**Consumer Stock Ownership Plans (CSOPs)—The Prototype Business Model for Renewable Energy Communities**

#### **Jens Lowitzsch**

East European Business Law and European Legal Policy at the Faculty of Business Administration and Economics, Europa Universität Viadrina, Große Scharrnstraße 59, D-15230 Frankfurt, Germany; lowitzsch@europa-uni.de

Received: 31 October 2019; Accepted: 13 December 2019; Published: 25 December 2019

**Abstract:** The 2018 recast of the Renewable Energy Directive (RED II) defines "renewable energy communities" (RECs), introducing a new governance model and the possibility of energy sharing for them. It has to be transposed into national law by all European Union Member States until June 2021. This article introduces consumer stock ownership plans (CSOPs) as the prototype business model for RECs. Based on the analysis of a dataset of 67 best-practice cases of consumer (co-) ownership from 18 countries it demonstrates the importance of flexibility of business models to include heterogeneous co-investors for meeting the requirements of the RED II and that of RE clusters. It is shown that CSOPs—designed to facilitate scalable investments in utilities—facilitate co-investments by municipalities, SMEs, plant engineers or energy suppliers. A low-threshold financing method, they enable individuals, in particular low-income households, to invest in renewable projects. Employing one bank loan instead of many micro loans, CSOPs reduce transaction costs and enable consumers to acquire productive capital, providing them with an additional source of income. Stressing the importance of a holistic approach including the governance and the technical side for the acceptance of RECs on the energy markets recommendations for the transposition are formulated.

**Keywords:** Renewable energy communities; renewable energy directive; prosumership; decentralised energy production; energy clusters; European Union; consumer (co-)ownership.

#### **1. Introduction**

A consumer stock ownership plan (CSOP) is a financing technique that employs an intermediary corporate vehicle and facilitates the involvement of individual investors through a trusteeship. It is a type of investment transaction that may use external financing, thereby achieving the benefit of financial leverage. The CSOP was applied for the first time in 1958 with spectacular success in the U.S. by its innovator, Louis O. Kelso, a business and financial lawyer turning 4,580 farmers into (co-)owners of the new fertilizer manufacturer Valley Nitrogen Producers, Inc. This involved an investment of USD 120 million which today inflation adjusted would equal around EUR 915 million. It is related to Kelso's best-known financial innovation, the employee stock ownership plan (ESOP), that enabled millions of American workers to become (co-)owners of their employer companies. Both plans repay the acquisition loan not from wages or savings but from the future earnings of the shares acquired. Today the ESOP is an integral part of American corporate finance with around 6,660 ESOPs and a little under 3,000 ESOP-like plans in the USA, about 14.2 million participating employees holding around USD 1.4 trillion in assets as of 2016 [1]. Applied to the energy context as CSOP can buy into an existing or invest in a new renewable energy (RE) plant. Designed to facilitate scalable investments in utilities, it is open to co-investments by municipalities, plant engineers, energy suppliers or other strategic partners.

Moreover, as a low-threshold financing method, it enables individuals to invest in RE projects [2]. The renewable energy consumer stock ownership plan (RE-CSOP) as an alternative financing source for sustainable investments is of particular importance for municipalities that are charged with fulfilling energy efficiency (EE) and climate policy goals but have limited budgets and often lack the funding to make these investments. An objective of this contractual model is, above all, to facilitate single-source financing (i.e., employing one bank loan instead of many micro loans), thus reducing transaction costs. At the same time, individual liability of consumers is avoided, while participating consumers are able to acquire capital ownership, providing them with an additional source of income. Other important issues are easy tradability of shares, deferred taxation for consumer-shareholders and pooling of voting rights.

Especially, low-income households who usually do not dispose of savings necessary for conventional investment schemes are enabled to repay their share of the acquisition loan from the future earnings of the investment: A fiduciary entity that is set up by the local community and managed by an independent director is authorized to take on a bank loan to acquire shares in the RE plant on behalf of the consumers. The shares are allocated among the consumer-beneficiaries in proportion to their respective energy purchases. Monies saved by self-consumption and increased EE as well as revenues from the sale of the excess energy production are used to repay the acquisition loan. After amortisation of this debt, profits are distributed to the consumer-beneficiaries.

In 2018 the European Union has introduced a legal framework for renewable energy communities (RECs) that will have to prove its success in the years to come. A crucial element for the acceptance of RECs by the energy markets will be the underlying business model. This article introduces RE-CSOPs as the prototype business model for RECs. In the limited time since the entering into force of the new rules only very few articles, for the most part policy papers of the different interest groups, have been published. Therefore, the focus lies on the conceptual side of this business model omitting a review of the literature.

#### *1.1. Prosumership in the 2018*/*19 EU Clean Energy Package*

Consumer (co-)ownership in RE is one essential cornerstone of the overall success of energy transition. Marshall McLuhan and Barrington Nevitt as early as 1972 suggested in their book Take Today [3] that technological progress would transform the consumer into a producer of electricity. When consumers acquire ownership in RE, they can become prosumers (Alvin Toffler probably first introduced the artificial word stemming from the Latin in his book The Third Wave [4]), generating a part of the energy they consume, thus reducing their overall expenditure for energy, while at the same time having a second source of income from the sale of excess production. The European Union agreed on a corresponding legal framework as part of a recast of the Renewable Energy Directive (RED II) [5], which entered into force in December 2018:


The RED II is part of the "Clean Energy for all Europeans Package" of the European Union, a package of measures that the European Commission presented on 30 November 2016 to keep the EU competitive as the energy transition changes global energy markets; this legislative initiative has four main goals, that is, energy efficiency, global leadership in RE, a fair deal for consumers and a redesign of the internal electricity market. The RED II rules are embedded in those of the 2019 Internal Electricity Market Directive (IEMD) [6] and Regulation (IEMR) [7]. The transposition of these comprehensive rules—in particular those on energy communities—requires developing, implementing and rolling out business models that broaden the capital participation of consumers in all Member States [8].

RED II introduced RECs as a new Europe-wide governance model for RE projects and defined them in Art. 2 as a legal entity:


Complying with the prerequisites for RECs, a corresponding business model needs to have the capability of involving heterogeneous co-investors, that is, local citizens, municipalities, SMEs but possibly also commercial investors in RE projects. Other than bringing together the interests of local citizens and their municipalities, this is an important prerequisite for preferential conditions under the "enabling framework" for RECs, as defined in Art. 22 RED II. This approach facilitates the involvement of municipalities who need to respect the typical prerequisites of municipal law for participation in RE projects, i.e., public purpose, capacities for the investment, subsidiarity, appropriate representation as pacemakers of the energy transition. (Optional) minority stakes for commercial investors is itself nothing new, as citizens' energy models in the wind sector often include professional partners as members of limited partnerships [9]. Depending on the type of project and the underlying technology, it may be useful to include them as operation and maintenance of infrastructure in RE projects can be very complex; this concerns, for example, not only wind energy and bioenergy, but also energy cluster projects aiming at sector coupling that may involve electricity sharing, storage, e-mobility, cogeneration, and the like [10,11].

#### *1.2. Research Questions and Approach*

Conventional business models for consumer ownership may not always allow for the combination of different types of co-investors. With regard to cooperatives [12], for example, the one-member one-vote principle is often an obstacle to partnering with SMEs and commercial investors, since these parties will prefer voting rights proportional to their shareholding. Furthermore, municipal co-investments are hindered by the necessity of representation on management and supervisory bodies, as cooperative law does not acknowledge a right of delegation similar to legislation applicable to joint stock companies. Cooperative projects often set up special purpose vehicles (usually a privately held corporation with limited liability) to avoid this problem [13]. The RE-CSOP involves such a standard special purpose vehicle, but with a defined governance structure allowing for the direct involvement of municipalities and strategic partners while safeguarding the interests of the local partners. Unlike cooperatives, where all management and board positions are reserved for members and representation by third parties is not permitted [14], a CSOP may hire external management. Thus, it avoids obstacles related to the principle of self-governance and ensures the representation of municipalities on the board. At the same time members of an energy cooperative can participate in a RE-CSOP, together with strategic partners, when expanding an existing RE plant together with strategic partners.

With regard to the RED II requirements for RECs and the necessary contractual arrangements, this article seeks to answer the following questions:


As the novelty legislation is not broadly known yet, Section 2 on theory first lays out the new legal framework for energy communities with a focus on the governance model for RECs and their importance for RE clusters. Reflecting on available empirical evidence, Section 3 draws on the experience of already existing best practice energy communities in the field of RE, assessing how many involve heterogeneous partners, and in those that do, their relationship to each other with regard to ownership structure and governance. To identify these patterns, the analysis [15] of a dataset of 67 best practice cases from 18 countries covering Europe, North and South America and Asia [16] is referred to asking: (a) Whether they are open to different actors (i.e., the heterogeneity of members or shareholders); and (b) if so, what their governance and ownership structure was. In the light of these empirical findings, Section 4 presents the RE-CSOP putting forward a proposal for future practice using a modular approach: (a) Three levels for co-investments are identified; and (b) the RE-CSOP is adapted to each of these levels describing how it reflects the needs of the different co-investors. Section 5 then discuss specific aspects of this business model, namely, how to convey individual consumers' shareholding, the financing of the investment, and its taxation. Section 6 concludes and formulates policy recommendations with a view to the pending transposition of the RED II. The glossary provides definitions.

#### **2. Theory**

Energy communities are mentioned and defined in both the RED II and the IEMD. While the recast of the renewables directive focuses on the promotion of RE and thus speaks of "renewable energy communities" (RECs), the directive on the internal electricity market of the European Union as the more general legal act addresses "citizen energy communities" (CECs) [17]. This raises the question of the relationship between these two types of energy communities and, more generally, the relationship between these two legal acts. Furthermore, the Clean Energy Package introduces a new Europe-wide governance model for RECs and CECs to foster environmental, economic or social community benefits. These benefits are of particular importance for the development of the energy systems of tomorrow, that is, RE clusters that further support the deployment of renewable energy sources (RES) and provide stability of the grid and energy supply in energy markets increasingly characterised by volatility of production [15]. Flexibility [18], bi-directionality, interconnectivity [19] and complementarity [20] are prerequisites to these RE clusters that; however, require an active involvement of all actors involved, including consumers.

#### *2.1. Relation of Electricity Market Directive*/*Regulation and Renewable Energy Directive*

While the purpose of IEMD/R is the completion of the internal market in electricity that has progressively been implemented since 1999, that of RED II on the other hand is to specifically support the deployment of RES for energy production, including electricity, and to foster acceptance for renewables among the Europeans. Both directives expressly see the consumer *"at the heart of the energy markets*", defining him or her—individually or jointly—respectively as *"active consumer"* (IEMD) and *"renewable self-consumer"* (RED II). With regard to energy communities, the IEMD mainly concerns the horizontal level, that is, their rights and obligations towards public authorities, other electricity enterprises and consumers. This design is also reflected in recital 2 IEMR on the aim of the internal market in electricity *"to deliver a real choice for all consumers in the Union, both citizens and businesses, new business opportunities and more cross-border trade, so as to achieve e*ffi*ciency gains, competitive prices and higher standards of service, and to contribute to security of supply and sustainability"*. Amongst other issues the IEMD provides energy communities with a level playing field vis-a-vis other market participants (see Art. 65 IEMD). RED II, on the other hand, additionally ensures that RECs can compete for support *"on an equal footing with other market participants"* and calls on the Member States to *"take into account specificities of renewable energy communities when designing support schemes"* (Art. 22 para 7 RED II).

While the framework under IEMD is primarily a *"regulatory framework"* (see Art. 16 para. 1, sentence 1), that of RED II has the explicit aim *"to promote and facilitate the development of RECs"* (see

Art. 22 para. 4, sentence 1), including preferential conditions or incentives. However, the above distinction is not always sharp since the IEMR/D also contain elements that support the deployment of RES. Recital 3a IEMR stipulates as an explicit aim *"to ensure the functioning of the internal energy market while integrating requirements related to the development of renewable forms of energy and environmental policy, in particular specific rules for certain renewable power generating facilities, concerning balancing responsibility, dispatch and redispatch as well as a threshold for CO2 emissions of new generation capacity where it is subject to a capacity mechanism"*. As enshrined in Art. 11, for example, the IEMR defines the principle of priority dispatch for RE plants with an installed electricity capacity of less than 400 kW (for RE plants commissioned after 1 January 2026 less than 200 kW) and for *"demonstration projects for innovative technologies".* RE-plants that concluded contracts before the entering into force of the IEMR continue to benefit from priority dispatch. Furthermore, with regard to RECs Art 7 para. 3 IEMR stipulates that *"Nominated electricity market operators shall provide products for trading in day-ahead and intraday markets which are su*ffi*ciently small in size, with minimum bid sizes of 500 Kilowatt or less, to allow for the e*ff*ective participation of demand-side response, energy storage and small-scale renewables including directly by customers"*. Figure 1 illustrates the relation of the RED II and the IEMD/R. *Energies* **2019**, *12*, x 5 of 23 *integrating requirements related to the development of renewable forms of energy and environmental policy, in particular specific rules for certain renewable power generating facilities, concerning balancing responsibility, dispatch and redispatch as well as a threshold for CO2 emissions of new generation capacity where it is subject to a capacity mechanism"*. As enshrined in Art. 11, for example, the IEMR defines the principle of priority dispatch for RE plants with an installed electricity capacity of less than 400 kW (for RE plants commissioned after 1 January 2026 less than 200 kW) and for *"demonstration projects for innovative technologies".* RE-plants that concluded contracts before the entering into force of the IEMR continue to benefit from priority dispatch. Furthermore, with regard to RECs Art 7 para. 3 IEMR stipulates that *"Nominated electricity market operators shall provide products for trading in day-ahead and intraday markets which are sufficiently small in size, with minimum bid sizes of 500 Kilowatt or less, to allow for the effective participation of demand-side response, energy storage and small-scale renewables including directly* 

**Figure 1.** Relation of the Renewable Energy Directive (RED II) and the Internal Electricity Market Directive/Regulation (IEMD/R). **Figure 1.** Relation of the Renewable Energy Directive (RED II) and the Internal Electricity Market Directive/Regulation (IEMD/R).

