A comparative review of municipal energy business models in Germany, California, and Great Britain: Institutional context and forms of energy decentralization

There is widespread agreement in policy and academic circles that energy systems in many jurisdictions are becoming more decentralized. Energy decentralization may be occurring among US and European municipal governments as they establish energy companies to serve customers and promote energy sector decarbonization. This paper reviews different forms of energy decentralization identified in the literature. It then reviews and compares municipal energy company development and activity in three jurisdictions with different legal and regulatory frameworks. Differences in institutional context, we argue, explain much of the variation in municipal energy business models and, by extension, the ways in which energy decentralization is occurring. Specifically, we show that the opportunity to take on monopoly functions where municipal companies are not competing with other market players, and thereby face fewer financial and operational risks, enable municipal energy companies to promote energy decentralization in business activities. On the contrary, these opportunities are limited where municipal energy companies must compete in markets with other players. The findings confirm that public policy institutions play a critical role in energy decentralization and demonstrate how studying commercial activities through a business model lens can help reveal decentralization dynamics. The results are also intended for cities considering new municipal ventures, especially where cities are trying to learn lessons from international examples. They suggest an explicit consideration of differences in policy and regulatory contexts.