This paper adopts a comparative case study between the emerging civic energy sectors in the UK and Germany. It explores the relations between civic ownership structures and institutions of banking and finance in the UK and Germany whilst outlining the significant role of financial institutions in assessing the potential for civic energy sectors to take a substantive part in achieving transitions to secure, affordable and low carbon energy systems.

As for the exploration of the role of financial institutions in enabling energy system change, there exists a gap in the analysis work between the UK and Germany. In the UK, not enough work has been done to better understand the relation of the overall institutional structure of banking and finance. Whilst in Germany there has been more explicit analyses of the role of financial institutions in civic energy, such as co-operative financing structures and how they provide the institutional framework to involve citizens with financial, social and political aspects of renewable energy deployment, however, there still remain unanalysed factors of internal dynamics.

This paper provides a deep analysis of the electricity value chain concerning the civic sector involvement in both nations. It goes along the phases of generation, distribution and supply as well as an interpretation of the role of financial institutions in each individual nation.

Regarding generation in the UK, the market liberalisation led corporations to own most electricity generation assets, with the Big Ten companies owning 85% whilst the community energy sector owned a lower 0.3% of renewable capacity in 2012. Germany presents a lower concentration of ownership with the Big Four of companies owning 33.4% of generation capacity supported by the German Feed-in Tariff (FiT). At the same time, the municipal utilities own a total 6% of installed capacity.

With respect to distribution, community ownership of energy distribution is still rare in the UK, mainly because there is no periodic opportunity to change the ownership structure. Due to this, monopolies are naturally generated. In Germany, the clear goal to accelerate the energy transition and change to renewables has pushed a significant re-municipalisation. A clear example of this is Hamburg purchasing the grid from Vattenffall after 50.9% voted in favor of re-municipalisation.

Supplying commercial and domestic energy is still monopolised in the UK, with only six suppliers and little opportunity for new entrants. This means a small number of low carbon energy suppliers. Germany presents a more diverse spectrum, with approximately 1000 companies, of which 850 are municipal.

Germany has achieved expansion of the energy sector thanks to their stable banking sector and by incorporating three traits that are unfamiliar in the UK’s centralised sector: local subsidiarity, common public benefit values and pro-motional lending. What is important in the German case is the integration between the bank-based financial institutions of the German economy and the civic energy sector. The UK differs from the German banking system since few banks will loan on small-scale community schemes.

1. The paper clearly identifies the importance of financial institutions (banking specifically) in the macroeconomic context of the emergence of local energy ownership structures in both the German and the UK's energy markets. It addresses the different effects each country has had from relying and recieving funds from the public and the private investment sector.
2. Financial institutions are active, key enablers in energy transitions and shape the ownership structures and technology choices of different nations towards a safe and effective energy transition to low carbon. Despite the fact that both the private and the public investment sector are highly influential in shaping the ownership structure, banking insititutions have played a substantial role in developing the ownership structure in these countries.
3. In the UK, relying on centralised and internationalised sources of private capital has had two effects. Firstly, the availability of capital for the energy sector is more exposed to volatility in financial markets, as utility equity and bank debt in market-based systems are closely tied to capital liquidity. Secondly, the ability of multinational and investment capital to lend small-scale projects is very low due to the liquidity requirements of market-based financial systems.
4. Profits from stadtwerke or municipal utilities from energy assets in Germany, which comprise a third and a half of the electricity supply market, can be used to reach social, environmental and economic goals. An example of this is providing a smart, self sustainable grid to developing rural communities. It has been proven that, with proper technical education, rural communities improve their agricultural performance thanks to the implementation of renewable energy sources.
5. Even though they are not always harmonious, the incorporation of municipal institutions, cooperatives, citizen investement and recommunalisation groups plays an important form as a substantive part of the energy system that are subject to different dynamics than state or corporate institutions in Germany.
6. Proponents believe that the heterogeneous ownership structure for electricity distribution assets in Germany, which is tending towards re-communalisation, will accelerate the energy transition and retain values from energy infrastructures locally.