In sum, generally speaking, RECs are a specific form of CECs that benefit from an "enabling framework" promoting and facilitate their development. However, they have their own area of operations not falling under the IEMD/R as far as other types of energy (i.e., not electricity) are concerned. In this regard, the possibility of benefitting from conventional small-scale back-up generation is an important element for REC's micro-grid solutions, be it on- or off-grid. Most importantly, unlike CECs they benefit from the preferential conditions of the "enabling framework". In sum, generally speaking, RECs are a specific form of CECs that benefit from an "enabling framework" promoting and facilitate their development. However, they have their own area of operations not falling under the IEMD/R as far as other types of energy (i.e., not electricity) are concerned. In this regard, the possibility of benefitting from conventional small-scale back-up generation is an important element for REC's micro-grid solutions, be it on- or off-grid. Most importantly, unlike CECs they benefit from the preferential conditions of the "enabling framework".

#### *2.2. The New Governance Model and its Importance for RE Clusters 2.2. The New Governance Model and its Importance for RE Clusters*

With regard to energy communities, of course, European energy law does not rule out other private law citizens' or consumer-oriented initiatives facilitated by and implemented with the participation of the public administration in the Member States [17]. However, such initiatives would benefit neither from the possibility of electricity/energy sharing nor from the preferential conditions and incentives foreseen in the "enabling framework" to promote and facilitate the development of RECs With regard to energy communities, of course, European energy law does not rule out other private law citizens' or consumer-oriented initiatives facilitated by and implemented with the participation of the public administration in the Member States [17]. However, such initiatives would benefit neither from the possibility of electricity/energy sharing nor from the preferential conditions and incentives foreseen in the "enabling framework" to promote and facilitate the development of RECs under the

under the RED II. Therefore, the new Europe-wide governance model for energy communities is a

focus more on environmental, economic or social community benefits than on profits and both limit the effective control of the community to their beneficiaries; however, whereas RECs do this by tying RED II. Therefore, the new Europe-wide governance model for energy communities is a determining factor for the choice of business models applied [21]. Both types of energy communities focus more on environmental, economic or social community benefits than on profits and both limit the effective control of the community to their beneficiaries; however, whereas RECs do this by tying control to the criteria of locality and geographic proximity, CECs limit it by the size of the shareholders and their commercial activity, excluding those for which energy constitutes the primary area of activity. An overview is provided in Table 1.

**Table 1.** The new governance model for energy communities under Renewable Energy Directive (RED) II and Internal Electricity Market Directive (IEMD). Source: Modified after Lowitzsch, Hoicka, van Tulder 2019.


With regard to RE, the two crucial consequences of this governance model for the CSOP—as well as for any other business model—are that a REC according to Art. 22 RED II:


the composition, voting or decisions. Art. 2 pt. (56) IEMD defines "control" as "*rights, contracts or other means which, either separately or in combination and having regard to the considerations of fact or law involved, confer the possibility of exercising decisive influence on an undertaking, in particular by: (a) ownership or the right to use all or part of the assets of an undertaking; (b) rights or contracts which confer decisive influence on the composition, voting or decisions of the organs of an undertaking*".

These new rules for the lawful control over and administration of (local) energy generation, supply and management concern also the fair distribution of responsibilities and benefits and are the governance side of the technical solutions for the Energy Transition. Energy communities; thus, are the mirror image of energy clusters; the former concern the governance, the latter the technological side of the (renewable) energy systems of the future, entailing flexibility, bi-directionality and interconnectivity options between prosumers and producers of energy and the market [15]. Most importantly they allow energy sharing of a portfolio of RES, that can enhance complementarity, lower energy costs for prosumers [10] and, through (co-)ownership in RES, increase social acceptance of the architecture and logic of a RE future [22].

#### **3. Empirical Evidence: Material, Methods and Results**

To cast a light on available empirical information on the structure of renewable energy communities the results of an analysis [15] of a dataset of 67 best-practice examples of consumer (co-)ownership reported in the Palgrave Macmillan publication "Energy Transition: Financing Consumer Co-Ownership in Renewables" [16] are briefly summarised in this section. The notion of (co-)ownership is used not in the technical sense of joint ownership but to indicate that there may be other owners next to the consumers amongst the shareholders such as municipalities or conventional investors. The cases are from 18 countries covering Europe, North and South America and Asia, that is, CZ, DK, FR, DE, IT, NL, PL, ENG, SCT, ES, CH, CAL, CAD, BR, CL, IND, PAK, JAP; these countries were analysed following a consistent pattern including the energy mix, policies supporting consumer (co-)ownership, energy poverty, the regulatory framework, best practice, financing conditions, obstacles and perspectives to enable a like-to-like comparison. In light of the potential for replication of the regulatory framework beyond Europe, and to confirm the existence of projects that fit the criteria elsewhere, the extra-European cases present in the dataset were included in the analysis. The definition of consumer (co-)ownership as *"participation schemes that (a) confer ownership rights in RE projects (b) to consumers (c) in a local or regional area*" [23] (pp. 7–8) is followed in this article.

As mentioned, eligible members for RECs are natural persons, SMEs and local authorities, while CECs are, in principle, open to all entities. Both the IEMD and the RED II; thus, support heterogeneity of members, which follows from the purpose and guiding principle for both types of energy communities "to provide environmental, economic or social community benefits for its shareholders or members or for the local areas where it operates, rather than financial profits". However, with a view to the legislative process it remained unclear whether these guiding principles and in particular the emphasis on local and diverse co-investors originated from political desiderata or practical experience of already operating energy communities. Similar doubts arose with regard to the RED II prerequisites that to qualify as a REC, (a) the effective control should be held by members based in the proximity of the RE installations, and (b) its autonomy from single shareholders is to be upheld by the principle that no single shareholder owns a controlling stake. The IEMD contains a comparable but fairly milder restriction in precluding entities engaged in large-scale commercial activity and for which energy constitutes the primary activity as well as medium and large-sized enterprises from the shareholders effectively controlling the CEC.

The resulting limitations for enterprises which are either not local, too large or dominant in the energy sector with regard to control and size of their shareholding in energy communities may hamper their participation in RECs; together with those stemming from the business models prevalent to date risk to render RECs unattractive for these potential co-investors [21]. While good legislative intentions can lead to over-complex regulations that may actually hinder project implementation, a lot depends on how existing best practice deals with such problems [15]. Amongst other issues Lowitzsch, Hoicka

and van Tulder investigated the diversity of co-investors and the prevalent governance structures, testing the dataset for the two following criteria: (a) Heterogeneity of members and (b) governance and ownership. The results of the analyses for these two criteria can be summarised as follows:


Against the background of these empirical findings the question which business model is best suited for the RECs of the future becomes even more important. Only a sufficiently flexible business model like the RE-CSOP will be able to fulfil the necessary functions of RE clusters and allow truly heterogeneous partnerships for investment.

#### **4. Presentation of the Renewable Energy Consumer Stock Ownership Plan**

The modular approach of the RE-CSOP (see Figure 2) and the structure for each level of co-investment as described in this section is conceived under the assumption of complying with the new RED II governance model in order to benefit from the preferential conditions or incentives foreseen "enabling framework" to facilitate setting up RECs. Therefore, Figures 3–5 emphasise the role of the controlling members of RECs. As a rule, prosumers (households and non-energy small and medium sized enterprises) will hold between 33% and 51% of the shares in the corporation operating the RE-facility (Operating Company) and, together with the municipality, will have a majority interest. However, the CSOP conveys individual shareholding of the participating consumers through a trusteeship. Regarding the exercise of consumer's voting rights, the model offers flexibility: The fiduciary arrangements stipulate which matters are to be decided by the trustee or the managing director of the fiduciary entity (e.g., day-to-day business) and which will be voted on by CSOP-members (e.g., strategic decisions). It is; thus, the consumers themselves that determine the extent of their involvement, thus facilitating a process of apprenticeship. Finally, as the CSOP business model uses the borrowing power of a corporation, it enables the participation of vulnerable consumers that are underrepresented so far.

#### *4.1. The Modular CSOP Approach*

In practice, CSOP financing is based on a modular approach, starting with a "base model" and extending to higher levels, depending on the type of different co-investors involved, their investment horizons, needs and aims (see Figure 2a–c).

**Level I:** The base model is composed of two closely held corporations with limited liability, the fiduciary entity (Trusteeship) and the CSOP operating company (Operating Company). The fiduciary accordingly.

entity can also be a limited partnership or a RE-cooperative already in place which; however, this would have implications for the taxation of individual consumer (co-)owners and their corporate rights. This structure corresponds to a situation where a strategic co-investor has a local long-term interest (e.g., acceptance of a wind project) and does not mind burdening the Operating Company with a capital acquisition loan for consumers; all shareholders are proportionally liable for the debt.

**Level II:** A more complex structure results when the strategic investor, for example, has a short-term interest and will not engage in the project if his shareholding would be burdened with the acquisition loan that facilitates the consumer shareholding; in this situation the Operating Company stands next to a Holding (again a closely held corporation with limited liability) with only the latter being liable for the acquisition loan. Of course, the Operating Company will still provide security for the loan pledging part of the assets of the RE installation. *Energies* **2019**, *12*, x 9 of 23 being liable for the acquisition loan. Of course, the Operating Company will still provide security for the loan pledging part of the assets of the RE installation.

**Level III:** When upscaling and pooling more than one CSOP investment, the structure is still more complex: The Operating Company runs X number of RE projects, while separate Asset Companies own the RE installations of various RE-CSOPs. Strategic investors with differing short- or long-term interest (such as management, capital investment, electricity storage, aggregation and demand response) or a distribution system operator of a micro grid, for example, can invest at different levels accordingly. **Level III:** When upscaling and pooling more than one CSOP investment, the structure is still more complex: The Operating Company runs X number of RE projects, while separate Asset Companies own the RE installations of various RE-CSOPs. Strategic investors with differing short- or longterm interest (such as management, capital investment, electricity storage, aggregation and demand response) or a distribution system operator of a micro grid, for example, can invest at different levels

**Figure 2.** Co-investors in renewable energy communities (RECs). (Source: Own elaboration). **Figure 2.** Co-investors in renewable energy communities (RECs). (Source: Own elaboration).

To sum up, compatibility with conventional investments together with the potential of scalability, gives the RE-CSOP the advantage of avoiding concerns of market fragmentation [23]. Sub-scale investments can be eschewed, local projects pooled and partnerships with municipalities set up, thus advancing to economies of scale while retaining the benefits of individual consumer participation. Other than qualifying as a RECs and thus benefitting from the RED II "enabling framework" the RE-CSOP at the same time provides a business model flexible enough to allow for the cooperation with To sum up, compatibility with conventional investments together with the potential of scalability, gives the RE-CSOP the advantage of avoiding concerns of market fragmentation [23]. Sub-scale investments can be eschewed, local projects pooled and partnerships with municipalities set up, thus advancing to economies of scale while retaining the benefits of individual consumer participation. Other than qualifying as a RECs and thus benefitting from the RED II "enabling framework" the RE-CSOP at the same time provides a business model flexible enough to allow for the cooperation with professional energy companies (see in particular Level III).

professional energy companies (see in particular Level III). Against this background, RE-CSOPs can be an important "bridge technology" in financing citizen energy projects while extending the advantages of RE-cooperatives where projects involve heterogeneous co-investors, or where the cooperative model is not feasible for other reasons [12]. This is especially the case in Eastern Europe where citizen energy projects are still rare and where the cooperative model is associated with the socialist past. Furthermore, the flexible governance structure of CSOPs offers the advantage of combining RE projects with active citizen participation, both in financial returns and in decision-making, while also allowing for the participation of commercial investors. Especially in RE clusters that target sector coupling and may involve electricity sharing, storage, emobility, cogeneration, etc., including professional operators will become increasingly important as the operation and maintenance of the infrastructure of RE projects becomes more complex [15]. Here the RE-CSOP provides a standard governance model that safeguards the interests of local partners vis-à-vis their co-investors. Against this background, RE-CSOPs can be an important "bridge technology" in financing citizen energy projects while extending the advantages of RE-cooperatives where projects involve heterogeneous co-investors, or where the cooperative model is not feasible for other reasons [12]. This is especially the case in Eastern Europe where citizen energy projects are still rare and where the cooperative model is associated with the socialist past. Furthermore, the flexible governance structure of CSOPs offers the advantage of combining RE projects with active citizen participation, both in financial returns and in decision-making, while also allowing for the participation of commercial investors. Especially in RE clusters that target sector coupling and may involve electricity sharing, storage, e-mobility, cogeneration, etc., including professional operators will become increasingly important as the operation and maintenance of the infrastructure of RE projects becomes more complex [15]. Here the RE-CSOP provides a standard governance model that safeguards the interests of local partners vis-à-vis their co-investors.

#### *4.2. Level I—Key Elements of the Base Model (Leveraged or not) 4.2. Level I—Key Elements of the Base Model (Leveraged or not)*

vestors such as SMEs.

