Decarbonization of companies: the boom of self-consumption

At a time of unprecedented rises in energy costs, increasing numbers of companies are choosing to adopt self-consumption solutions as part of their CSR strategy. The majority of these businesses are installing solar panels on their roofs or land to generate their own electricity. The fifth annual International Energy Transition Observatory, published by De Gaulle Fleurance Avocats Notaires reveals that this is a worldwide phenomenon, often driven by regulations that promote the development of renewable energies and self-consumption.

Here we provide a round-up of this market trend in Germany, Brazil, Colombia, France, Greece, India, Togo, Turkey and the UK, with insights from the Observatory’s contributors, including Aquereburu & Partners, AZB & Partners, Becker Büttner Held, Bpifrance, Brigard Urrutia, KiloWattsol, KMU Law Office, Rokas, SerenySun, Shakespeare Martineau and SiqueiraCastro.

Key figures

• 85% growth in solar energy in Germany in 2023.
• 684,000 new self-consumption systems installed in Brazil, generating a total of 8.3 GW in 2023.
• 5,729 small-scale self-consumption systems (<1 MW) installed in Colombia in 2023.
• 200,000 new self-consumption projects in France in 2023 (up 77% on 2022).
• 421 MW. This is the total self-consumption capacity of households, businesses, municipalities, and energy communities in Greece in 2023, representing a 100% increase compared to 2022.
• 9,711 new businesses in India set up their own power plants to meet their own demand in 2022.
• 92,946 self-consumption installations as of March 2023 in the UK (almost tripling within a year).
• 75% is the target for renewable energy supply in Togo by 2030.
• 6,548 MW of installed capacity for individual self-consumption in Turkey by the end of 2020, just one year after regulations came into force.

Self-consumption can be either individual or collective. Individual self-consumption refers to an entity (a private individual or company) that installs a power plant (usually photovoltaic) on their own property and directly consumes the energy produced. Collective self-consumption refers to a group of people in the same area who directly consume the (usually solar) energy that they produce.

The surge in this practice is largely due to the cost of solar energy, which is expected to be the cheapest source of electricity in almost every country in the world by 2027. As a result, its contribution to global energy supply is set to reach 60% by 2060 (compared with 5% today). “The current energy crisis has created quite a shock, both for individuals and for businesses,” says Xavier Daval, CEO of KiloWattsol. “Both solar energy and the notion of energy self-supply have gone from being just nice sounding concepts to being a real necessity as a hedge against skyrocketing market prices.”

This same trend is evident in France, where the Arenh reform is expected, according to Xavier Daval, see the price of traditional electricity stabilise at €70 per MWh in 2026 (as opposed to €42 today). Industry estimates show that around 4 million homes will need to install photovoltaic power plants by 2035.

Another key driver is the development of CSR regulations, one of the aims of which is to reduce greenhouse gas emissions to achieve carbon neutrality by 2050, in line with the Paris Agreements. With this in mind, businesses are being encouraged to decarbonise their operations. Measures to encourage them to do so include tax breaks, bonuses and the ability to sell unconsumed surplus electricity at a guaranteed price, as well as new mandatory requirements. In France, for example, regulations are gradually requiring landowners with buildings or car parks larger than 500 m² to install photovoltaic panels on part of their surface area.

“Increasingly, owners and operators of buildings or industrial buildings/service sector facilities will choose the self-supply solution to meet their regulatory obligations,”

says Julien Lupion, head of the structured finance department at Bpifrance

“We are already seeing a great deal of enthusiasm about these projects.”

Germany – Yola Traum, lawyer at Becker Büttner Held

Germany has been a pioneer in the development of self-consumption and has encouraged it for many years. In spring 2024, it relaxed regulations governing collective self-consumption by passing the solar energy legislative package (Solarpaket I). The scheme – previously confined strictly to use by property owners and their tenants – has now been extended to commercial buildings and ancillary structures such as garages.

Brazil – Humberto Negrão, partner at SiqueiraCastro

Brazil has two main self-consumption schemes. The first relates to projects generating less than 5 MW, where renewable energy producers still have to buy electricity from a distribution company, but at a discounted rate. Similar to the Value of Solar system frequently used in the United States, these self-suppliers will also soon be eligible for a bonus that recognises the positive externalities of their installation. The second self-consumption scheme applies to users with a monthly consumption of more than 500 kW who use the energy produced by a power plant owned by an independent electricity producer. They benefit from certain reductions in sector-specific charges that they lose when they want to sell their surplus electricity.

