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Glossary · Energy industry & energy transition

Citizen energy

Citizen energy renewable energies energy sharing prosumer Cooperative Participation Acceptance energy transition

Citizen energy refers to energy projects in which citizens, local communities, energy cooperatives, municipal enterprises or other locally rooted actors take part. Participation can be economic, organisational or through ownership. The term is used mainly for projects involving renewable energy, such as wind farms, photovoltaic installations, local heating networks, storage systems, tenant electricity models or the shared use of electricity. Not every small installation and not every private solar system on a house roof is citizen energy. The term denotes a form of energy supply in which ownership, risk, returns and co-determination are distributed differently than in purely centralised investor models. In everyday language the term is broad. German support law, by contrast, contains a narrow statutory definition (see below).

Citizen energy describes an institutional and economic order, not a technical category. A citizen-owned wind turbine feeds the same electricity into the grid as a turbine owned by a large project developer. A cooperative's battery storage system performs technically the same tasks as an energy utility's storage system. The difference lies in the ownership structure, financing, participation rights and local embeddedness. Citizen energy thus shows who owns the infrastructure, who provides the capital, who receives the returns and who has a say.

Distinction from prosumers, self-consumption and energy sharing

Citizen energy is often confused with related terms. A prosumer is an electricity customer who generates electricity themselves and consumes part of it themselves, for example with a photovoltaic system on their own roof. This can be part of citizen energy but does not have to be. A single private installation without a collective structure is more a case of self-supply than citizen energy in the narrower sense.

Self-consumption is the share of the generated electricity that is used directly on site. Citizen energy can enable self-consumption, for example in a multi-unit building or a neighbourhood. However, many citizen energy projects feed their electricity wholly or mostly into the public grid. In that case the citizen-energy character does not arise from on-site consumption but from participation in generation, financing and returns.

Energy sharing refers to models in which jointly generated electricity is allocated and used within a group, in accounting or legal terms. Citizen energy can be the organisational basis for this. The term citizen energy is, however, broader. It also covers cooperatives, municipal shareholdings or local funds whose participants do not use the electricity themselves at all.

Financial participation to promote acceptance and citizen energy should also be distinguished. Payments to municipalities, discounted electricity tariffs or benefits for local residents can strengthen local approval. Citizen energy places greater emphasis on co-ownership, co-financing or co-decision-making. This matters in practice: a mere compensation payment creates different incentives than a stake in the project over its entire lifetime.

Legal concepts in Germany and the EU

In the Renewable Energy Sources Act (EEG 2023), the citizen energy company (Bürgerenergiegesellschaft) is narrowly defined in § 3 no. 15. It means a cooperative or other company that meets four conditions. It has at least 50 natural persons as members with voting rights. At least 75 percent of the voting rights are held by natural persons registered in a postcode area that lies wholly or partly within a radius of 50 kilometres around the planned installation. The distance is measured from the centre of the tower for wind turbines and from the outer edge of the installation for solar installations. The remaining voting rights may be held only by micro, small and medium-sized enterprises or municipalities. No single member may hold more than 10 percent of the voting rights. In addition, the voting rights of local residents must as a rule secure genuine influence over the company. A project may therefore count as citizen energy in general usage without meeting the requirements of the EEG.

This definition matters because under the EEG 2023, citizen energy companies do not have to take part in tenders for smaller projects and can still receive support. According to a presentation by the Climate Protection and Energy Agency of Lower Saxony, this applies to wind projects of up to 18 megawatts and solar projects of up to 6 megawatts. The company must then notify the Federal Network Agency (Bundesnetzagentur), at the latest three weeks after commissioning, that it owns the installation.

Separate from this is municipal participation under § 6 EEG. Operators should give affected municipalities a financial stake. For onshore wind turbines with an installed capacity of more than 1,000 kilowatts, they may offer the municipalities a total of 0.2 cents per kilowatt hour. The basis is the quantity of electricity actually fed in and a notional quantity of electricity according to Annex 2 of the EEG. For ground-mounted photovoltaics, up to 0.2 cents per kilowatt hour fed in is likewise permitted. These are one-sided payments without consideration. They promote acceptance but do not make the municipality a co-owner. Several federal states have enacted their own participation laws, some of which contain mandatory rules. The respective state law must therefore be checked for the specific project.

At EU level, Article 22 of the Renewable Energy Directive (EU) 2018/2001 regulates renewable energy communities. Member States must allow such communities to produce, consume, store and sell renewable energy and to share self-generated energy. They must also create an enabling framework. This includes distribution system operators cooperating with the communities and participation being open to low-income households as well. The EU category is therefore not identical to the German citizen energy company within the meaning of the EEG.

In Germany, the amendment of the Energy Industry Act (Energiewirtschaftsgesetz) created a separate framework for energy sharing with § 42c EnWG. Since 1 June 2026, distribution system operators must enable the shared use of electricity from renewable installations. Initially this applies only if all participants are located in the balancing area of the same operator of the distribution grid. From 2028, the framework is to be extended to directly adjacent grid areas. Grid charges continue to apply. Specialist bodies also point out that metering concepts, market communication and the allocation of roles had not yet been fully clarified at the start. For citizen energy cooperatives this is a new opportunity, but not yet an established standard model.

Why citizen energy is relevant in the electricity system

With the expansion of wind energy, photovoltaics, storage, heat pumps and charging infrastructure, the electricity system is spreading ever more widely across space. Installations are located closer to residential areas, commercial zones and agricultural land. As a result, part of the energy transition moves out of anonymous infrastructure into visible local spaces. Citizen energy can build a bridge here between technical planning and social ownership.