The first element of the RE-CSOP structure is the RE installation that is operated and managed by the Operating Company. The Operating Company is set up as a closely held limited liability corporation which is the best solution with regard to the functionality of the whole structure as well as The first element of the RE-CSOP structure is the RE installation that is operated and managed by the Operating Company. The Operating Company is set up as a closely held limited liability corporation which is the best solution with regard to the functionality of the whole structure as well as

**Variant A**—A new Operating Company is set up as a special purpose vehicle specifically for the new consumer co-investment: The consumers involved become (co-)owners of the RE installation by themselves or in partnership with other local public partners (e.g., a municipality, entity of local selfadministration, public law corporation or a municipal enterprise) and possibly with local private in-

"společnost s ručením omezeným" and under U.S. American law a "closely held corporation").

with regard to the optimisation of taxation (for example, under Polish law a "spółka z ograniczon ˛a odpowiedzialno´sci ˛a", under Italian law a "societá a responsabilita limitata", under Czech law a "spoleˇcnost s ruˇcením omezeným" and under U.S. American law a "closely held corporation").

**Variant A**—A new Operating Company is set up as a special purpose vehicle specifically for the new consumer co-investment: The consumers involved become (co-)owners of the RE installation by themselves or in partnership with other local public partners (e.g., a municipality, entity of local self-administration, public law corporation or a municipal enterprise) and possibly with local private investors such as SMEs. *Energies* **2019**, *12*, x 10 of 23

**Variant B**—An existing Operating Company is running and managing an existing RE installation: It is taken over partly or entirely by another legal subject assuming control on behalf of the consumers and the other co-investors of the local RE community pursuant Art. 22 RED II. **Variant B**—An existing Operating Company is running and managing an existing RE installation: It is taken over partly or entirely by another legal subject assuming control on behalf of the

As the ultimate goal of creating the overall structure is to grant corporate rights to the consumers, it is necessary to answer the question, how will they be included in this plan? This concerns in particular what kind of legal, corporate and property ties will connect the consumers of the RE installation with the Operational Company (independently of the contractual relationship for the supply of energy, of course). On the one hand, consumers could be direct shareholders of the Operating Company, but from a functional perspective this is not a desirable solution. Another component of the RE-CSOP; therefore, is a fiduciary entity. It is this fiduciary entity that on behalf of the consumer-shareholders, together with the other local shareholders, effectively controls the Operating Company (running the RE plant). The legal form of the intermediary entity administering the CSOP shares in the CSOP model for continental Europe, is derived from the Anglo-American Common Law of trusts [25]. In the absence of genuine trust legislation, this requires a two-tier structure (i.e., a closely held corporation with limited liability as fiduciary entity (Trusteeship) that holds consumer's shares in a closely held corporation with limited liability that operates the RE plant (Operating Company)). Figure 3 gives an overview of the financing structure and the key elements of the base model (Level I). consumers and the other co-investors of the local RE community pursuant Art. 22 RED II. As the ultimate goal of creating the overall structure is to grant corporate rights to the consumers, it is necessary to answer the question, how will they be included in this plan? This concerns in particular what kind of legal, corporate and property ties will connect the consumers of the RE installation with the Operational Company (independently of the contractual relationship for the supply of energy, of course). On the one hand, consumers could be direct shareholders of the Operating Company, but from a functional perspective this is not a desirable solution. Another component of the RE-CSOP; therefore, is a fiduciary entity. It is this fiduciary entity that on behalf of the consumershareholders, together with the other local shareholders, effectively controls the Operating Company (running the RE plant). The legal form of the intermediary entity administering the CSOP shares in the CSOP model for continental Europe, is derived from the Anglo-American Common Law of trusts [25]. In the absence of genuine trust legislation, this requires a two-tier structure (i.e., a closely held corporation with limited liability as fiduciary entity (Trusteeship) that holds consumer's shares in a closely held corporation with limited liability that operates the RE plant (Operating Company)). Fig-

ure 3 gives an overview of the financing structure and the key elements of the base model (Level I).

**Figure 3.** Key elements of the RE-CSOP financing structure in the base model for a REC. Source: Own elaboration. **Figure 3.** Key elements of the RE-CSOP financing structure in the base model for a REC. Source: Own elaboration.

As mentioned earlier, a RE-CSOP can use a bank loan to leverage the acquisition of shares in a RE project for consumers that have neither savings nor access to capital credit. National company and tax law permitting, using corporate credit to guarantee the loan that funds the acquisition of As mentioned earlier, a RE-CSOP can use a bank loan to leverage the acquisition of shares in a RE project for consumers that have neither savings nor access to capital credit. National company and tax law permitting, using corporate credit to guarantee the loan that funds the acquisition of consumer

sumer accounts, usually on the basis of relative energy consumption.

consumer shares by the CSOP, reduces the financing costs. If the Trusteeship borrows money to buy

costs will not be tax-deductible) and dividends paid on the shares the fiduciary entity holds in trust for the consumer-shareholders. As the loan is retired, paid-up shares are allocated to individual con-

In a variation of the above described loan structure, the lender often prefers to make the loan directly to the Operating Company, followed by a second "mirror loan" from the Operating Company to the Trusteeship. The tax results will be better than in the case of a direct loan to the fiduciary entity. The interest repayments—national company and tax law permitting—will be a deductible exshares by the CSOP, reduces the financing costs. If the Trusteeship borrows money to buy shares, the Operating Company repays the loan through periodic contributions (however, financing costs will not be tax-deductible) and dividends paid on the shares the fiduciary entity holds in trust for the consumer-shareholders. As the loan is retired, paid-up shares are allocated to individual consumer accounts, usually on the basis of relative energy consumption.

In a variation of the above described loan structure, the lender often prefers to make the loan directly to the Operating Company, followed by a second "mirror loan" from the Operating Company to the Trusteeship. The tax results will be better than in the case of a direct loan to the fiduciary entity. The interest repayments—national company and tax law permitting—will be a deductible expense from taxable corporate income as financing costs of the RE-investment. However, the Operating Company has to make annual contributions to the Trusteeship in amounts sufficient to amortise the internal loan from the Operating Company to the Trusteeship. The amounts paid by the fiduciary entity to the Operating Company to amortise the internal loan will as a rule constitute tax-free loan repayments and will be used by the Operating Company in turn to amortise the external loan. The "mirror loan" structure provides the lender with a stronger security interest in the assets pledged as collateral for the loan [26]. The lender will be in a better position to defend against claims of fraudulent conveyance in the case of default if collateral is taken directly from the borrower rather than from a guarantor of the loan. This should also lower the financing cost for the leveraged transaction significantly.

However, to use this structure the other shareholders of the Operating Company that do not directly benefit from the leveraged transaction must agree to assume the risk associated with financing the acquisition of shares by the Trusteeship with a bank loan. This may be acceptable if these shareholders are all members of the REC and share a genuine interest in involving the consumers. However, in situations where either the interests of the members of the REC are too heterogeneous or where external co-investors are involved, such co-investors may object to the mirror loan structure. In these situations, it may be necessary to set up a Holding Company, as described in the next section.

#### *4.3. Level II—Leveraged RE-CSOP with External Strategic Investor*

The following alternative structure of the RE-CSOP model employs a Holding Company which obtains external financing both for the consumers and for the other members of the local REC (i.e., taking on a loan or credit and then investing it in the Operating Company (Variant A); or acquiring the shares from the current owner(s) (Variant B)). The justification for this structure is the diversity of interests of the potential co-investors.

The Holding Company is again a closely held corporation with limited liability which, at the same time, may facilitate the functioning of the entire structure from the viewpoint of tax optimization. The investment or acquisition is financed from external sources, with the loan/credit being repaid from the future profits of the RE installation run by the Operating Company (with such profits coming from the sale of electricity to consumers or to the grid and from the difference in price of the energy provided to the prosumers). National tax law permitting, the Operating Company and the Holding Company may establish a capital tax group (see 5.2. below). In the case of such a structure, profits, losses and, what is most important here, costs, are calculated for tax purposes jointly for the combined tax group. As a result, in practice, financing costs (especially interest) can be deducted from the tax base of the Operating Company. Such a solution has many advantages, including the following:


long as they together have effective control of the operating company by keeping at least 51% of its shares.

• External strategic investors can buy into the project without being burdened by the leveraged transaction that enables consumers without significant savings to participate.

Thus, at Level II there are three entities in this structure—an Operating Company running the RE installation, a CSOP Holding (dominating company) and a Trusteeship, being the sole shareholder or the co-owner of the Holding, and thus indirectly controlling the Operating Company. Figure 4 shows the advanced scheme of the RE-CSOP model of Level II. *Energies* **2019**, *12*, x 12 of 23

**Figure 4.** Key elements of the leveraged RE-CSOP with strategic investors for a REC at Level II. (Source: Own elaboration). **Figure 4.** Key elements of the leveraged RE-CSOP with strategic investors for a REC at Level II. (Source: Own elaboration).

In summary, this solution offers two opportunities for co-investments at Level II: In summary, this solution offers two opportunities for co-investments at Level II:

(1) Leveraged investments financed by an investment loan taken on by the Holding Company. The target groups for this type of co-investment are, above all, local co-investors belonging to the REC pursuant to Art. 22 RED II as, for example, a municipality, a small or medium enterprise, members of a RE cluster, etc. They all have in common that their investment horizon is long- to mid-term and that, as a rule, they will have difficulties in obtaining financing individually, or, at least will incur higher financing cost [27], than when benefitting from the borrowing power of the Holding that pledges its shares in the Operating Company to secure the repayment of the investment loan. (1) Leveraged investments financed by an investment loan taken on by the Holding Company. The target groups for this type of co-investment are, above all, local co-investors belonging to the REC pursuant to Art. 22 RED II as, for example, a municipality, a small or medium enterprise, members of a RE cluster, etc. They all have in common that their investment horizon is long- to mid-term and that, as a rule, they will have difficulties in obtaining financing individually, or, at least will incur higher financing cost [27], than when benefitting from the borrowing power of the Holding that pledges its shares in the Operating Company to secure the repayment of the investment loan.

(2) Non-leveraged investments financed by a strategic investor in the Operating Company. The target group for this type of co-investment is, generally speaking, external strategic investors that either do not qualify as members of a REC pursuant to Art. 22 RED II and/or have different motivations for their engagement in the project. They typically will have a short- or mid-term investment horizon with preferences for liquidity and a clear exit strategy. Examples are, on the one hand, shareholders engaged in large scale commercial activity for which energy constitutes a primary area of activity (e.g., an energy supplier), or, on the other hand, an external investor with a specific temporary investment interest, as, for example, a plant engineer that seeks acceptance for RE project [28]. (2) Non-leveraged investments financed by a strategic investor in the Operating Company. The target group for this type of co-investment is, generally speaking, external strategic investors that either do not qualify as members of a REC pursuant to Art. 22 RED II and/or have different motivations for their engagement in the project. They typically will have a short- or mid-term investment horizon with preferences for liquidity and a clear exit strategy. Examples are, on the one hand, shareholders engaged in large scale commercial activity for which energy constitutes a primary area of activity (e.g., an energy supplier), or, on the other hand, an external investor with a specific temporary investment interest, as, for example, a plant engineer that seeks acceptance for RE project [28].

other energy sources (fossils as back-up but also those not easily to divest from);

mary aim of economic activity (e.g., cogeneration, waste, biomass, etc.).

clusters emerging in the Energy Transition [15]. The needs that these RECs will depend on a number

When RECs reach more complexity both with regard to the technical aspects of energy genera-

The variety of renewable sources (wind, PV, biomass, etc. and their complementarity) or

The specific combination of different energy sources where energy production is not the pri-

*4.4. Level III—Upscaling and Pooling RE-CSOP Investments* 

of factors that can be grouped into two categories:

1. Technical or engineering requirements [10,11]:

## *4.4. Level III—Upscaling and Pooling RE-CSOP Investments*

When RECs reach more complexity both with regard to the technical aspects of energy generation, use or transfer and with regard to the variety of heterogeneous co-investors involved, a need for upscaling and pooling of several RE-CSOP projects will arise. This is, in particular, the case with RE clusters emerging in the Energy Transition [15]. The needs that these RECs will depend on a number of factors that can be grouped into two categories:

	- The variety of renewable sources (wind, PV, biomass, etc. and their complementarity) or other energy sources (fossils as back-up but also those not easily to divest from);
	- The specific combination of different energy sources where energy production is not the primary aim of economic activity (e.g., cogeneration, waste, biomass, etc.).

agement as illustrated in Figure 5 for Level III.

regard to aggregation, demand flexibility, etc.

	- The operating company is run by a third party with expertise in installation and operation, including metering and maintenance, but such third party remains subject to the RECs instructions. professional energy company may have a majority interest; The operating company is run by a third party with expertise in installation and operation, including metering and maintenance, but such third party remains subject to the RECs in-

In all the different combinations of scenarios resulting from the factors enumerated above, it will be important to have the possibility to separate the ownership of production assets from their management as illustrated in Figure 5 for Level III. structions. In all the different combinations of scenarios resulting from the factors enumerated above, it will be important to have the possibility to separate the ownership of production assets from their man-

**Figure 5.** Key elements of pooled/upscaled RE-CSOP investments with strategic investors for a REC at Level III. (Source: Own elaboration). **Figure 5.** Key elements of pooled/upscaled RE-CSOP investments with strategic investors for a REC at Level III. (Source: Own elaboration).

