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Energy democracy

Trend towards municipal utilities in Germany overstated

A new study by the DIW finds that the market share of municipal utilities is actually shrinking. Nonetheless, the economics researchers found that municipals do their job just as well as firms from the private sector.

One sign of the alleged trend towards community energy in Germany has been the push for municipalities to take over their own grids. We reported on the situation in Hamburg and Berlin, for instance. Municipals play a crucial role in energy democracy – giving citizens and communities a priority over private corporations in the energy sector, as Kate Aronoff of the US explains in this wonderful piece.

Now, Germany’s leading economics research institute, the DIW, has taken a closer look at the data (in German). While it is true that the number of municipal utilities rose by 17 percent from 2003 to 2012, the number of private-sector power suppliers actually rose faster, by 49 percent.

The chart below shows revenue. Private-sector firms (gray bars) saw theirs more than double. Municipal utilities could not quite keep up, so the total market share (black bar) actually fell from just over a third to just over a quarter.

Municipals
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DIW

Nonetheless, there are more municipal utilities than private-sector power providers, as the chart below shows – an indication that the municipal utilities tend to be much smaller. On the other hand, municipals grew the most in the power sector (these charts also cover water and gas supply).

Utilities
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DIW

In addition, the study investigated whether municipals or private firms or more efficient. The researchers found no significant difference “even though the goals differ.” Specifically, firms from the private sector primarily focus on profits, whereas municipal utilities can focus more on the quality of services and returning the revenue to the municipal budget overall.

In the end, perhaps that is the main take away / selling point for opponents of municipals: you can focus on serving your community (instead of returning profits to investors) without reducing the overall efficiency of service provision.

(Craig Morris / @PPchef)