VILAWATT - Innovative local public-private-citizen partnership for energy governance

The city of Viladecans, like many across the EU, faces an urgent need to accelerate its energy transition. With most of the city’s housing stock constructed before the 1970s, the city’s homes operate well below modern energy efficiency standards, contributing to significant waste and higher emissions levels. While improving energy efficiency at the EU level has the potential to reduce total energy consumption by 5-6% and lower CO₂ emissions by about 5%[1], progress in housing retrofitting in Viladecans remains stalled, largely due to private sector reluctance over perceived financial risks. This issue is particularly pressing in low-income communities, where the need for intervention is greatest, as these areas often face higher rates of energy poverty.

[1] Resource Efficiency and Climate Change: Material Efficiency Strategies for a Low-Carbon Future

To help address these challenges, VILAWATT introduced a local energy currency, the Vilawatt, to encourage sustainable behaviours and promote the energy efficiency among residents in Viladecans. The Vilawatt currency had four main objectives to: i) capitalise on energy savings from the building renovations; ii) promote sustainable behaviour by reducing energy consumption and CO2 emissions; iii) raise awareness among citizens about the importance of the energy transition; and iv) stimulate the local economy.

The Vilawatt currency is managed by the Municipality and supported by an electronic money institution – a digital bank regulated and backed by Spain’s central bank for issuing electronic money. The institution guarantees that one Vilawatt always equals one Euro, providing value stability and allowing for easy exchange at any time. To get access to the Vilawatt currency and use it, citizens of Viladecans can download the Vilawatt app, an online banking application that can execute these transactions.

The currency operates through a dual participation model that serves both consortium members (i.e., those subject to the project’s renovation construction) and the wider community of Viladecans who wish to use the Vilawatt currency. For VILAWATT consortium members, the currency functions as a direct reward system for energy efficiency. The consortium actively monitors members' energy consumption patterns through smart meters, automatically rewarding documented reductions in energy use with Vilawatt currency. Beyond consortium members, the currency is accessible to all Viladecans residents, who can register through the application and convert euros to Vilawatt. While these users do not receive direct energy-saving rewards, they benefit from accessing special promotions and discounts offered by the local businesses. In addition, it allows users to discover new businesses in the city.

This dual-stream system creates multiple environmental and economic benefits. Consortium members are incentivised to reduce emissions through direct energy savings, while all users contribute to sustainability by keeping economic activity local, thereby reducing transport-related emissions. The currency can be used to pay local taxes and fees, and it is accepted at over 450 retail and service businesses in the city The currency's restriction to local circulation generates a powerful multiplier effect, as each Vilawatt unit typically changes hands multiple times within the community before being converted back to euros. This localised circulation not only strengthens the city's economic resilience but also promotes a more sustainable, low-carbon urban economy by prioritising local consumption.

Figure 1. Visual representation of the way the IFS works

Implementing the Vilawatt energy currency was not a simple task, as it was a completely new concept for the community and involved navigating complex legal and economic challenges. Citizens were unfamiliar with the idea of a local energy currency, making it difficult to communicate its benefits and encourage adoption. Additionally, numerous legal and regulatory hurdles had to be addressed before the currency could be put into use, such as ensuring compliance with financial regulations and obtaining necessary approvals. This involved the technological development of systems to exchange information between local currency and electronic money, alongside creating mechanisms for cash-in and cash-out transactions, user identity verification systems, and money laundering prevention systems. Economic concerns, such as securing the value of the currency and ensuring its stability, also needed to be carefully managed to build trust and confidence among users.

While the VILAWATT renovations were concentrated in the Montserratina neighbourhood, the Vilawatt currency was designed to encompass the entire city of Viladecans. Limiting the currency's use to just one district would not have been feasible, especially considering the city's population of 66,000. Expanding the currency citywide ensured that all residents, businesses, and community stakeholders could actively participate in the initiative, fostering inclusivity and amplifying the overall impact of the programme. By involving the entire city, the currency not only promoted energy-saving practices and sustainable behaviours more effectively but also strengthened the local economy through a greater network of participants. This wider reach allowed Vilawatt to have a greater influence on reducing carbon emissions and accelerating the city’s just energy transition.

Initially, the VILAWATT project and its energy currency were funded through UIA (ERDF) resources, with €383,530.06 allocated for setup and operation during the UIA phase (2017–2020). These costs were divided into two main phases: currency development and currency deployment. The currency development phase amounted to €114,459.96, and included creating a benchmarking and requirements report, conducting participatory working sessions to define the functions and rules of the energy currency, performing a legal, financial, and administrative assessment, and designing the energy currency. The currency deployment phase totalled €269,070.10 and focused on engaging local businesses and shops, raising citizen awareness about using the energy currency, implementing the currency, and producing an intermediate report on its results.

Following the project’s official closure, the currency has been financed exclusively by the municipality, ensuring its continued operation and integration into the local economy. The operation and maintenance costs are detailed below.

