Grassroots innovations

Innovations in Sweden

Development of Swedish wind cooperatives – Struggle for establishment

– Dick Magnusson & Linda Lundmark –

Since the deregulation of the Swedish electricity market, in January 1996, many wind cooperatives have been developed by individuals and organizations with an ambition to produce their own affordable renewable wind energy. However, in recent years wind cooperatives started to experience major barriers due to decreasing electricity and electricity certificate prices and changed tax legislation. The historic development, barriers and mobilization attempts by wind cooperatives will be further described in this text.

1. What is the new solution or approach?

Compared to ‘grey’ energy, ‘green’ energy is relatively expensive, as negative externalities such as contributing to climate change or air pollution are not calculated in the price of ‘grey’ energy based on fossil fuel sources. As a consequence, ‘green’ renewable energy (RE) faces difficulties in entering the energy market. To enable and encourage the production of renewable energy, regulations need to be changed or created to make this happen. Changing governmental rules is never easy, especially if they go against the vested interests of both government and energy sector.

The postcode rose is a model which enables collective net metering for citizens away from their individual property or roof. Citizens within the borders of one postcode and adjoining postcodes. The regulation provides a tax discount on the energy tax for the citizens that collectively own the renewable energy production, for example through a cooperative or homeowner association (VVE).

2. Historic development of wind cooperatives

Sweden has a long history of centralized energy production where municipalities and the government owned energy company Vattenfall have been responsible for production and distribution of electricity. This along with a rigid energy market dominated by nuclear energy and hydro power have restricted the development of grassroots innovations for small scale renewable energy. In 1996 the electricity market was deregulated with the aim to allow for increased market competition, customer flexibility and system efficiency. With this change a number of municipalities sold their electricity and district heating companies and Vattenfall expanded to the international arena while the Finish energy company Fortum and the German company Eon entered the Swedish energy market. This liberalization also meant that grassroots initiatives now had a greater chance to produce their own renewable energy.

The first Swedish wind cooperative started in Näs at Gotland in 1990. The initiators were a group of people driven by environmental idealism. They received strong interest from the locals who were willing to invest in wind energy while not expecting to make economic profits. At that time the price was not cheaper than the electricity you could get from the energy company. From 1993 until 1996 a number of other wind cooperatives was formed mainly in southern Sweden but also one in Lysekil on the west-coast and two close to lake Vättern. Today there are in total 81 wind cooperatives in the country, contributing with around 10 percent of the total production of wind energy. Most of these wind cooperatives have been developed due to individual initiatives but some have also been assisted and initiated by municipality owned energy companies who have offered their customers the possibility to buy wind energy shares and transferred the wind power plants to an economic association. The first wind cooperative of this kind was formed in 1993 in Gothenburg by Göteborg energi. Other municipality owned energy companies who have followed this example are Örebro Energi, Halmstad Energi, Falkenberg Energi, Kalmar Energi, Varberg Energi, Lund Energi and Helsingborg Energi. These types of municipal initiatives have been described as a success factor by many energy cooperatives. This is because energy companies can contribute to vital knowledge and investment support during early stages. They also usually possess a large customer base which simplifies the process of finding and reaching out to members.

Wind cooperatives have taken more or less influence from each other during the years, mainly during the initial planning and development stages regarding organizational, economic and legislative questions. Many of the wind cooperatives that started around the time of the electricity market deregulation was initiated by individuals with an environmental commitment, similarly to the case in Gotland. The pioneering cooperatives experienced some difficulties in receiving new members, however this became easier due to a growing interest during the late 1990s and early 2000s when the economic situation also became better for many wind cooperatives. These initiatives received necessary support from the green electricity certificate system which was initiated in 2003. This system implies that for every MWh of renewable energy produced the producer receives a certificate from the Swedish Energy Agency that can be sold on the open market, contributing to an increased income.

However, around 2010 the development trend for wind cooperatives were changing. Changed tax legislation and decreasing electricity prices and electricity certificate prices started posing economic barriers for many wind cooperatives and since then around 20 cooperatives have been decommissioned.

3. Legislative and economic barriers

Changes in the Swedish tax legislation, in 2008, implied that wind cooperatives now had to pay a so called withdrawal tax “uttagsskatt” since their electricity price was offered below the market price. This law became highly criticized by many wind cooperatives who considered the law to be unreasonable since it did not take into account the large capital investments made by the shareholders, to produce their own electricity. The development of wind cooperatives decreased during this time due to a lack of interest from potential members. In addition, around the same time, due to high electricity production in Sweden, both the electricity and the electricity certificate prices were starting to decrease. This is another economic barrier which concerned especially the wind cooperatives who had started their organizations just a few years prior to 2012, when the investment costs where higher but when the economic conditions in general were better. Similarly to the withdrawal tax, the decreasing electricity and electricity certificate prices contributed to lower income for wind cooperatives and lower interests from potential members.

Many wind cooperatives are experiencing that the government is not doing enough to facilitate, or that they even oppose, the development of these local energy initiatives. The low electricity prices are the result of an overproduction on electricity in Sweden, where many wind cooperatives consider nuclear energy to be superfluous. In addition, in 2017, both nuclear energy and hydro power received tax reliefs from the state.

Another obstacle which have continuously affected especially wind cooperatives is a difficult planning and authorization process. This is due to both NIMBY related reactions from locals and obstacles from the Swedish military. Wind cooperatives also experience that the negative impact, caused by wind turbines, on the surrounding natural environment and species is considered and taken into account to a greater extent during this process in comparison to its positive and long term societal and environmental impact.

4. How is it talked and written about?

The main mobilization efforts among wind cooperatives have been regarding the taxation issues, especially the “uttagsskatt”, and the low electricity and electricity certificate prices. Efforts made attempting to change the current energy system and influence politicians differs to some extent between wind cooperatives. Bigger cooperatives like o2 el and Telge energi vind, who possess a lot of expertise and resources, have been quite active in trying to influence politicians to change or remove the withdrawal tax legislation from wind cooperatives. For example, through direct conversations with politicians, arranged meetings but also by writing debate articles. Among other wind cooperatives some have attempted similar methods to a smaller extent while others more or less have given up, feeling a sense of hopelessness and inability to influence. Most cooperatives however have a similar experienced of a quite bureaucratic and slow process, especially in attempting to change tax legislation. So far, these mobilizations efforts have not resulted in any concrete changes.

Regarding mobilization efforts, many wind cooperatives are also referring to the Swedish organizations SERO (Sveriges energiföreningars riksorganization) and SVIF (Svensk vindkraftsförening). SERO is a non-governmental organization supporting organizations that are engaged in different forms of renewable energy production in Sweden and SVIF is a similar organization however mainly focusing on promoting wind power development. Both of these organizations have a close cooperation and have been active in attempting to influence Swedish authorities and creating a supporting energy system for, among others, wind cooperatives.

Wind cooperatives have generally been getting positive mentions in news media. They are written about as economically favorable for the members, as they historically have been providing good economic returns. They are also considered as environmentally friendly, similarly to how wind power is generally described, but as some of the cooperatives have had internal struggles, they have also been getting some negative press due to those organsations.

In general, the wind cooperative development has been strong but is at the moment in flux due to changed prerequisites. The challenges will remain in the taxation and electricity price issues, but also if the, now somewhat, old organizations wants to carry on when the plants are reaching the end of their technological lifespan.