**5. Discussion of the Key Elements of the RE-CSOP as Applied at Levels I–III**

*5.1. Indirect Consumer-Shareholding in the Capital of the Operating Company (or Holding)*

to provide a variety of services, such as balancing responsibilities, coordination and settlement between REC participants or the implementation of a virtual power plant. Consequently, Art. 21 para 5 RED II foresees that Member States allow the possibility that prosumer's installations are owned by a third party but remain under the direction of self-consumers as Art 16 IEMD permits that Member States allow CECs to own, establish, purchase or lease distribution networks and to manage them or delegate management to third parties. The fact that RECs will bundle functions ranging from generation to distribution and sale is de facto an exception from the unbundling rules for energy markets implemented over the last decades, and again may make them attractive to strategic investors with

This is of particular importance, as it will also allow the involvement of strategic investors with

(Co-)ownership resulting from consumer investment leads in practice to a situation where consumers have influence on the management of the company. From the point of view of co-investors—

This is of particular importance, as it will also allow the involvement of strategic investors with majority interest in the Operating Company, which in this case may also be an already existing daughter of a professional energy company; such a strategic partner [29] can be delegated by the REC to provide a variety of services, such as balancing responsibilities, coordination and settlement between REC participants or the implementation of a virtual power plant. Consequently, Art. 21 para 5 RED II foresees that Member States allow the possibility that prosumer's installations are owned by a third party but remain under the direction of self-consumers as Art 16 IEMD permits that Member States allow CECs to own, establish, purchase or lease distribution networks and to manage them or delegate management to third parties. The fact that RECs will bundle functions ranging from generation to distribution and sale is de facto an exception from the unbundling rules for energy markets implemented over the last decades, and again may make them attractive to strategic investors with regard to aggregation, demand flexibility, etc.

#### **5. Discussion of the Key Elements of the RE-CSOP as Applied at Levels I–III**

#### *5.1. Indirect Consumer-Shareholding in the Capital of the Operating Company (or Holding)*

(Co-)ownership resulting from consumer investment leads in practice to a situation where consumers have influence on the management of the company. From the point of view of co-investors—internal or external—such influence is problematic in terms of predictability and steering of the dynamics in decision-making processes [9]. First, it is highly undesirable that a co-investor would have to interact constantly with all consumer-shareholders, which easily can be hundreds in large CSOPs. Second, with regard to the question of how participating consumers vote their shares, it is undesirable that every consumer takes individual decisions without coordination with the others making it difficult for the remaining shareholders to understand and forecast their voting behaviour and interests. At the same time avoiding fragmentation of their ownership stake ensures that consumers voice has an appropriate weight vis-à-vis that of their co-investors [30]. Therefore, it is desirable that consumer-shareholders take a common position after an informed decision-making process.

#### 5.1.1. Conveying Individual Share Ownership through a Trusteeship

Against this background, the CSOP model conveys individual shareholding of the participating consumers through a Trusteeship, which also—if desired—enables a cautious and gradual transfer of involvement in management decisions; the responsibility for day-to-day decisions of business operations stays with skilled management [31]. The vehicle of a fiduciary entity is a tool for professionalization of decision-making processes on the part of consumers, which at the same time ensures that consumers vote their shares together (en block) after an internal consultation advised by an expert. The fiduciary entity typically takes the form of a closely held corporation with limited liability (however, it could also be, for example, a limited partnership) administered by a managing director [25]. The fiduciary entity has only one shareholder (i.e., its founder; usually the initiator of the RE-project), shown in the list of shareholders at the registry court, with its sole purpose to represent the shareholding of the consumer-shareholders in the operating company. The establishment of the trust follows the conclusion of fiduciary contracts between the trustors and the managing director representing the Trusteeship. From a tax point of view the fiduciary entity is transparent as it is the consumer-shareholders who are the economic owners of the shares.

Instead of direct shareholding in the operating company the RE-CSOP, thus, involves a fiduciary entity that conveys the capital participation of the consumer-shareholders. A (fiduciary, fully fledged) Trusteeship of a shareholding occurs when a shareholder (here the fiduciary entity = trustee) owns the shareholding for the account of one or more other entities (here individual consumer-shareholders = trustors) in the sense that she is entitled to the rights arising from the shareholding only in accordance with a fiduciary contract concluded with the trustors [32]. Unlike in the case of an "authorisation trust" or the "power of attorney trust" in this case the separation of the trustee's external legal competence from his internal fiduciary duty is purely accomplished. The trustee (fiduciary entity) has a dual role: in relation to the other shareholders (e.g., municipality, strategic investor) she is the holder of the shareholder rights and in relation to the settlors she is entitled and obliged to exercise these rights for the account of the settlors (i.e., the participating consumers). The settlors can be described as holders of shareholder rights merely in the economic sense of the term. The trustee is in every respect carrier of the membership (i.e., shareholder) and, consequently, it is the fiduciary entity that is shown in the list of shareholders of the operating company (here a closely held corporation with limited liability).

5.1.2. Core Issues to be Considered for all RE-CSOP Models (Levels I–III)

In the context of enabling consumers to purchase shares, three key aspects need to be considered: (a) Securing the transferability of shares; (b) minimizing the cost of changes of ownership within the consumer-shareholders; and (c) granting corporate rights to the consumers.

**Transferability of shares**—The rules for changes of ownership among the consumer-shareholders represented by the managing director of the fiduciary entity are enshrined in statutes of the Trusteeship (and will be mirrored in the individual Investment Agreements that the consumer-shareholders conclude with the fiduciary entity):


**Minimizing the cost of changes amongst the consumer-shareholder**—Pooling consumers' ownership rights in a fiduciary entity reduces transaction cost of share transfers between participating individuals (e.g., when CSOP participants move away from the region and transfer their share to new residents). At the same time facilitating consumer (co-)ownership through a fiduciary entity also ensures easy tradability of the shares. "Brokering" consumer shareholding in the Operating Company by the Trusteeship is sufficient to render consumer shares fungible and only requires a fiduciary contract (here Investment Agreement) between the consumers and the Trusteeship: It is the fiduciary entity represented by its managing director that—entering into the Investment Agreement with the consumer-trustors—now holds the shares of the Operating Company on behalf of the consumers. When consumer-shareholders change, the buyer or heir simply steps into the Investment Agreement in lieu of the former trustor. Changes of shareholders need not be registered—as would be the case for direct shareholding in the Operating Company—and the amount of participation held by the Trusteeship can fluctuate making administration easy. The basic mechanism is a fiduciary contract as is used in other investment settings. This structure is a standard solution in Germany tested many times by so-called public companies ("Publikumsgesellschaften" [33]) in real estate investments, who face a similar problem: A very large number of investors is intended to participate in the equity of a company where every change in ownership, whether it be due to death, sale of shares, or seizure has to be signed into the commercial register following the relevant formal procedures. Whether or

not the transfer of capital participation from one consumer to another requires notarisation depends on the type of trusteed entity and national company law. For example, in Germany this would be the case for a closely held corporation with limited liability but not for a limited partnership, which in the latter case would have the advantage of lowering the transaction costs of transfers of capital participation from one consumer-shareholder to another. In contrast, the transfer of shares of an Italian closely held corporation with limited liability, following a 2019 reform of company law, does not require notarisation any longer. Depending on national tax and company law the advantages and disadvantages of the different legal design options, therefore, must be weighed against each other.

**Granting corporate rights to consumer-shareholders**—The statues of the trusteed entity, which as a rule will be a closely held corporation with limited liability, will include a catalogue of decision that can be taken only after a vote among the consumer-shareholders. This leads to a two-tier structure for the decision-making process with regard to representation and control and especially voting rights distinguishing between:


In this way, as mentioned above, the Trusteeship is also a tool for professionalization of the decision-making processes in the Operating Company while at the same time ensuring that:


#### *5.2. Financing the Consumer-Investment in the Operating Company*

The CSOP is a type of leveraged investment (or buyout) transaction that uses external financing (debt), thereby achieving the benefit of financial leverage [9]. The cost of raising capital, as well as the repayment method, and, above all, the repayment period of the entire debt is all of key importance for the success and efficiency of this type of transaction. This section presents several legal and economic ways to shorten the debt repayment period or reduce the cost of financing and thus increase the effectiveness of financing RE-CSOP transactions.

The basic variable to be analysed is the debt repayment period. This is the period during which the CSOP Holding repays the debt using funds from the profits of the RE installation (the Operating Company). On the Holding or the Operating Company's balance sheet, liabilities from loans taken will gradually decrease in favour of equity. After the repayment period, the debt liabilities will be paid off, which means that external lenders no longer have any claims against the acquirer. In a simplified manner, it can be said that in such a situation the CSOP Holding (and indirectly the consumers) becomes the "full" economic owner of the RE installation (the Operating Company).

The repayment period is influenced by several factors. Determinants can be divided into two groups. The first group are economic factors of a more external nature, one being the size of the debt incurred, measured as the relation between equity and liabilities—the larger the percentage of the CSOP Holding's or Operating Company's assets financed from external funds, the longer the debt repayment period. Another factor is the profitability of the RE installation, that is, of the Operating Company measured by the return on equity ratio (ROE)—the higher the profit generated by the RE installation, the faster the repayment period. The second group of factors affecting the repayment period are legal and economic factors used in a specific transaction. This category includes, among others: (a) funds contributed by consumers; (b) tax optimization; or (c) a preferential loan granted by a public partner.

**Contributions by the consumers**—The application of CSOP financing in the context of Local Energy Communities according to Art. 22 RED II brings benefits to all parties, especially to the consumers. Therefore, it is justified that consumers make determined financial contributions to the RE-CSOP, which will help to increase its economic efficiency. However, against the background of the principle of proportional participation of CSOP participants depending on consumption (and not on financial strength), a limit is the average income of citizens and their access to savings. The amount of consumer contributions and their importance for the overall project depends on the size of the projected RE installation and the number of consumers supplied, the average purchasing power parity and, above all, the part of the income allocated for contributions. From experience in the U.S., it seems right to limit individual consumer contributions to a maximum of 10% of their respective earnings to avoid risk concentration [31].

Furthermore, it has to be taken into account that there may be changes after the initial allocation of shares to the individuals proportional to the households' respective energy purchases. In order not to incentivise increased energy use by a strict coupling of the acquisition of shares to consumption, a correcting factor should reward increased EE measured by a decrease in consumption per household member. Rewarding consumer-shareholders for reducing their consumption is also justified by the accelerated amortisation of the bank loan, as this will result in an earlier point in time that dividends are paid out.

**Capital Tax Group**—An important solution may be the creation of a tax capital group [34], which includes the Operating Company (running the RE installation) and the Holding Company. In this way, financing costs (interest) can be deducted from the tax base, which translates into a higher net profit of the entire capital group and enables the use of the so-called tax shield effect. Repayment of debt using a capital tax group can be made using:


Thus, the setting up of a capital tax group is desirable and—provided that it is permissible under the relevant national taxation legislation—should be considered during the creation of CSOP structures. However, restrictions with regard to the effective control of the two entities may occur. For example, under Polish tax law creating a capital tax group requires that the Holding Company has a 75% majority interest, thus lowering the ceiling for strategic investors' share to 25%.

**Preferential conditions, subsidies or loans**—Some of the solutions aimed at shortening the debt repayment period and thus improving the efficiency of the entire undertaking, are preferential conditions for land use, public subsidies or, if available, preferential loans from a public partner who owns part of the infrastructure where the investments take place [35]. In the case of a municipality, these may be buildings on which RE installations are constructed. Thus, a part of the funds for RE investments could come from one of the REC's partners according to Art. 22 RED II. This solution facilitates obtaining external financing and reducing the costs of the entire project. In addition, the public partner earns a higher interest rate than is earned on the funds invested in the capital market. Under this method, there are two options for debt repayment:


#### *5.3. Taxation of the RE-CSOP and its Consumer-Shareholders*

**Deferred taxation for consumer-shareholders**—Under continental European tax law, the Trusteeship is treated as "transparent" [32] (i.e., the shares of the Operating Company are deemed to be owned by the consumer-shareholders) as beneficial owners (or economic owners) of the Operating Company. However, the standard Investment Agreement of the RE-CSOP (fiduciary contract) stipulates that a consumer-shareholder cannot dispose of his or her share(s) held in trust until fully paid for and until the CSOP participant decides to leave the plan. In this way, deferred taxation of the appreciation of their investment is guaranteed as taxation does not occur until the shares are eligible to be distributed from the Trusteeship and the consumers are actually able to economically dispose thereof. The parallel structure of the Operating Company and the Trusteeship (pooling the shares of the consumer-shareholders) ensures that only dividends paid out are taxed at the level of the consumer-shareholders.

**Tax treatment of profits at the level of the Operating Company**—In the form of a privately held corporation with limited liability, the Operating Company is, tax-wise, not transparent and with regard to profits incurred at the level of the Operating Company shelters the consumer-shareholders [36]:


**Tax treatment of the financing cost**—Usually, the project vehicle will be set up and capitalized as a new Operating Company since buying into an existing utility will be the exception for RE projects. When leveraging the CSOP investment, it is important that the bank loan be taken directly at the level of the Operating Company that is operating the project (e.g., a wind turbine (mirror loan, see above 4.2.)) and that it is the Operating Company that repays the loan from its profits. Only after the bank loan is repaid will profits be paid out to plan participants. Building and running the newly installed facility, profits/losses accrue directly with the Operating Company. Therefore, both deduction of interest payments, as well as depreciation and carry forward of losses, lower the tax burden, increase liquidity and thus accelerate principal payments [36].

The treatment of interest payments is less advantageous in the event of a leveraged investment in an existing incorporated utility. Interest payments incur for the Operating Company rather than at the level of the utility where they would lower the tax burden and thus generate additional liquidity to repay principal. Usually, during the first years the Operating Company will incur losses or, if at all, very small profits as the deductible financing cost, that is the interest on the bank loan, is offset by any taxable income. Of course, the Operating Company must generate enough income to cover the cost of financing servicing both interest and principal of the bank loan. Although, as a rule, double taxation is avoided and the Operating Company in the form of a privately held corporation with limited liability shields the consumer-shareholders taxwise, the benefits are limited under this scenario. Nevertheless, acceleration of principal payments as under the first scenario could be achieved by a debt-push-down through a merger of the Operating Company with the RE utility as target.