The Vilawatt energy currency currently operates with an annual cost of €96,000, which is allocated across various essential components. These include €6,500 in variable costs for user registrations and cash-in processes, ensuring the smooth onboarding and transaction functionality for participants. The interconnection system with entity for electronic money (EDE) accounts for €20,000. Brokerage fees amount to €30,000, reflecting the role of intermediaries in facilitating transactions and maintaining system integrity. Development costs, encompassing technological enhancements and updates, total €14,000, while indirect costs and industrial profits contribute €7,500. Additionally, a VAT of 21% is applied, highlighting the tax obligations integral to the system’s operations.

While the currency is led exclusively by the municipality, who manages it and pays for the operational costs, the development of the energy currency was led by UBIQUAT, a private company that designs currency platforms based on electronic money. It worked closely along two municipal companies VIGED and VIMED in charge of technical rehabilitation and legal aspects[1].

[1] Viladecans - VILAWATT | Portico

The success of the Vilawatt energy currency relied on:

• Citizen awareness raising: Raising awareness among citizens about the benefits of the energy currency was vital for encouraging participation and building trust. This involved tailored communication campaigns that targeted diverse demographics, including schools, local businesses, and community organisations. By educating the public on how the currency works, its environmental advantages, and the potential for economic savings, the municipality fostered a sense of ownership and engagement, ultimately driving widespread acceptance and use of the currency.

• Technological capacity: Ensuring the security and safety of transactions necessitates the implementation of advanced technological solutions. The use of a dual system combining an online banking application and electronic money management allowed for the tracking of all transactions.
• Legal factors: Navigating the regulatory landscape involved addressing legal issues related to currency creation, compliance with national regulations, and obtaining necessary certifications.  Specifically, the Spanish Law (21/2011) on Electronic Money affected key aspects of the Vilawatt currency's design, such as the retention period and associated fees.[1] Any attempts to impose delays or additional fees to discourage redemption are not permissible. This required careful coordination with legal experts and public authorities to ensure that all administrative procedures were followed.

[1] The Vilawatt project Journal N° 4

Political support played an important role in the overall success of the project. The municipality of Viladecans backed the VILAWATT project into the broader Viladecans 2030 strategy, which aims to achieve climate neutrality by 2030. This sent a clear signal to citizens and local businesses the role of the project and continued operation of the energy currency.

The main obstacles faced during the development and implementation of the Vilawatt energy currency were as follows:

• Novelty and legal procedures:  Since the concept was new and innovative, it was challenging to navigate the legal framework and administrative procedures at the city level. There were no established guidelines for how such a currency should function, particularly within the context of Spain’s existing financial regulations. This meant that the entire process had to be built from scratch. This included navigating complex compliance requirements at both city and national levels, securing approval from Spain's central bank, and establishing new administrative protocols within the municipal government.
• Technical complexity linked to the creation of an electronic local currency: Such currencies require highly complex systems to ensure security, reliability and functionality. To address these obstacles, the project worked with UBIQUAT to design a secure system and comply with all necessary legal requirements.
• Public understanding and acceptance. The concept of a local energy currency proved difficult for many residents to grasp, requiring extensive community engagement efforts to explain its basic mechanics, demonstrate its practical value, clarify its relationship to conventional money, illustrate the connection between energy efficiency and currency rewards, and build trust in the system's security and reliability.
• Delays due to Covid-19 pandemic further complicated these challenges by delaying the currency's launch. However, this delay was ultimately used productively to refine technical systems and strengthen the legal framework. The pandemic also complicated community engagement by limiting in-person interactions, highlighting the need for adaptable outreach strategies. Since the success of the energy currency relied heavily on citizen buy-in and local business participation, this presented a significant challenge.

The project has demonstrated evolving success over time, achieving significant milestones in its implementation and beyond. During the UIA phase (2017-2020), the currency engaged over 60 monthly users and recorded transactions amounting to approximately 3,000 euros per month. To date, the Vilawatt currency has been traded over 1 million euros among over 4,600 users spending the currency with over 450 registered businesses[1].

[1] Vilawatt, Viladecans, Spain | Portico

The energy currency played an important role in the success of the VILAWATT project, particularly in achieving its core objective of raising citizen awareness about the energy transition. To begin, the project struggled with visibility, as it was primarily known to those directly involved in the housing renovations. However, with the introduction of the energy currency and its citywide reach, the project's visibility increased significantly. This not only heightened awareness of energy transition and efficiency but also fostered active participation from the broader community.

The VILAWATT project played a significant role in transforming the organisational culture within the municipality. It led to the creation of the City Council Innovation Model (MIA), with its mission to “transform the City Council into a proactive organisation which creates new forms of citizen collaboration improving the quality of life of the city in a sustainable way and making people proud to be part of it”[1]. Vilawatt was particularly instrumental in testing how the axis focused on urban ecological and economic transition could be implemented in practice, making it a vital part of this cultural shift.

