The European make-it or break-it green moment

By Esmeralda Colombo, 15 February 2021

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Esmeralda Colombo Esq., Centre on Climate and Energy Transformation (Bergen, Norway)

At a time of crises, we need to plan for our renewable energy future. In December 2019, the European Commission President, Ursula von der Leyden, presented the European Green Deal as ‘Europe’s man on the moon moment’. In December 2020, the first year’s anniversary of the European Green Deal went almost unnoticed, risking to dash expectations.

The coronavirus pandemic has generated the most serious global public health emergency in over a century. In this context, important policies and targets set in the European Green Deal are likely to be delayed (Simon 2020). Take for example the growth of renewable energy, which will slow for the first time in 20 years as a fallout of the pandemic. How to confront the challenge? Here is my take: what we need is an aggressive plan for putting the fewer resources we have to their best use. More than that: what is needed is the deployment of renewable energy at scale, with the help of European citizens that still trust Europe will be the first climate-neutral continent by 2050, as the European Green Deal reads.

A 100% renewable energy-based EU power system by 2050 can be achieved in the most cost-effective way only if European citizens not only consume, but also produce and store renewable energy: in brief, if they become prosumers (Child and others 2019). In 2016, EU prosumers were 6 million, in 2050, EU prosumers ought to top 264 million (Hendricks and Mesquita 2019). But for that to happen, we need the right legislation in place.

The ‘right things’ to do

As Nobel Prize winner, William D. Nordhaus, has perceptively put it, even if we are ‘doing things’ in climate change matters, we are not doing ‘the right thing’. On renewable energy, EU policymakers have largely ignored the need to make prosumers part of the solution. For instance, EU prosumers currently face complex and inconsistent regulation across Europe to finance energy storage batteries jointly with their solar panels (Potau, Leistner, and Morrison 2018). Not only does this ‘policy neglect’ slow the EU attainment of its internal and external climate goals. It also fails to tackle outstanding inequalities in access to energy in the European Union, with more than 50 million people affected by energy poverty with a disproportionate impact on women (Hall, Brown, Davis, and Ehrtmann 2020). This is a problem of energy injustice. Regretfully, the drafted EU Climate Law from March 2020 has not offered any answers in this respect.

So, back to Nordhaus’ point, what is the right thing to do in EU climate change matters? One of the right things is to focus on prosumers, and specifically on what the revised EU Renewable Energy Directive calls the renewable energy communities, an innovative form of prosumers. Energy communities have long existed, often in remote places or islands, but the energy transition requires their scaling up (Lowitzsch, Hoicka, and van Tulder 2020). The formal recognition of renewable energy communities has been aired also in the United States, and the newly sworn-in President Joe Biden may decide to catalyze new initiatives and avoid some of the European bridles.

Among the regulatory and market barriers for deploying energy storage in the European Union (Gailani and others 2020), the policy spotlight should be shone on prosumers access to finance for storing renewable energy. I am convinced that the European Commission should issue a White Paper by early 2021—before the start of the next EU financial cycle—in which it clarifies the enabling role of prosumers in the clean energy transition. The role of renewable energy communities as prosumers in the clean energy transition could be enhanced in three concrete ways.

1. Make Access to Finance Gender-Equal and Feasible across EU Member States

Renewable energy communities should be able to access finance for their projects of renewable energy storage on an equal footing across EU Member States. Women should enjoy the same conditions of men when they attempt to obtain a loan. Conversely, Europe’s man on the moon moment—the European Green Deal—is still premised on business-as-usual banking practices, where EU female-led renewable energy communities may end up paying higher interest rates, even if they are not riskier borrowers.

2. Make Access to Finance Gender-Equal and Feasible at the EU level

Renewable energy communities should be able to access finance at the European Investment Bank (EIB) and the European Local ENergy Assistance (ELENA), which currently offer renewable energy loans only to large corporations and groups, undercutting a level playing field for prosumers’ participation in the electricity market. Moreover, women are underrepresented in prosumerism and lack facilitated access to finance. The EIB and ELENA should not only plan for loans to prosumers, but also establish best practices toward women (e.g., preferential rates). Lastly, the Eurosystem (the European Central Bank and the 19 central banks in the euro area) should revise the current haircut policy (the difference between an asset’s market value and the amount that can be used as collateral for a loan, in percentage). In fact, the Eurosystem should apply lower haircuts to sustainable assets and debt instruments, starting with prosumers. Supporting access to finance at the EU level would be consistent with the EU Taxonomy Regulation, which establishes when investment is sustainable and yet should better be specified.

3. A Consistent Strategic Innovation Policy: Snowballing

Renewable energy communities should know what they are ‘betting on’ for our clean energy future. The EU is now lacking a platform for innovation through transparent disclosures of cleantech metrics in a way that the most efficient cleantechs can form a ‘snowball’ for scaling up clean energy. Such strategy would facilitate prosumers’ choice and be regularly updated, tailored to EU geophysical traits, and include a gender perspective. Because of its interdisciplinarity, innovation through energy storage can exert an appeal on women that the fossil fuel industry has lacked, boosting women’s green employment (IRENA 2019).

More to Think on Ahead

Of course, it is not only women who experience unequal conditions to access finance. In addition to the current gender equality debate, we should focus on racial energy injustice, in particular communities of color and households with a migrant background in the EU, who fail to be involved in the new wave of prosumerism. A public consultation on the proposed gender-based perspective offers a mold for unearthing the causes of and solutions to racial energy injustice.

Moreover, we need to fully understand the impact of the projects deployed by renewable communities. Renewable energy communities themselves can obstruct the enjoyment of environmental goods for other communities (e.g., wind turbines on land), or disrupt ecosystems (e.g., birds injured by wind turbines). Are the impacts of renewable energy projects remedied and compensated? Have renewable energy communities offered opportunities for other marginalized communities to be involved in the process? Are renewable energy projects increasing the health benefits of marginalized communities, considering how materials are sourced and workers are treated along the projects’ value chain? A clean energy Europe should factor in the dark side of the moon of renewable energy communities as well, beyond the rhetoric of moon landings.

We know that 2021 is going to be a make-it or break-it moment for the European Green Deal. Put on hold in 2020 due to the pandemic, the European Green Deal cannot be deferred any longer. Climate change is a public health and ecologic emergency. One of the ‘right things’ to do is thus to forge a plan for a citizen-oriented and gender-equal energy future by fostering renewable energy communities.

An earlier version of this article was written for the Policy Course of the Financing and Deploying Clean Energy Certificate at the Yale Center for Business and the Environment. This article has benefited enormously from the comments received within the Policy Course by research assistant Jonathan Silverthorne, as well as cohort peers Kim H. Erle and Lalrinpari Sailo. The author would like to extend her sincere gratitude to Postdoctoral fellow Eléonore Maitre-Ekern and Professor Beate Sjåfjell for their thoughtful comments and editing for Blogging for Sustainability’.

To read more on the prospective role of women-led renewable energy communities in Europe, see this interview and the policy memo that the author sent to the President of the European Commission, Ursula von der Leyen, and Executive Vice-President and Commissioner for Climate Action, Frans Timmermans.

Tags: Banks and finance, Planetary Boundaries, Sustainability
Published Feb. 15, 2021 3:18 PM - Last modified Apr. 29, 2021 2:59 PM

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