#### **6. Conclusions and Policy Recommendations**

With regard to energy communities, European energy law does not rule out other private law citizens' or consumer-oriented initiatives than RECs which may be supported by and implemented with the participation of municipalities in the Member States [17] (p. 30). Such projects, while not complying with the RED II / IEMD governance model, would, of course, not benefit from the privilege

of energy sharing of IEMD, and in particular the preferential conditions and incentives foreseen in the "enabling framework" under RED II. However, such initiatives could be led and controlled by professional actors on the energy markets who in RECs would be constraint to remain external investors or minority shareholders. The question whether such professional actors will accept the new governance model and decide to join RECs will depend on two factors:


The legislative instrument to advance RECs by tying the benefits of the "enabling framework" to the compliance with the governance model can be described as an opt-in mechanism [37] aiming at creating peer-pressure: With a rising number of RECs operating successfully in European municipalities, this new business model will also become increasingly attractive to the incumbents; at the same time the underlying governance model, with its emphasis on the prosumer and the active consumer, will become more acceptable. However, the number of RECs set up in turn will depend on their ability to involve heterogenous co-investors which, as the empirical evidence discussed in Section 3 shows, is key to the success of RE clusters. Here trusteed investment models and in particular the RE-CSOP, introduced in Section 4 as a flexible low-threshold financing method, can play an important role as a bridge technology. The capability to align the interests of municipal, individual and commercial investors, while mitigating the frictions stemming from inherent limitations of conventional approaches make the RE-CSOP the prototype business model for RECs, as has been argued in Section 5.

#### *6.1. Recognising the Challenges of RE Clusters in the Energy Systems of Tomorrow*

Against this background, a holistic approach is key to the success of RECs. This has to include not only the governance but also the technical side. The best legislative intentions may lead to over-complexity in one field, while having unintended consequences in another, if not thought through consistently in an interdisciplinary approach. Notwithstanding, the RED II and, to a lesser extent, the IEMD focus on governance issues without providing details on the incentives that make a cooperation let alone partnership of RECs with professional energy companies in RE clusters [15] economically attractive. Therefore, four issues require specific attention:


Again, a lot will depend on the underlying business models and their capacity to provide flexible solutions that meet the different needs of the diverse actors. To test and demonstrate their potential RE-CSOPs are currently being implemented in the Horizon 2020 project SCORE, which runs from 2018 to 2021 in three pilot regions and in cities across Europe following these pilot projects [41,42]. During implementation, SCORE puts an emphasis on vulnerable groups affected by fuel poverty as a rule excluded from RE investments.

#### *6.2. Spelling Out the "Enabling Framework" for RECs*

The provisions on energy communities of the RED II and the IEMD remain relatively open to interpretation and leave the national lawmakers with room to manoeuvre. The transposition into national law until June 2021 is an opportunity to fine-tune and adapt the RED II rules to the needs of RE clusters and to formulate appropriate incentives supporting the underlying business models, like the RE-CSOP. In particular, during this period, the challenge is to overcome obstacles stemming from a lack of compatibility both with the existing regulatory frameworks and the national idiosyncrasies in order not to discourage national legislators. Without going into detail, four general aspects are key to successful transposition:


**Funding:** The SCORE project that this research is based on has received funding for a coordination and support action from the European Union's Horizon 2020 research and innovation programme under grant agreement No 784960.

**Acknowledgments:** The author is indebted to the Kelso Institute for the study of economic systems to have facilitated fruitful exchange of ideas with experts in the field at the 2019 Procida Symposium. The experience from implementing the Horizon 2020 project "SCORE" had a valuable impact on the reflections in this article and publishing it open access was possible thanks to its funding.

**Conflicts of Interest:** The author declares no conflict of interest.


**Clean Energy for All Europeans Package of the European Union** A package of measures that the European Commission presented on 30 November 2016 to keep the EU competitive as the energy transition changes global energy markets; this legislative initiative has four main goals, that is, energy efficiency, global leadership in RE, a fair deal for consumers and a redesign of the internal electricity market. **Citizen Energy Communities (CECs)** Defined in Art. 2 (11) of the IEMD as a legal entity that "(a) is based on voluntary and open participation and is effectively controlled by members or shareholders that are natural persons, local authorities, including municipalities, or small enterprises; (b) has for its primary purpose to provide environmental, economic or social community benefits to its members or shareholders or to the local areas where it operates rather than to generate financial profits; and (c) may engage in generation, including from renewable sources, distribution, supply, consumption, aggregation, energy storage, energy efficiency services or charging services for electric vehicles or provide other energy services to its members or shareholders". **Consumer Stock Ownership Plan (CSOP)** A financing technique that employs an intermediary corporate vehicle, facilitates the involvement of individual investors through a trusteeship and may use external financing, thereby achieving the benefit of financial leverage. **Demonstration Projects for Innovative Technologies** Defined in Art. 2 para. 2 (x) of the IEMR as "a project demonstrating a technology as a first of its kind in the Union and representing a significant innovation that goes well beyond the state of the art". **E**ff**ective control of RECs and CECs** Defined in Art. 2 pt. (56) IEMD as "rights, contracts or other means which, either separately or in combination and having regard to the considerations of fact or law involved, confer the possibility of exercising decisive influence on an undertaking, in particular by (a) ownership or the right to use all or part of the assets of an undertaking; (b) rights or contracts which confer decisive influence on the composition, voting or decisions of the organs of an undertaking". **Electricity**/**Energy Sharing** (incl. (virtual) net-metering) Recital (46) IEMD stipulates: "Electricity sharing enables members or shareholders to be supplied with electricity from the generation installations within the community without being in direct physical proximity to the generating installation and without being behind a single metering point". In the context of RECs, this is extended in Recital (71) and Art. 21 para. 6 to energy sharing. **Employee Stock Ownership Plan (ESOP)** An ESOP can use leverage and enables workers to acquire shares of their employer corporations, repaying the acquisition loan not from their wages but from the future earnings of their shares in the company. **Enabling Framework** Art. 22 para. 4 RED II foresees an enabling framework "to promote and facilitate the development of RECs"**;** furthermore, Art. 21 para. 6. foresees an enabling framework "to promote and facilitate the development of renewables self-consumption". **Fiduciary Trusteeship** A fiduciary, fully fledged Trusteeship of a shareholding occurs when a shareholder (here the fiduciary entity = trustee) owns the shareholding for the account of one or more other entities (here individual consumer-shareholders = trustors) in the sense that she is entitled to the rights arising from the shareholding only in accordance with a fiduciary contract concluded with the trustors. **Internal Electricity Market Directive (IEMD)** Defines amongst others "citizen energy communities" (CECs), introducing in Art. 16 a new governance model and the possibility of energy sharing for them. **Internal Electricity Market Regulation (IEMR)** Mainly focussing on the completion of the internal market in electricity that has progressively been implemented since 1999. **Investment Agreements** In the RE-CSOP these are concluded between CSOP participants and the Trusteeship and stipulate the fiduciary relationship including rights and obligations of both parties. **Leveraged investment** Financing transaction that uses external financing (debt), thereby achieving the benefit of financial leverage**.**


#### **References**


© 2019 by the author. Licensee MDPI, Basel, Switzerland. This article is an open access article distributed under the terms and conditions of the Creative Commons Attribution (CC BY) license (http://creativecommons.org/licenses/by/4.0/).

#### *Article*

## **Technologies of Engagement: How Battery Storage Technologies Shape Householder Participation in Energy Transitions**

## **Sanneke Kloppenburg 1,\* , Robin Smale <sup>1</sup> and Nick Verkade <sup>2</sup>**


Received: 30 September 2019; Accepted: 14 November 2019; Published: 18 November 2019

**Abstract:** The transition to a low-carbon energy system goes along with changing roles for citizens in energy production and consumption. In this paper we focus on how residential energy storage technologies can enable householders to contribute to the energy transition. Drawing on literature that understands energy systems as sociotechnical configurations and the theory of 'material participation', we examine how the introduction of home batteries affords new roles and energy practices for householders. We present qualitative findings from interviews with householders and other key stakeholders engaged in using or implementing battery storage at household and community level. Our results point to five emerging storage modes in which householders can play a role: individual energy autonomy; local energy community; smart grid integration; virtual energy community; and electricity market integration. We argue that for householders, these storage modes facilitate new energy practices such as providing grid services, trading, self-consumption, and sharing of energy. Several of the storage modes enable the formation of prosumer collectives and change relationships with other actors in the energy system. We conclude by discussing how householders also face new dependencies on information technologies and intermediary actors to organize the multi-directional energy flows which battery systems unleash. With energy storage projects currently being provider-driven, we argue that more space should be given to experimentation with (mixed modes of) energy storage that both empower householders and communities in the pursuit of their own sustainability aspirations and serve the needs of emerging renewable energy-based energy systems.

**Keywords:** battery storage technologies; energy practices; public participation; householders; socio-technical transitions

#### **1. Introduction**

In Europe and elsewhere, there is an increase in renewable energy generation at domestic and community level. By installing solar panels, more and more householders are becoming prosumers and take responsibility for the decarbonization of the electricity system. However, for the grid, the uptake of solar poses challenges to the balancing of supply and demand of electricity and to grid management. Solar panels only generate energy during day time, whereas a peak in domestic electricity consumption takes place in the evening. Moreover, there are seasonal differences in the hours of day light and in weather conditions. Storage of renewable energy near to their decentralized sources, at the domestic or local level, is increasingly seen as a solution to this problem. Rapid developments in battery technologies have even led some to claim that we are at the brink of a 'storage revolution' [1] that may change the way householders and institutional actors engage with energy in fundamental

ways. In addition to promises about the potential of storage for decarbonization and decentralization of the energy system, storage features in discourses about the empowerment of householders and communities to take more control over their energy use and become more independent from energy suppliers [2,3].

Despite the view of storage as a potential enabler of the energy transition, not much is known about the role that householders play, or are imagined to play, in energy systems that include distributed storage [4]. Yet, home batteries open up a range of possible roles and practices for householders. They enable householders to store their energy for use at a later time, but are also an important element in enabling new energy practices such as sharing and trading energy. These new energy practices place householders in a different relationship with the energy system and its key actors, such as energy suppliers. For example, the use of residential energy storage can help householders to become (more) autonomous in their energy supply, but domestic storage may also be used for Demand Response to help stabilize the grid [5].

In this article our aim is to explore potential ways in which home batteries can enable householders to become engaged in the transition towards low-carbon energy systems. Departing from the idea that energy systems are socio-technical configurations, we identify different ways in which householders and communities can become involved in low-carbon energy systems with storage. We link this idea of socio-technical configurations, or storage modes, to theories of 'material participation' [6,7] that argue that through everyday interactions with (energy) technologies, people can express concerns and 'intervene' in the energy system. Our theoretical argument then is that the ways in which householders (are enabled to) engage with energy storage technologies in an everyday, practical sense at the same time shape their participation in wider energy systems and their transitions.

In the following sections, we first explain our approach to energy storage as a technology of engagement, and the way we conducted our research. Next, we distinguish five different socio-technical configurations -or storage modes- in which householders can play a role. We identify how each mode affords specific energy practices for householders, such as storing, trading, or exchanging energy, and how the performance of these practices implies a particular distribution of tasks and responsibilities between householders and others energy system actors. In discussing the wider potential implications of these new types of engagements, we reflect on how energy storage may foster new collective energy practices and engagements that challenge our traditional understanding of energy communities, but also how these new energy practices often imply automation and reliance on intermediaries.

#### **2. Renewable Energy Technologies as Technologies of Engagement**

Literature in science and technology studies (STS) views technologies not just as material objects, but argues that the social and the technical are co-dependent and co-evolving [8]. This field stresses that technology and its social context mutually shape each other. Societal values such as sustainability, and ideas about the roles of users shape the technology, and at the same time technologies are constitutive of the social, in the sense that they actively shape their own context of use. Renewable energy technologies too have been approached as configurations of the technical and the social [9–11]. Walker and Cass use of the term 'mode' to understand renewable energy technologies as configurations of technology and social organization [9]. By social organization they refer to the ways technology is 'utilized and given purpose and meaning' [9]. They distinguish for example the traditional 'public utility mode' from modes that have emerged more recently, such as a the 'private supplier', 'community' and 'household mode'. Walker and Cass seek to understand how different modes embed within them different roles for publics in renewable energy deployment. They characterize these roles in terms of people's spatial proximity to the technology and their level of awareness and active engagement with renewable energy. For example, what they call the 'captive consumer' role entails a consumer who is distanced from the sources of renewable energy generation and consumes green energy passively. In an 'energy producer' role, on the other hand, people own and operate their own green energy generation technologies, for example via solar panels on their roofs, and are necessarily active and aware [9]. This approach

thus recognizes the variety of roles and engagements of publics that emerge in relation to different renewable energy configurations.

While Walker and Cass discuss a wide range of technologies, from micro to macro scale, other studies have characterized and categorized different sociotechnical configurations around one particular technology. For community energy storage, Koirala et al. [2] have identified three configurations, namely shared residential energy storage, shared local energy storage, and shared virtual energy storage. This allows them to analyze the various ways in which local communities can use energy storage. Parra et al. [12] describe four categories defined by scale and application: single home storage, community storage, grid storage, and bulk storage. We take a different approach in basing our categorization of different storage modes on the question of how householders can become involved in and use energy storage.