[1] Viladecans - VILAWATT | Portico

The Vilawatt energy currency remains active and has grown since the conclusion of the UIA project, continuing to serve as a key tool for promoting energy efficiency across Viladecans. The reward system, which incentivises energy-saving behaviours, for members of the consortium who participated in the building renovations is still operational. These members are rewarded for ongoing efforts to adopt energy-saving practices, creating a sustained culture of environmental responsibility. The currency remains accessible to all Viladecans residents who wish to convert euros to Vilawatt.

The sustainability of the Vilawatt currency is strengthened by the integration of the VILAWATT project into the broader strategic framework of the city. The Viladecans 2030 Strategy, adopted in September 2021, positions the VILAWATT project as a key driver in achieving its mission to make the city climate neutral by 2030[1]. This strategic alignment ensures continued political commitment and facilitates resource allocation to the project, and hence the energy currency. However, for the currency to be sustainable in the long term, it is important that the costs associated with maintaining it are not only borne by the municipality but also shared by citizens.

[1] Final Journal UIA VILAWATT project | Portico

While the energy currency already covers the entire city and does not intend to expand its geographical scope, the municipality is actively exploring ways to scale its practical application. The municipality is currently working on integrating an Eco-Rating system into the currency, which will link it to other important city goals, such as recycling and sustainable practices. This innovative component will incorporate other eco-friendly practices into the currency framework, promoting environmentally responsible behaviours and further embedding sustainability into the local economy. This multi-faceted approach has the potential to create a more holistic sustainability ecosystem within the city.

The VILAWATT project is actively participating in working groups with other cities interested in implementing similar instruments, including the energy currency. This is coordinated by the Barcelona Provincial Government, and there are currently around 15 municipalities in Spain interested in learning more about the local currency and how to implement it. Additionally, VILAWATT has been chosen as one of the pilot networks under the URBACT/UIA transfer mechanism. Through this programme, the city has collaborated with Seraing in Belgium, Nagykanizsa in Hungary, and Trikala in Greece to develop tailored implementation plans for energy efficiency measures inspired by the successful initiatives in Viladecans. While there is potential to replicate this model in other cities, its replicability will depend on national regulations permitting the use of such a currency and the readiness of local businesses to adopt and integrate the system.

No complementarity was found with other funds.

Drawing on the experience of VILAWATT, several key insights[1] can be drawn for cities looking to implement virtual currencies as an innovative financial solution to urban challenges. While they need to be adapted to local contexts, these can help guide cities in establishing successful virtual currencies:

• Pre-identifying possible challenges: It is essential to anticipate and address potential legal and fiscal challenges upfront. For example, the VILAWATT currency navigated issues related to retention periods, restrictions imposed by electronic money regulations, and the implementation of blockchain technology. A successful currency model must consider both economic and legal dimensions, ensuring operational compatibility and aligning with the interests of all stakeholders.
• Political support: Strong backing from political leaders and local authorities is crucial for the successful implementation and longevity of a virtual currency initiative. Political support helps secure necessary resources, facilitates collaboration across departments, and builds trust within the community.
• Ensure citizen buy-in: Gaining early support from residents is crucial. By investing time and resources into a clear and comprehensive implementation plan that prioritises community engagement, cities can mitigate resistance to change and encourage new behaviours. The VILAWATT project made this possible through strong communication and engagement campaigns.
• Creating virtuous circles: Sustaining ongoing collaboration with citizens and businesses throughout the currency’s implementation is vital. By fostering a culture of continuous feedback and involvement, cities can ensure that the currency remains relevant and responsive to the needs of the community, ultimately enhancing its effectiveness and acceptance.
• Ensure technological capacity: The technical team responsible for implementing the virtual currency should possess expertise in the financial and virtual currency sectors. This expertise is essential for ensuring the highest levels of security and service quality on the payment platform. Even if the currency does not operate as a cryptocurrency, the system must be prepared to respond effectively and swiftly to any potential cyber threats.
• Strong legal knowledge: A solid legal foundation is essential for the successful implementation of a virtual currency initiative. This includes legal analyses and reports to ensure compliance with relevant regulations, as well as obtaining necessary approvals from market regulators. A clear and well-supported legal framework helps mitigate risks in implementation.

[1] Vilawatt | Portico

• Idescat. The municipality in figures. Viladecans (Baix Llobregat)  
• Resource Efficiency and Climate Change: Material Efficiency Strategies for a Low-Carbon Future
• Vilawatt, Viladecans, Spain | Portico  
• The VILAWATT currency. The VILAWATT currency | Portico  
• Viladecans - VILAWATT | Portico
• Vilawatt | Portico    
• Final Journal UIA VILAWATT project | Portico
• UIA VILAWATT Application Form, Internal document, made available by UIA Permanent Secretariat
• VILAWATT Project Closure & Sustainability Fiche, Internal document, made available by UIA Permanent Secretariat
• VILAWATT Final Qualitative Report, Internal document, made available by UIA Permanent Secretariat
• Interview with Ramon Viader, Director of general services at Viladecans, and Sonia Dominguez Mendez: International Relations Officer in Viladecans City Council.