Colombia – Claudia Navarro Acevedo, partner at Brigard Urrutia

The Colombian government encourages projects that promote the self-consumption of electricity, through tax breaks, the option to sell surplus energy and government funding. Renewable energy projects attract the most support. Only individual self-consumption currently exists. However, regulations on collective self-consumption, in the form of energy communities, are expected to be introduced in 2024.

France – Sylvie Perrin, Frédéric Paquet, partners, Claire Haas, Alexandra Nowak, lawyers, Béatrice Boisnier, legal counsel, at De Gaulle Fleurance

In France, despite the various measures introduced to promote the development of self-consumption and solar energy, there are still a number of barriers to overcome. Most notably, collective self-consumption does not benefit from the same tax advantages as individual self-consumption. It can also be more difficult for these projects to secure financing. “For years, banks have provided financing for projects involving power-purchasing agreements, granting them 20-year terms and guaranteed rates,” says Donald François, founder of SerenySun. “Now they will need to learn about community self-supply projects, which is an entirely new model. This means seeking out self-suppliers who can enter and exit the project when they wish, at prices that, rather than remaining fixed over 20 years, instead obey the law of supply and demand.”

Greece – Mira Todorovic Symeonides, partner and Panagiota Maragkozoglou, associate at Rokas Law Firm Athens

In Greece, self-consumption incentives are generous. With a budget of 238 million euros, subsidies for installations (up to 10.8 kW) amount to 65% for households and 40% for farmers, while subsidies for storage batteries (up to 50 kWh) range from 90% to 100%. With an additional budget of 30 million euros, farmers receive a subsidy covering 30% of the installation cost (up to 50 kWh). Furthermore, small and medium-sized enterprises or self-employed individuals who equip themselves are allowed to deduct twice the cost of their investment from their gross income.

India – Bahram N. Vakil – co-founder and senior partner, Anuja Tiwari – senior partner, Siddhanth Mitra – lawyer at AZB & Partners

In India, self-consumption has also grown considerably, involving a wide variety of energy sources, including hydro, steam, diesel, gas, wind and solar. Energy-intensive industries such as aluminium, cement and chemicals have set up their own power plants, either to supplement the electricity purchased from the utilities, or for emergency use to protect against unreliable grid power, for example in the event of restrictions, breakdowns or power cuts. In 2022, regulations made it easier to switch to self-supply from renewable energy sources.

United Kingdom – Isaac Murdy, lawyer; Sushma Maharaj, consultant; Peter Mayhew, lawyer; Daniel Clarke, legal director, at Shakespeare Martineau

The adoption in the UK in 2020 of the Smart Export Guarantee Scheme, which allows self-suppliers to sell the electricity they do not use, has played a key part in driving growth in the self-consumption market, with the number of projects in 2023 increasing almost threefold within a year. In addition to these regulatory changes, technological innovation has been instrumental, with the emergence of peer-to-peer energy exchange platforms using artificial intelligence (AI) and blockchain. In 2018, residents of Hackney were able to automatically exchange solar energy produced in their area with each other. Smart meters use AI to predict consumption demand, while blockchain is used to schedule and offset exchanges.

Togo – Moamar Tidjani, lawyer at Aquereburu & Partners 

Togo is aiming to achieve a 100% electrification rate by 2030, 75% of which will come from renewable energy sources. Since 2018, any individual or legal entity has been allowed to generate electricity from renewable energy sources for their own consumption, and has the right to sell any surplus.

Turkey – Mert Mustecaplioglu, partner; Özge Kaplan, lawyer; and Zeynep Nisa Aydın, trainee, at KMU Law Office.

Since 2019, regulations have governed individual self-consumption and apply to unlicensed renewable electricity production facilities. Self-suppliers have the right to sell surplus electricity to the public operator at guaranteed prices. They receive additional subsidies if they use at least 55% Turkish components in their installations. The Turkish energy market regulator must approve any installation producing more than 5 MW.