#### *Storage Modes and New energy Practices for Householders*

Rather than understanding engagement in terms of general 'roles' for 'publics' or positioning ourselves in emerging research on public perceptions of energy storage [13,14], our aim is to examine what these 'publics', as householders who have installed energy storage devices, can do. In other words, we unpack the roles and forms of engagement by focusing on the (new) *energy practices* that become possible in different storage modes. Here we build on the work of Noortje Marres [6], who calls for an appreciation of everyday material practices as forms of participation. She views people's everyday use of energy technologies such as smart meters, as possibilities for public engagements in environmental issues. As she argues, everyday material actions can enable 'practical or physical interventions in current states of affair' [6]. Such an understanding of 'material participation' acknowledges the ways in which people are engaged in sustainable energy transitions through their everyday practices with household and energy devices.

Building on Marres' work, Throndsen and Ryghaug [15] apply the concept of material participation to assess the character of householder engagement in the case of smart grids. They conclude that householders, as 'material publics', articulate widely ranging (and politically engaged) smart grid enactments. Ryghaug et al. [7] argue the introduction of novel energy technologies in householders' everyday lives, such as solar panels, the electric car, and the smart meter, may create new forms of (materially based) energy citizenship. They give the example of the smart meter that through near real-time measurement and visualization of energy consumption makes energy visible in the household. This may result in the articulation of the issue of energy efficiency, and new forms of (practical) participation such as time-shifting of energy consumption, or replacing existing electric appliances with more efficient ones. The theory of material participation thereby challenges the dominant but narrow understanding of participation as involvement in decision-making. Instead, participation also takes the form of households interacting with energy systems through their everyday use of energy technologies in domestic settings, because in these everyday practices, issues around sustainability and climate change are articulated, and energy decisions are taken [7].

We draw upon the theory of material participation to explore how interactions with home batteries can engage people in the energy systems in different ways. For example, through installing a home battery, people can express their concern for climate change. At the same time, the use of batteries can also make them aware of new issues, such as the rhythms of domestic energy production and consumption and the systemic problem of grid balance. Finally, batteries also enable people to intervene in energy systems in a very concrete and physical sense, because batteries allow the redirecting of energy flows between the household and the wider grid. These examples illustrate energy storage devices as 'objects of participation and engagement' [7] in energy systems. Conceptualizing residential energy storage as a technology of engagement thereby allows us to examine not only how different modes imply different roles and energy practices for householders, but also how each mode at the same time shapes householders' participation in the transition to low-carbon energy systems in distinct ways.

In analyzing which different storage modes are emerging and what forms of engagement they imply, we follow a four-step approach (see Figure 1). Our first step is to examine how storage is viewed as a 'solution' to a particular problem, and whose problem this is (or is made to be). Different problematizations of electricity production and consumption entail specific ways of thinking about storage in home batteries as a solution. Some storage rationalities are more directly linked with householders experiences and practices as solar PV owners, while others start from the problems grid operators face in the context of a changing energy system. Starting from these diverse problem-solution sets we then describe the variety of (new) roles and energy practices for householders that are made available. Next, we analyze the distribution of tasks in these practices. It is important to discuss not only the (new) practices that emerge for householders, but also how and with whom these practices are being carried out, as some of these activities and choices may be delegated to technologies or providers and intermediaries. Finally, we examine the storage modes in relation to the wider energy system (outer circle of the figure). Everyday material practices of storing energy in household batteries enable interventions in the direction and management of (green) energy flows within household and between households, but also in the wider energy infrastructures. As such, these practices represent a rather 'direct' form of engaging with, and potentially reshaping the energy system. Our approach therefore also pays attention to the potential implications on the relationships between householders, providers, and technologies in low-carbon energy systems. *Energies* **2019**, *12*, x FOR PEER REVIEW 4 of 15

**Figure 1.** Analytical framework for identifying and analyzing storage modes.

#### **Figure 1.** Analytical framework for identifying and analyzing storage modes. **3. Materials and Methods**

**3. Materials and Methods** 

In analyzing which different storage modes are emerging and what forms of engagement they imply, we follow a four-step approach (see Figure 1). Our first step is to examine how storage is viewed as a 'solution' to a particular problem, and whose problem this is (or is made to be). Different problematizations of electricity production and consumption entail specific ways of thinking about storage in home batteries as a solution. Some storage rationalities are more directly linked with householders experiences and practices as solar PV owners, while others start from the problems grid operators face in the context of a changing energy system. Starting from these diverse problemsolution sets we then describe the variety of (new) roles and energy practices for householders that are made available. Next, we analyze the distribution of tasks in these practices. It is important to discuss not only the (new) practices that emerge for householders, but also how and with whom these practices are being carried out, as some of these activities and choices may be delegated to technologies or providers and intermediaries. Finally, we examine the storage modes in relation to the wider energy system (outer circle of the figure). Everyday material practices of storing energy in household batteries enable interventions in the direction and management of (green) energy flows within household and between households, but also in the wider energy infrastructures. As such, these practices represent a rather 'direct' form of engaging with, and potentially reshaping the energy This paper builds on empirical data that was collected at different moments and sites in the context of a research project on emerging energy practices in the smart grid (2014–2019). The data are qualitative and consists of interviews with different stakeholders in the energy system in the Netherlands, and to a lesser extent Germany and the United Kingdom. We conducted 14 interviews with providers of home battery systems and services, energy storage experts, NGO's and local governments involved in storage pilot projects. The bulk of the data, however, comes from interviews and observations with householders who were involved in storage pilot projects, or who had installed home batteries themselves. In the fall of 2016, 6 interviews were held with householders in Germany who had installed batteries for individual self-consumption, of which a few also participated in a virtual energy community called SonnenCommunity. In the Netherlands we conducted longer term fieldwork in the context of two demonstration projects. Here 14 interviews were held with householders engaged in the pilot project Jouw Energie Moment ('Your Energy Moment') in which home batteries were used for grid balancing. Furthermore, 30 interviews were conducted in the City-zen pilot project, where householders with batteries engaged in wholesale energy trading. A shortcoming is that we were unable to conduct interviews with local communities who owned and operated storage collectively, because there are relatively few real-world examples of this (but see the Feldheim case reported in [2]).

system. Our approach therefore also pays attention to the potential implications on the relationships

This paper builds on empirical data that was collected at different moments and sites in the context of a research project on emerging energy practices in the smart grid (2014–2019). The data are qualitative and consists of interviews with different stakeholders in the energy system in the Netherlands, and to a lesser extent Germany and the United Kingdom. We conducted 14 interviews with providers of home battery systems and services, energy storage experts, NGO's and local governments involved in storage pilot projects. The bulk of the data, however, comes from interviews and observations with householders who were involved in storage pilot projects, or who had installed home batteries themselves. In the fall of 2016, 6 interviews were held with householders in Germany who had installed batteries for individual self-consumption, of which a few also participated in a virtual energy community called SonnenCommunity. In the Netherlands we conducted longer term fieldwork in the context of two demonstration projects. Here 14 interviews were held with householders engaged in the pilot project Jouw Energie Moment ('Your Energy Moment') in which home batteries were used for grid balancing. Furthermore, 30 interviews were conducted in the City-zen pilot project, where householders with batteries engaged in wholesale To gather information about community-owned storage, we therefore relied on interviews with storage providers and document study. Due to the variety of research material and differential access to cases, this research has an exploratory character. Hence, we use the real-world cases to conceptualize and identify the different forms of engagement that the use of home batteries may foster, rather than to systematically evaluate the extent to which new energy practices around storage already result in (new forms of) participation.

#### **4. Results**

independent'.

in such a way that solar (battery) power is used.

Below we draw out five different socio-technical configurations around home batteries: individual energy autonomy; local energy community; smart grid integration; virtual energy community; and smart grid integration. *Energies* **2019**, *12*, x FOR PEER REVIEW 5 of 15

#### *4.1. Mode 1: Individual Energy Autonomy* energy trading. A shortcoming is that we were unable to conduct interviews with local communities

In the first mode, Individual energy autonomy (Figure 2), individual households deploy domestic energy storage for the purposes of using (more) self-generated solar energy. The rationality of this mode is optimizing self-consumption of electricity produced by PV panels. Self-consumption itself is a gratifying project for many PV panel owners. As one of the interviewed householders put it, 'I can use the energy, it gives a good feeling to me. To produce it and to use it'. Beyond this, two main motivations are at play here: (long-term) economic reasoning, and desire for autonomy or self-sufficiency. Self-consumption of solar power with domestic storage emerges as an alternative 'business model' for PV owners, as there is a common expectation that in the near future feeding back electricity into the grid will become less financially attractive. Secondly, domestic batteries appeal to householders who wish to become more energy autonomous, and less dependent on subsidies and energy providers. Here, different levels of energy autonomy may be pursued, ranging from going off-grid, to being self-sufficient during a black-out (back-up power), to remaining connected to the grid but relying on it as little as possible. As one of the householders argued: 'Somewhere the subsidies will stop and then you have a big advantage when owning a battery, then you are independent'. who owned and operated storage collectively, because there are relatively few real-world examples of this (but see the Feldheim case reported in [2]). To gather information about community-owned storage, we therefore relied on interviews with storage providers and document study. Due to the variety of research material and differential access to cases, this research has an exploratory character. Hence, we use the real-world cases to conceptualize and identify the different forms of engagement that the use of home batteries may foster, rather than to systematically evaluate the extent to which new energy practices around storage already result in (new forms of) participation. **4. Results**  Below we draw out five different socio-technical configurations around home batteries: individual energy autonomy; local energy community; smart grid integration; virtual energy community; and smart grid integration. *4.1. Mode 1: Individual Energy Autonomy* 

**Figure 2.** individual energy autonomy. **Figure 2.** Individual energy autonomy.

In the first mode, Individual energy autonomy (Figure 2), individual households deploy domestic energy storage for the purposes of using (more) self-generated solar energy. The rationality of this mode is optimizing self-consumption of electricity produced by PV panels. Self-consumption itself is a gratifying project for many PV panel owners. As one of the interviewed householders put it, 'I can use the energy, it gives a good feeling to me. To produce it and to use it'. Beyond this, two Home batteries for self-consumption often come along with an app or display on the device itself which enables householders to develop monitoring practices. One of the householders described it as a 'little pleasure' when he uses his app and sees 'that the sun shines and that you can see the battery charging'. Several respondents planned energy-intensive activities, like laundering and dishwashing, in such a way that solar (battery) power is used.

householders who wish to become more energy autonomous, and less dependent on subsidies and energy providers. Here, different levels of energy autonomy may be pursued, ranging from going off-grid, to being self-sufficient during a black-out (back-up power), to remaining connected to the grid but relying on it as little as possible. As one of the householders argued: 'Somewhere the subsidies will stop and then you have a big advantage when owning a battery, then you are

Home batteries for self-consumption often come along with an app or display on the device itself which enables householders to develop monitoring practices. One of the householders described it as a 'little pleasure' when he uses his app and sees 'that the sun shines and that you can see the battery charging'. Several respondents planned energy-intensive activities, like laundering and dishwashing,

main motivations are at play here: (long-term) economic reasoning, and desire for autonomy or self-

Domestic batteries used for the purpose of enhancing self-consumption place ownership in the hands of householders. However, this does not mean that individual householders can operate their batteries directly. The battery installer can translate the wishes of the householder into the learning algorithms which subsequently govern operation of the battery. As one householder put it: 'With the installer you can configure the battery and optimize everything so that it is attuned to the household. What could the customer do herself? Not so much.'

#### *4.2. Mode 2: Local Energy Community Energies* **2019**, *12*, x FOR PEER REVIEW 6 of 15

In the local energy community mode (Figure 3), both problem and solution are defined at the community level or within a local area. Local communities cannot always use their locally produced energy within the community itself. For distribution system operators (DSOs), the renewable energy generated by 'green communities' places local pressure on the distribution grid. To both communities and DSOs, an attractive solution is optimizing the local use of locally produced renewable energy. In terms of infrastructures, this mode can either consist of a local community connected to a larger 'neighborhood battery' or be formed by connecting distributed domestic batteries in a local setting. This mode comprises a range of variants from fully self-sufficient off-grid communities to local communities who are sharing energy via the public grid. Domestic batteries used for the purpose of enhancing self-consumption place ownership in the hands of householders. However, this does not mean that individual householders can operate their batteries directly. The battery installer can translate the wishes of the householder into the learning algorithms which subsequently govern operation of the battery. As one householder put it: 'With the installer you can configure the battery and optimize everything so that it is attuned to the household. What could the customer do herself? Not so much.' *4.2. Mode 2: Local Energy Community* 

**Figure 3.** local energy community. **Figure 3.** Local energy community.

In the local energy community mode (Figure 3), both problem and solution are defined at the community level or within a local area. Local communities cannot always use their locally produced energy within the community itself. For distribution system operators (DSOs), the renewable energy generated by 'green communities' places local pressure on the distribution grid. To both communities and DSOs, an attractive solution is optimizing the local use of locally produced renewable energy. In In the local energy community mode, householders become prosumers who not only generate and consume individually, but also for and from the community's pool of energy. This allows for engaging with energy as a 'common good', or a 'common pool resource' [16]. Managing the 'common energy pool' at the community level implies new practices which include the monitoring of not only individual but also community-wide demand and generation; timing-of-demand to match local renewable energy availability (in storage); and energy sharing or peer-to-peer trading between community members.

terms of infrastructures, this mode can either consist of a local community connected to a larger 'neighborhood battery' or be formed by connecting distributed domestic batteries in a local setting. This mode comprises a range of variants from fully self-sufficient off-grid communities to local communities who are sharing energy via the public grid. In the local energy community mode, householders become prosumers who not only generate and consume individually, but also for and from the community's pool of energy. This allows for engaging with energy as a 'common good', or a 'common pool resource' [16]. Managing the 'common energy pool' at the community level implies new practices which include the monitoring of not only individual but also community-wide demand and generation; timing-of-demand to match local renewable energy availability (in storage); and energy sharing or peer-to-peer trading between community members. Theoretically, local energy community storage can be organized in various ways. The local energy community may consist of a pre-existing energy cooperative that decides to add storage to its local renewable energy generation. In the pilot projects we studied, however, the batteries were owned, operated and controlled by other parties than the community itself, requiring little involvement of communities and households. Community energy storage with batteries in its present phase is still experimental, taking place in pilots and living labs. One of the reasons for the absence of 'commercial' variants of this mode are the regulatory barriers to peer-to-peer trading within a community, and to energy collectives becoming their own supplier [12]. In the Netherlands and the United Kingdom, however, regulatory sandboxes are now in place that enable the first communities to experiment with peer-to-peer supply [17]. In conclusion, community energy storage in principle offers

local renewable energy generation. In the pilot projects we studied, however, the batteries were owned, operated and controlled by other parties than the community itself, requiring little involvement of communities and households. Community energy storage with batteries in its present phase is still experimental, taking place in pilots and living labs. One of the reasons for the absence of 'commercial' variants of this mode are the regulatory barriers to peer-to-peer trading within a community, and to energy collectives becoming their own supplier [12]. In the Netherlands and the United Kingdom, however, regulatory sandboxes are now in place that enable the first communities to experiment with peer-to-peer supply [17]. In conclusion, community energy storage in principle a range of possibilities to organize energy supply and demand at decentral level. Different forms of (community) co-ownership of storage technologies (and generation units) can be imagined, as well as partnerships between energy suppliers and cooperatives; for example, energy suppliers could partner with cooperatives to supply the deficit at moments when the community's energy demand is higher than supply.