Its significance lies first in raising capital. Many renewable installations require high upfront investment but deliver relatively stable returns over a long period. Citizens can provide capital through cooperative shares, subordinated loans, limited partnership stakes or municipal models. This does not automatically make projects cheaper or simpler, but the financing base becomes broader. Part of the value creation remains in the region, for example through land leases, trade tax, dividends and contracts for local trades and operations management.

Second, citizen energy changes how infrastructure is viewed. A wind farm in which a municipality, a cooperative or local residents hold a stake is discussed differently from a project whose owner is hardly visible locally. Participation replaces neither permitting nor species protection, distance review or grid connection. But it can make it more transparent how benefits and burdens are distributed. In wind energy in particular, disputes often arise where the interventions are locally visible but the returns accrue elsewhere.

Third, citizen energy can trigger learning processes. Anyone involved in a photovoltaic cooperative, a heating network or a shared storage system is more likely to engage with generation profiles, electricity consumption, load shifting, grid charges and supply costs. Concrete projects make connections tangible: electricity is generated at certain times, grids have limited connection capacity, and storage systems can shift electricity in time but cannot replace missing quantities.

Technical and economic limits

Citizen energy is sometimes presented as if local participation could solve technical bottlenecks. That overburdens the concept. A citizen energy installation needs the same grid connection as any other installation. It is subject to the same obligations regarding metering, balancing, direct marketing, feed-in management, redispatch and technical safety. If the grid in an area is at capacity, the ownership structure alone creates no additional line capacity. Even with energy sharing under § 42c EnWG, the electricity flows through the public grid, and the usual grid charges remain.

Economically, too, citizen energy does not protect against project risks. Wind assessments can be too optimistic, construction costs rise, permits are delayed, interest rates change the calculation, and electricity prices fluctuate. For cooperatives and local participation models, it therefore matters how risk, liability and return are presented. Citizen energy must not be sold as a risk-free form of saving. It is an investment in energy infrastructure, usually long-term and often only to a limited extent sellable or terminable early.

Professional operations management remains necessary. Maintenance, billing, market communication, tax issues, data protection, contract management and regulatory obligations require expertise. Many successful citizen energy projects combine local ownership with professional service providers. This is not a contradiction. The question is not whether a project is run "by citizens" or "professionally", but which tasks are decided locally and which require specialist knowledge.

Misunderstandings in the political debate

A common misunderstanding equates citizen energy with approval. Local participation can defuse conflicts but does not guarantee consensus. Even in cooperative models, neighbours argue over sites, the landscape, land leases or the distribution of returns. Citizen energy does not abolish conflicts of interest. But it can create rules under which benefits and responsibility are distributed more visibly.

A second misunderstanding reduces citizen energy to romantic small-scale supply. Many projects are demanding infrastructure undertakings with investments in the millions, long-term contracts and complex regulatory requirements. Local rootedness does not automatically make them small-scale. Citizen energy can also include larger wind farms, regional solar parks or heating networks. However, the support privileges of the EEG are tied to size limits and to the strict criteria of the citizen energy company.

A third misunderstanding concerns the actual delivery of electricity. Anyone who holds a stake in a wind farm does not receive exactly that electricity in their own socket at all times. In the public grid, feed-in and consumption are considered separately in accounting, market and physical terms. Contracts can regulate origin, price and revenue distribution. The electricity itself, however, follows the physical conditions of the grid, not ownership shares. With energy sharing, too, the electricity is allocated only on paper. Participants still need a supply contract for the electricity that the shared installation does not cover. Anyone who overlooks this expects a local self-sufficiency that the grid cannot deliver in this way.

Regulation, conflicting objectives and assessment

Whether citizen energy emerges depends heavily on the rules. These include the design of tenders, permitting law, grid access, tax treatment, prospectus obligations, the rules for tenant electricity and shared building supply, direct marketing and the federal states' participation laws. Large project developers can more easily pre-finance complex procedures and spread risks. Small cooperatives and municipal initiatives depend more on predictable procedures, understandable forms of participation and fair access. The EU directive expressly obliges Member States to remove unjustified legal and administrative obstacles for renewable energy communities.

This gives rise to a conflict of objectives. The electricity system needs a fast and cost-efficient expansion of renewable generation. But a procedure that relies only on economies of scale can displace local actors. Citizen energy policy tries to ease this tension, for example through exemptions from the tender obligation, simplified procedures, advice, municipal participation or special support conditions. Such rules must be designed carefully. Well-intentioned privileges can trigger windfall effects or lead to projects being organised as citizen-owned only for show. This is why the EEG requires that local residents actually have influence and that no single member dominates the company.

For the energy transition, citizen energy is neither a sideshow nor a panacea. It concerns the social and economic architecture of the expansion. The term draws attention to ownership, participation and local value creation. It does not, however, explain grid bottlenecks, security of supply or electricity prices. Its strength lies in linking technology and institution: the same installation can have very different distributional effects depending on the ownership model. Citizen energy does not turn electricity generation into a purely local good and does not suspend the rules of the electricity market. It changes who takes part in investments, returns and decisions.

Sources

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Edited by eCMS on 11.11.2026 16:31

© 2026 Erik Schmidt. All rights reserved. Quotations with a link to the source are welcome.