How can financial incentives promote local ownership of onshore wind and solar projects? Case study evidence from Germany, Denmark, the UK and Ontario

Abstract

Mobilising citizens as investors in local solar photovoltaic and onshore wind energy projects can help meet climate objectives, generate local development opportunities, and build social support for low carbon transition. This can be achieved through the introduction of financial incentives attractive to local actors. To investigate what types of financial incentives are effective at the feasibility, development, construction, and operation stages of project development, we undertake a comparative case study of their use in Denmark; Germany; the UK; and Ontario, Canada. We find that a requirement for incentives such as grants and soft loans at the feasibility and development stages is a distinguishing feature of projects with citizen involvement, reflecting their greater risk aversion, lack of technical experience and financial capacity, and their inability to balance risk across a portfolio of projects. At later project stages, market-independent supports (feed in tariffs, grants, and tax incentives) have been effective in mobilising investment, but market-based supports (feed in premiums and quota schemes) can also be tailored to the specific needs of local community actors. These findings add a new dimension to the growing academic and policy debate about how Governments can effectively mobilise investment from local communities and citizens in distributed renewable technologies.