#### *4.3. Mode 3: Smart Grid Integration*

The smart grid integration (Figure 4) mode centers on the increasing problems grid management faces with the ongoing growth of renewable generation at the domestic scale. Grid assets at this scale are not necessarily suited for greater and volatile flows to and from the household. This can be accommodated by making more intelligent use of the grid assets and domestic devices in place with the help of IT, which is the 'hype' [18] called the smart grid. In the smart grid, the demand of households is no longer something that is simply predicted and accommodated by the grid; demand becomes something to be managed and steered at level of the individual household. The flexibility of domestic energy usage becomes an asset to be maximally unlocked and used towards efficient grid management. Domestic energy storage capacity is an ideal flexibility tool from the point of view of the DSO: storage can buffer peaks and troughs in domestic energy demand without requiring the involvement of householders or interfering in their energy use. The rationale of this mode is therefore to align the workings of the batteries (and other household appliances) with the needs of the grid. *Energies* **2019**, *12*, x FOR PEER REVIEW 7 of 15 offers a range of possibilities to organize energy supply and demand at decentral level. Different forms of (community) co-ownership of storage technologies (and generation units) can be imagined, as well as partnerships between energy suppliers and cooperatives; for example, energy suppliers could partner with cooperatives to supply the deficit at moments when the community's energy demand is higher than supply. *4.3. Mode 3: Smart Grid Integration* 

**Figure 4.** smart grid integration. **Figure 4.** Smart grid integration.

The smart grid integration (Figure 4) mode centers on the increasing problems grid management faces with the ongoing growth of renewable generation at the domestic scale. Grid assets at this scale are not necessarily suited for greater and volatile flows to and from the household. This can be accommodated by making more intelligent use of the grid assets and domestic devices in place with Within the smart grid, householders are assigned a role as (active or passive) micro-managers with some responsibility to manage the impact they have on the grid. While they might actively shift some energy usage in reaction to more variable grid tariffs, the smart home with battery storage can also automate some of these decisions. Householders thus 'share' their batteries with the grid, allowing external control of the (dis)charging the battery.

the help of IT, which is the 'hype' [18] called the smart grid. In the smart grid, the demand of households is no longer something that is simply predicted and accommodated by the grid; demand becomes something to be managed and steered at level of the individual household. The flexibility of domestic energy usage becomes an asset to be maximally unlocked and used towards efficient grid management. Domestic energy storage capacity is an ideal flexibility tool from the point of view of the DSO: storage can buffer peaks and troughs in domestic energy demand without requiring the involvement of householders or interfering in their energy use. The rationale of this mode is therefore to align the workings of the batteries (and other household appliances) with the needs of the grid. As a result of automation and external control batteries may end up as black boxes, obfuscating the flows of renewable energy in the home and thereby creating a number of new uncertainties for householders. In smart grid pilot project Jouw Energie Moment, many participants critiqued the unintuitive information they were provided with: 'The only thing we pick up on with respect to that battery, is when it is 'humming', which means it is doing something.' The batteries would seemingly switch randomly switch between charging, discharging and neutral, never reaching full charge. Another householder stated: 'I just have no clue of what does what. And whether or not the battery is providing us any benefits.' In this respect, many householders stated that 'naturally,

allowing external control of the (dis)charging the battery.

to this objective.

Within the smart grid, householders are assigned a role as (active or passive) micro-managers

As a result of automation and external control batteries may end up as black boxes, obfuscating the flows of renewable energy in the home and thereby creating a number of new uncertainties for householders. In smart grid pilot project Jouw Energie Moment, many participants critiqued the unintuitive information they were provided with: 'The only thing we pick up on with respect to that battery, is when it is 'humming', which means it is doing something.' The batteries would seemingly switch randomly switch between charging, discharging and neutral, never reaching full charge. Another householder stated: 'I just have no clue of what does what. And whether or not the battery is providing us any benefits.' In this respect, many householders stated that 'naturally, one would preferably want to be self-sufficient'. However, they were unclear if the batteries were contributing one would preferably want to be self-sufficient'. However, they were unclear if the batteries were contributing to this objective.

Since DSOs are barred from fulfilling "market-able" roles, the batteries are most likely controlled by an intermediate market actor like an aggregator. Domestic storage and other 'smart appliances' in the home thus become tools for grid supporting services. If householder insight into the functioning of home batteries (and other smart energy technologies) is insufficient, householders may come to see them as external or even invasive tools for solving others' problems [19]: 'At the moment it feels as if I help to solve a logistical problem for the project. I have found space in my home for someone else's experiments. But if I benefit... how can I see that? In effect I can't. I only see a big battery and hear a humming sound.'

#### *4.4. Mode 4: Virtual Energy Community*

that is generated by the community itself.

matter'.

The fourth mode –virtual energy community (Figure 5)- has parallels with the local energy community mode. The situation in which householders possess a battery system to increase their individual self-sufficiency while still relying on conventional energy suppliers to cover additional needs is seen as unsatisfactory. The rationale therefore is to link householders and optimize the use of self-produced energy within the community. While in the local energy community mode members live in the same local area, the virtual community members consist of geographically dispersed households. The members' energy devices (including solar panels, storage devices) are connected via smart meter technologies to a digital platform that allows for the monitoring and exchange of surplus energy. The first real world applications are now emerging (e.g., SonnenCommunity, Schwarmdirigent). One of these virtual energy communities, established by a battery storage provider, is presented as 'a community of [battery owners] who are committed to a cleaner and fairer energy future'. The same provider states that 'as a [member of our community], you don't need your conventional energy provider anymore—you are independent' [20]. In these framings, householders become not only prosumers in a virtual energy community, but also 'part of the energy future'. The goal of the virtual energy community is to meet the energy demand of the community with energy that is generated by the community itself. *Energies* **2019**, *12*, x FOR PEER REVIEW 8 of 15 Since DSOs are barred from fulfilling "market-able" roles, the batteries are most likely controlled by an intermediate market actor like an aggregator. Domestic storage and other 'smart appliances' in the home thus become tools for grid supporting services. If householder insight into the functioning of home batteries (and other smart energy technologies) is insufficient, householders may come to see them as external or even invasive tools for solving others' problems [19]: 'At the moment it feels as if I help to solve a logistical problem for the project. I have found space in my home for someone else's experiments. But if I benefit... how can I see that? In effect I can't. I only see a big battery and hear a humming sound.' *4.4. Mode 4: Virtual Energy Community* 

**Figure 5.** virtual energy community. **Figure 5.** Virtual energy community.

The fourth mode –virtual energy community (Figure 5)- has parallels with the local energy community mode. The situation in which householders possess a battery system to increase their individual self-sufficiency while still relying on conventional energy suppliers to cover additional needs is seen as unsatisfactory. The rationale therefore is to link householders and optimize the use of self-produced energy within the community. While in the local energy community mode members live in the same local area, the virtual community members consist of geographically dispersed In this mode, ownership of the battery is with the individual householders, but the solar surplus that is produced when the batteries are full and/or the stored energy is 'shared' with others. It is important to note here that the sharing or exchanging of energy is virtual: The network does not consist of separate cables between members, but of a digital platform that enables virtual exchange via the existing grid. The meaning of 'sharing' therefore is complex. As one interviewed virtual community member put it: 'the idea is good. With [my friends] I spoke about it, they are part of it. Then I said,

Schwarmdirigent). One of these virtual energy communities, established by a battery storage provider, is presented as 'a community of [battery owners] who are committed to a cleaner and fairer energy future'. The same provider states that 'as a [member of our community], you don't need your conventional energy provider anymore - you are independent' [20]. In these framings, householders become not only prosumers in a virtual energy community, but also 'part of the energy future'. The goal of the virtual energy community is to meet the energy demand of the community with energy

In this mode, ownership of the battery is with the individual householders, but the solar surplus that is produced when the batteries are full and/or the stored energy is 'shared' with others. It is important to note here that the sharing or exchanging of energy is virtual: The network does not consist of separate cables between members, but of a digital platform that enables virtual exchange via the existing grid. The meaning of 'sharing' therefore is complex. As one interviewed virtual community member put it: 'the idea is good. With [my friends] I spoke about it, they are part of it. Then I said, when there's sun at your place, I'm using your power. It's certainly a good idea, as the solar power that is stored, that is too much, can also be used on a place where it rains. But it's all virtual, it's not physical. The energy does not move from one place to the other, but okay, it doesn't

about money!'

when there's sun at your place, I'm using your power. It's certainly a good idea, as the solar power that is stored, that is too much, can also be used on a place where it rains. But it's all virtual, it's not physical. The energy does not move from one place to the other, but okay, it doesn't matter'.

In the examples we studied, households were not actively engaged in energy exchange in the sense that they needed to decide on when and with whom to enter transactions; the process was managed by a third party—the aggregator—and often highly automatized. It is the responsibility of the aggregator to make sure that the demand within the virtual community matches the supply, so choices and decisions about the distribution of energy are made by this intermediary actor. The exchange of energy is not disclosed or made actionable to householders in the sense that they get insight in for example the current availability of community energy or get rewarded or sanctioned for their energy behavior. What is requested from households is to provide access to their energy data: the energy production, consumption and storage practices of members are monitored, and together with weather forecasts, used to make predictions of supply and demand in the community.

#### *4.5. Mode 5: Electricity Market Integration*

In the fifth and final mode, electricity market integration (Figure 6), the problem is defined in economic terms: due to competition on free electricity markets and growing renewable energy generation, electricity markets have become increasingly volatile. Batteries allow people to exploit this volatility, because the electricity flow can be temporarily halted, captured, and released again at a later point in time. The rationale of this mode is to align the workings of the batteries with energy market demands in order to create financial benefits for battery owners. In our research, we did not find any commercial variants of this mode yet, but there are examples of trials such as the Dutch pilot project City-zen. The households with batteries do not trade individually because the capacity an individual household can have available is too small. Instead, the participating households are aggregated to form a collective of householders. The aggregator in the Dutch project uses a Virtual Power Plant as the underlying technical infrastructure and explained that 'with all 50 participants, we want to create a large community. This community will be seen as one energy producing or consuming unit' [21]. In the project, the batteries loaded from the grid when prices were low and exported the electricity to the grid when prices were high. Energy thereby became a (tradeable) commodity and householders were ascribed a role as an economic actor who 'acts' according to market rhythms and logics. In the City-zen project, it appeared that for many householders this role as a market actor was at tension with their initial motivation to acquire solar panels for environmental reasons. As one householder explained: 'I didn't first go green with these things to now only think about money!' *Energies* **2019**, *12*, x FOR PEER REVIEW 9 of 15 In the examples we studied, households were not actively engaged in energy exchange in the sense that they needed to decide on when and with whom to enter transactions; the process was managed by a third party—the aggregator—and often highly automatized. It is the responsibility of the aggregator to make sure that the demand within the virtual community matches the supply, so choices and decisions about the distribution of energy are made by this intermediary actor. The exchange of energy is not disclosed or made actionable to householders in the sense that they get insight in for example the current availability of community energy or get rewarded or sanctioned for their energy behavior. What is requested from households is to provide access to their energy data: the energy production, consumption and storage practices of members are monitored, and together with weather forecasts, used to make predictions of supply and demand in the community. *4.5. Mode 5: Electricity Market Integration* 

**Figure 6.** Electricity Market Integration. **Figure 6.** Electricity Market Integration.

a later point in time. The rationale of this mode is to align the workings of the batteries with energy market demands in order to create financial benefits for battery owners. In our research, we did not find any commercial variants of this mode yet, but there are examples of trials such as the Dutch pilot project City-zen. The households with batteries do not trade individually because the capacity an individual household can have available is too small. Instead, the participating households are aggregated to form a collective of householders. The aggregator in the Dutch project uses a Virtual Power Plant as the underlying technical infrastructure and explained that 'with all 50 participants, we want to create a large community. This community will be seen as one energy producing or consuming unit' [21]. In the project, the batteries loaded from the grid when prices were low and exported the electricity to the grid when prices were high. Energy thereby became a (tradeable) commodity and householders were ascribed a role as an economic actor who 'acts' according to market rhythms and logics. In the City-zen project, it appeared that for many householders this role as a market actor was at tension with their initial motivation to acquire solar panels for environmental reasons. As one householder explained: 'I didn't first go green with these things to now only think

In theory, in this mode the batteries could be owned by householders as well as third parties. The householders provide (stored) energy, their energy data, as well as the control over the charging and discharging of the battery to an intermediary party in exchange for a monetary reward. The intermediary acts as an aggregator of a group of households and trades on their behalf, by using

In the fifth and final mode, electricity market integration (Figure 6), the problem is defined in

In theory, in this mode the batteries could be owned by householders as well as third parties. The householders provide (stored) energy, their energy data, as well as the control over the charging and discharging of the battery to an intermediary party in exchange for a monetary reward. The intermediary acts as an aggregator of a group of households and trades on their behalf, by using historical and real-time energy consumption and production data from households in order to make accurate predictions of the amount of energy each household has available for trading. Householders thus engage in trading but this activity does not require specific skills or competences from them, nor does it require or stimulate them to actively adjust their energy consumption practices.

