobs or even generate a multiple of these crowded-out jobs (as estimated on a NUTS2-level by Kapetaki et al.
2020, p. 66, Table 16). It must be made clear to regional stakeholders that the climate transition will not only affect their region through the phase-out of fossil fuels as important economic drivers—it also implies a level of uncertainty for other energy-intensive industries like automotive engineering and metals. Therefore, climate protection strategies, in particular the decarbonisation of energy production, will not only bring about new economic potentials but must also be fully integrated into a superior sustainable economy policy (Davies, den Hoed, and Michie
2020, pp. 17–18). Therefore, regional policy makers must establish clear forward planning structures. Given that surrounding regions might well face similar challenges, innovative regional solutions should be proactively implemented by regional policy makers in cooperation with industrial stakeholders to strengthen regional labour markets.