VKU advocates cooperation

04.08.2025

Source: E & M powernews

A study conducted by EY on behalf of the Association of Municipal Enterprises provides an overview of current cooperations in the energy industry and their framework conditions.

Municipal energy suppliers make a significant contribution to the energy transition and work more efficiently than is often claimed thanks to targeted cooperation. This is one of the findings of a recent study carried out by the consulting firm EY on behalf of the German Association of Local Utilities (VKU). According to the study, municipal utilities increase their efficiency through cooperation without giving up the advantages of their independence.

VKU Managing Director Ingbert Liebing emphasizes that the energy transition is decentralized and relies on regional expertise. With the NEST regulatory project - the acronym goes back to a key issues paper by the Federal Network Agency on the further development of incentive regulation entitled "Netze. Efficient. Secure. Transformed" - the Federal Network Agency is promoting centralization that puts smaller distribution network operators at a financial disadvantage. This could slow down the expansion of renewable energies, especially in rural areas. "Promoting cooperation strengthens the energy transition. Those who force mergers jeopardize their acceptance," says Liebing.

The EY study examines more than ten cooperation models, including joint wind farm projects, digital grid platforms and white label solutions in sales. According to the study, examples such as SUN GmbH in northern Hesse, Energieallianz Bayern and Smartoptimo show how municipal utilities can pool expertise, reduce costs and drive innovation through joint projects.

The study also contradicts the theory that smaller suppliers are structurally inefficient. However, their proximity to citizens, regional value creation and high level of acceptance make them important partners in the transformation.

Cooperation treated like mergers in regulatory terms

"Municipal utilities are not a brake pad, but an accelerator of the energy transition - close to citizens, resilient and innovative," says Liebing. Cooperation enables economies of scale without giving up democratic control or regional identity. Clear governance structures, risk diversification and capital bundling, economies of scale and standardization, knowledge and technology transfer, modular participation options as well as trusting and open communication are the key success factors, according to the study.

The VKU calls for the political framework conditions for cooperation to be improved, for example through simplified procedures, planning security for investments and targeted funding programs. However, the VKU is critical of the Federal Network Agency's current drafts for regulating distribution network operators, as these could weaken smaller network operators. "If we take the energy transition seriously, we need stable investment conditions," warns Liebing.

In particular, the authors of the study criticize that the Federal Network Agency often does not recognize the lease model as conducive to investment. Accordingly, shareholdings could have a negative impact on incentive regulation. Cooperation would therefore become uneconomical. However, the lease model is attractive for many municipal companies in cooperative grid companies in order to secure municipal ownership and avoid valuation risks.

In addition, the current regulation forces the company to charge uniform grid fees across the entire grid area when several grid areas are combined in one grid company. This leads to unequal load distribution and ultimately often to political resistance in the municipalities. Examples in Hesse have shown that this is a frequent reason for the failure of cooperations or even for their reversal.

In regulatory terms, cooperations are generally treated in the same way as mergers. However, this equation inhibits meaningful mergers. According to the consultants, cooperations are not only a success factor for the present of municipal utilities, but also a strategic design instrument for their future.

The study entitled "Joining forces - Targeted cooperation as a lever for success in the energy transition" is available for download on the VKU website.

Author: Fritz Wilhelm