#### **5. Discussion**

#### *5.1. Comparing the Five Storage Modes*

Our identification of storage modes shows that a variety of different combinations of home battery storage technology and social organization is currently emerging. In addition to the already more established individual energy autonomy mode, providers are developing new modes that enable energy sharing and providing energy services to the energy system. The five modes we have distinguished differently engage householders in energy production and consumption through storage, in terms of the practices householders are enabled to engage in, and with regard to their relations with the conventional energy system and other householders (see Table 1).


**Table 1.** Five modes of energy storage, including the real-world examples in which fieldwork was conducted.

\*: no interviews with householders.

First, each mode affords particular energy practices for householders to engage in. In the individual energy autonomy mode, householders engage in self-consumption of stored energy within their household. In the other four modes, self-consumption is complemented with energy sharing, providing grid services, and trading.

Second, the modes entail particular relationships of householders to the conventional energy system. In the individual energy autonomy and local energy community modes, the aim is to increase self-sufficiency at household or community level, and in the ultimate case create a local microgrid. This idea of storage facilitating greater energy autonomy is opposite to the logic of integration that underpins the smart grid and market integration modes. In the latter modes, householders provide energy and services to actors within the energy system and thereby engage in the management of the energy system. The virtual energy community mode is less straightforward to characterize, as it fosters both autonomy and integration. While virtual energy communities may aim at autonomy from conventional energy suppliers, their geographically distributed character means that they need to rely on the public grid for sharing energy.

Third, the five storage modes also imply different types of relationships with other householders. The individual energy autonomy mode is the only mode in which householders do not engage with other householders. The two community modes (mode 2 and 4) connect householders based on shared local identity or values, in order to exchange energy among each other. The market and grid modes, on the other hand, may also aggregate individual households, but these 'collectives' engage in energy transactions with market and grid actors. For householders it may feel as if they participate on an individual basis, while in fact an aggregator treats multiple households as a pool in order to enable their participation in grid management and energy markets [22].

In the remainder of this paper, we want to draw out two important potential implications of these storage modes. Rather than discussing the implications of each mode separately, we reflect on two overarching effects that we consider to bring the most fundamental changes to how people can take part in the energy transition. First, some of the modes enable householders to engage in energy production, consumption and storage via *new collectivities* that challenge our traditional understanding of energy communities. Second, in all of the modes, a large part of the organizational 'work' around storage is performed by *intermediaries and smart technologies*, which challenges the idea of empowerment of prosumers and communities.

#### *5.2. New Collective Material Practices*

The individual energy autonomy mode is the only mode in which householders produce, store and consume energy within the bounded spaces of their own home. The other four modes comprise material practices which enable householders to form larger collectives and share their hardware and/or energy with others. Such material practices allow householders to go beyond optimizing self-consumption and exchange energy with other households or start transacting with the market or the grid. Existing local energy communities can add batteries to their renewable generation to boost local energy autonomy, but batteries can also enable the formation of new collectives of prosumers. These new collectives are a result of technical infrastructures that interconnect multiple households with batteries. Since aggregation does not require geographical proximity of the households, such new collectives can have members nation-wide as the example of the SonnenCommunity showed. The storage modes that afford collective material practices thereby bring along a range of questions about the character, aims and ideologies of these practices, and how they may and may not differ from the well-known local renewable energy generating communities.

In the literature, a common way to describe renewable energy communities is as 'those projects where communities (of place or interest) exhibit a high degree of ownership and control in renewable energy production as well as benefiting collectively from the outcomes' [23]. Such communities for example consist of local energy cooperatives that develop collective energy practices [24], such as collectively generating solar energy for local use. The aggregation of domestic batteries in particular affords new communities of interest, with new collective practices, to be formed. While the SonnenCommunity is an example of the creation of a community of like-minded users aiming at autonomy from conventional suppliers, other prosumer collectives may align their collective practices with market or grid rationalities. So just like local communities, the new collectives may be oriented towards social goals (e.g., autonomy), sustainability (green energy), and economic goals (profit seeking). An important difference is that the prosumer collectives that are now emerging are often not initiated bottom-up by citizens, but by grid operators, energy suppliers, and start-ups which have the expertise to build and manage the complex underlying technical infrastructure.

How householders can engage these new collectives may differ widely. There are prosumer collectives in which householders participate without being aware of the other 'members', for example when householders are aggregated to provide grid services. In other collectives the connections with other households are made visible in particular ways. For the SonnenCommunity, for example, the provider visualizes the location of community members on a map and shows which type of energy they generate for the community (solar, biogas). In some peer-to-peer exchange platforms

consumers can even choose the peer they want to buy energy from. Emerging prosumer collectives thus shape new collectives which can take very different forms: from the aggregation of householders in collectives that remain invisible and anonymous, to a community of interest with 'members' or 'peers'. An important remaining question, however, is how inclusive these new collectives are for different types of households including lower-income households or tenants. As Ryghaug et al. [7] also argue for the case of electric vehicles and solar panels, the costs of these storage devices may mean that material participation via batteries is not equally accessible to all groups in society.

#### *5.3. The Growing Power of Aggregators and Algorithms in New Material Energy Practices*

Even though storage devices are located in households or communities, the role of householders in energy storage cannot simply be characterized as the active and aware prosumer. Most of the 'work' around energy storage is carried out by or on behalf of professionals, such as the installation and maintenance of the battery system, the monitoring and management of the battery charging strategy, and the managing of aggregated batteries. The emerging material practices surrounding storage are organized by intermediaries [25] as well as by information technologies.

Intermediary organizations, such as aggregators and green energy suppliers, play a key role in facilitating what householders can do with storage, as well as how, and with whom. Intermediaries are new players in the energy system, who act as a mediator or broker between householders and energy providers. They collectivize householders' energy consumption and production practices and enable and manage their participation in local and national energy systems. In the case of energy exchange among householders, intermediaries may arrange the balancing of supply and demand in the community. Intermediaries thus broaden the options for householders to enter into transactions with other householders and the energy system: transactions that are either too complex, or otherwise inaccessible to (individual) households. For geographical and virtual energy communities who want to become (more) self-sufficient, increased autonomy may thus go along with new forms of dependence on intermediaries who arrange the management and operation of energy exchange. There are concerns about the extent to which householders are able to access the full market potential of their batteries, as business models offered by intermediaries may distribute burdens and revenues unfavorably [26]. Material participation by householders through the purchase of storage batteries is, in other words, not synonymous with householder empowerment.

Information technologies too are a major factor in the management and control of (networked) households with batteries. Smart metering technologies monitor householders' energy consumption, production and storage practices. Hence, it is through these technologies that the householders' energy behavior becomes visible and gets embedded in battery management. Battery charging and discharging strategies often rely on algorithms that predict a household's energy behavior based on its historical energy production and consumption data. In addition, algorithms instruct the direction of energy flows (e.g., discharge to the household, or to the grid). Algorithms may also prioritize certain types of energy (green energy, cheap energy) in the way the battery systems work. In other words, they decide which energy is allowed to flow where and when. Householders choose these 'settings' when they buy a particular storage product or service, and may fine-tune them when the battery is installed. After that, the charging and discharging processes are often automated and users have little possibilities to change settings. Information technologies thus appear as a key factor in enabling connections between local or geographically distributed households and connections with wider infrastructures such as electricity markets. In shaping which transactions can take place, how, and between which entities, digital platforms [27] are becoming a new underlying structure for organizing energy production and consumption at decentral level, with as yet unknown implications for power relations in the energy system [28].

#### **6. Conclusions**

In this paper, we discussed energy storage as a 'technology of engagement' to better understand how householders and communities through their interactions with storage technologies engage in energy transitions. Drawing on Walker and Cass, we developed the concept of 'storage mode' to examine how battery technologies can be part of diverse sociotechnical configurations. We identified the emergence of five different storage modes, which demonstrates that renewable energy storage can entail a wide variety of relationships and interactions between householders and other energy system actors. To further unpack the various roles and engagements for householders, we examined the problem definitions, practices and task divisions in the modes. Our approach highlights that people can relate to renewable energy technologies not just as supporters or protestors or users, but through a diversity of roles that actively integrate them in the wider energy system (see also [15]): as co-manager or market actor, and as communities or individuals organizing energy production and consumption at decentral scale. As a technology of engagement, energy storage thus allows householders to interact with and shape the energy system in new ways. Most of the storage modes allow prosumers with battery systems to generate not only use value (by self-consumption of stored energy), but also exchange value (by sharing and trading energy and providing grid services) [29]. Energy storage thereby leads to more options for prosumers about what they want to do with their self-generated energy and with whom.

When storage affords energy practices in which self-produced energy gets exchange value, an important question is how prosumers will relate to this. Two diverging storylines now get connected to this exchange value: the first presents self-produced energy as a potential source of revenue for householders (energy as commodity), and the second emphasizes the sharing of surplus energy with other households (energy as (common pool) resource). Future social scientific research could follow up on these storylines and analyze the "moral economies" -or in other words moral and ethical questions about the production, distribution and exchange of energy- that emerge around this newly unlocked exchange value.

In examining the ways in which the new energy practices are organized in storage modes, our framework challenges the notion of active and aware citizens owning and operating their own household or community batteries. On the one hand, energy storage enables householders to become more autonomous from conventional suppliers and to enter new exchange relationships with other householders and the energy system. On the other hand, they face new dependencies on intermediaries and opaque information technologies. As long as householders believe that aggregators and algorithms act in their interest, they may not consider this a problem. Our analysis showed, however, similar to Parra et al. [12]), that the real-world applications of energy storage are still very much provider-driven. For existing community groups, it is difficult to initiate storage projects because in most countries legal limitations and complexities block communities from supplying their own energy to its members, or to organize the distribution of energy. In this context of provider-driven storage products and services, the question for householders is if they trust it is their aspirations and interests that are taken into account.

It is with regard to this potential for alternative forms of organizing energy production and consumption that we can identify policy implications. To foster storage modes that take into account a wider range of (future) interests and aspirations of householders and communities, and enable diverse forms of energy citizenship, governments could develop policies to actively support experimentation with social organization. An example of this is the Dutch 'Experimentenregeling' which provides energy cooperatives regulatory lenience to experiment with generating, supplying and distributing energy in their own local network. At the same time, studies have shown that such community-based models face difficulties due to financial, legal, social and technical restrictions and complexities surrounding energy storage and engaging with governance circles [2,17]. Beyond regulatory leniency, two other requirements for enabling experimentation include elimination of some of the financial risks and uncertainties in order to embolden communities as initiators of pilot projects, and secondly,

professional facilitation of householders and communities to enable them to articulate their interests and ambitions vis-à-vis intermediaries. The emergence of prosumer platforms too offers opportunities for co-creation by citizens. Prosumer platforms could be developed or adapted together with local or virtual energy communities to ensure that energy exchange takes place based on valuations of energy and distribution of benefits and costs that the community favors. Opening up spaces for communities to initiate and develop energy storage projects may prevent that some emerging modes become marginalized too soon, and prevent lock-in situations in which existing power relations between providers and householders are reproduced. Recognizing that energy storage (as technology of engagement) offers prosumers enticing—and sometimes conflicting—perspectives on greater energy autonomy and self-sufficiency as well as on greater systems integration, it is important to provide space for experimentation with (mixed modes of) energy storage that both empower householders and communities in the pursuit of their own sustainability aspirations and serve the needs of emerging renewable energy-based energy systems. Providers and policy makers need to recognize that the 'storage revolution' should not just be seen in technical or economic terms, but also as an experiment with multiple new ways of relating to energy and new forms of social organization of energy production and consumption.

**Author Contributions:** Conceptualization, S.K., R.S. and N.V.; methodology, S.K., R.S. and N.V.; validation, S.K., R.S. and N.V.; investigation, S.K., R.S. and N.V.; data curation, S.K., R.S. and N.V.; writing—original draft preparation, S.K., R.S., and N.V.; writing—review and editing, S.K. and R.S.; visualization, R.S.; project administration, S.K.

**Funding:** This research was funded by the Netherlands Organisation for Scientific Research NWO, grant number 408-013-3.

**Acknowledgments:** We are grateful to the DEMAND Center at Lancaster University for co-funding and hosting all three of us to do empirical work in the United Kingdom between April and June 2016. Thanks also to Walter Fraanje for assisting with the empirical work in Germany, and to Marten Boekelo for conducting the interviews in the City-zen project.

**Conflicts of Interest:** The authors declare no conflict of interest. The funders had no role in the design of the study; in the collection, analyses, or interpretation of data; in the writing of the manuscript, or in the decision to publish the results.

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