New Era of Energy Remunicipalisation?

In the early nineties municipal energy supply was considered a burdensome and costly service by many municipalities. Hence, many of them outsourced the energy supply to private companies. Now, as many concession agreements with private utilities are about to expire, municipalities are reconsidering a remunicipalisation of the grids. Many municipalities are again thinking that energy and investments in its infrastructure are an attractive source of income, providing stable yields.

Particularly since a group of municipal utilities acquired the utility Thüga from E.ON AG, municipalities all over Germany are considering (or reconsidering) getting back into the energy sector. The upcoming expiry of roughly 2,000 concession agreements in the next two years should provide a favourable background. In concession agreements, municipalities grant energy supply companies a concession to use public property in their area. The concessionaire is required to lay and operate the  local energy distribution networks.

An added bonus for many municipalities is the opportunity to improve their eco-balance by operating their own utilities, either by purchasing renewable electricity or generating it themselves. Many municipal utilities want to promote renewable energy and build biogas or solar installations. Acquiring the grid is often seen as a first step, the second is setting up  a sales department and building power plants, Spiegel quotes an industry expert as saying.

Getting control over the grids is a poker game with high stakes, in which the major utilities are not willing to relinquish their power easily, says Spiegel. Besides, municipal utilities enter a competitive market dominated by players with many years of experience and market knowledge. Reclaiming the grid is also a technical challenge. Furthermore, municipalities often lack experience in effectively operating grids.

Source: Spiegel Online