The EU member states’ implementation of the directives for energy communities (ECs) from Renewable energy directive (REDII) and the fourth Electricity Directive is closing as June 2021 approaches. There are many definitions handling them (Citizen energy communities, Renewable energy communities, Jointly acting renewable self-consumers) and even more ways of implementing them nationally. Because there are many similarities and overlaps in the directives, this blog handles them all together and tries to make sense of what they could mean in practice. Important aspects include at least the geographical proximity of the community; how members get compensated; and what kind of restrictions are there for governance structures and technologies.
Proximity of actors and resources
Nowadays, electric grids are more and more a platform facilitating energy services rather than a network that feeds electricity from central power plants to end-customers. Yet, they still operate as monopolies and defining rules for ECs can be tricky. For preserving the monopoly, the geographical proximity of an EC is an important question. Starting from smallest option, different options include:
1. Apartment building
The RED II directive defines Jointly acting renewable self-consumers located in the same building or multi-apartment block. Germany implemented their Mieterstrom model in 2017 and here, proximity is in principle the same multi-apartment building.
2. Multi-apartment building complex
For instance, Finland will implement a rule that enables collective self-consumption within an area with same owner of the property boundaries. Most typically, this means a housing company.
REDII also defines Renewable Energy Communities, which include a notion that the effective control of the energy community should be retained by people and organizations in the proximity of the EC. Examples of this include the Postcoderoos model in the Netherlands, where members are within the same postal code; and the Autoconsommation collective model in France, where members are within 2km from the production plant; in Spain’s model, the max distance is 500 meters. Alternatively, proximity can be defined as being in the downstream of a same low-voltage grid. Alternatively, the model of Closed Distribution Network requires a geographically closed industrial and commercial area.
4. No proximity restriction
The Citizen Energy Community directive does not have a proximity restriction. This enables, for example, collective investments in wind power generation or participation in Virtual Power Plants where controlled resources are distributed in different locations.
Compensation for community members
The collective self-consumption models are usually based on savings from network tariffs and taxes. However, different frameworks for compensation for the self-consumed electicity exist (Hall et al., 2019; Zulianello et al., 2020).
- Savings from network costs and taxes.
- This is the case in Finland, for example.
- Savings from most of network costs and taxes.
- Germany’s model is similar except the EEG part of the electricity bill.
- Fixed compensation
- Italians get 0,10€/ kWh compensation and Dutch a 0.13 €/kWh tax refund for self-consumed electricity.
- Local grid tariffs
- In France, there are specific network tariffs that encourages self-consumption during times of high power demand.
It should be noted that the electricity price is very different depending on the country, and therefore also the savings from self-consumption differ. The main challenge in all self-consumption models is that it reduces the income for both the DSO and the state via decreased electricity tax payments. Instead of decreasing these revenues, some countries have decided to incentivize collective self-consumption by giving compensations.
There are also different ways for remunerating excess electricity fed into the grid. Some countries have a fixed feed-in tariff, some gain the market spot price, and in some countries, there is no compensation at all.
Restrictions on governance and technology
The implementation of the EC directives may be done by imposing some restrictions on the type of the power plant. The Citizen Energy Community directive does not have restrictions on the technology type, but Renewable Energy Community directive holds only renewable energy.
There may be restrictions on the maximum capacity. In Germany and Spain, for example, the max capacity is 100 kW.
Also, there may be requirements for the governance of the communities. In the Netherlands, participants of the Postcoderoos model have to be members of a cooperative and at least 80% of members have to be private consumers. Yet, in most countries, there is no restriction on the legal form of the community.(Hannoset et al., 2019)
As seen from this brief overview of different EC regulatory options, there is a lot of variation between the countries. Indeed, regulating ECs seems to be a challenge and there planning it holds several paradoxes that regulators have to ponder:
Control vs. autonomy. Regulators and also technology providers probably prefer standardized solutions that do not require customization, and this may entail setting regulatory requirements. Yet, ECs are context-specific, and every location has different opportunities. Control vs. autonomy -paradox also refers to the principle of voluntary participation in an EC. Long-term investments like ECs require certainty on the customer base in the future but customers have also the freedom to leave the community.
Simplicity vs. energy system-friendliness. In general, customers are not very interested in their energy consumption and most people value simplicity. In some cases, self-consumption models can seem complicated, especially for cooperatives without expertise in the energy field. On the other hand, ECs should be beneficial for the energy system as a whole. This requires a certain level of complexity in the EC models, such as reacting to spot market prices or participating in demand response markets, for example. Providing a customer-friendly package requires simplified value proposition with appropriate level of automation in customer’s premises.
Economic incentives vs. non-profit nature of ECs and revenue decrease for DSO and state. ECs are a great way of getting people active and incentivizing private money into decarbonization efforts. Yet, reasonable economic incentives are required for these investments to happen, both on the supply and demand sides. On the other hand, ECs are stated non-profit oriented by regulation. And as mentioned, self-consumption models decrease revenue from the DSO and state, and in the long run this model is not sustainable solution.
In overall, the field is still developing, and the number of EC projects is in tens or hundreds instead of thousands (Arbeille & Hennion, 2020). Countries will certainly learn from other countries’ experiences from different EC models across Europe. ECs’ introduction into regulation can be seen as a learning-by-doing process, in which models are developed as we get more information on what works and what does not. Making this process more collaborative, some countries, like the Netherlands and the UK, have adopted “regulatory sandboxes” where new models can experimented for a certain period of time (van der Waal et al., 2020). In any case, member states implement ECs from very different cultural and political starting points, and learning from others will be beneficial in making the diffusion happen.
– Jussi Valta, PhD Student, Industrial Management, Tampere University
Arbeille, J., & Hennion, A. (2020). Collective Self Consumption projects : The lever to unlock access to local renewable electricity.
Hall, S., Brown, D., Davis, M., Ehrtmann, M., & Holstenkamp, L. (2019). Business Models for Prosumers in Europe.
Hannoset, A., Peeters, L., & Tuerk, A. (2019). Energy Communities in the EU – Task Force Energy Communities. https://www.h2020-bridge.eu/wp-content/uploads/2020/01/D3.12.d_BRIDGE_Energy-Communities-in-the-EU-1.pdf
van der Waal, E. C., Das, A. M., & van der Schoor, T. (2020). Participatory experimentation with energy law: Digging in a ‘regulatory sandbox’ for local energy initiatives in the Netherlands. Energies, 13(2), 1–21. https://doi.org/10.3390/en13020458
Zulianello, M., Angelucci, V., & Moneta, D. (2020). Energy Community and Collective Self Consumption in Italy. UPEC 2020 – 2020 55th International Universities Power Engineering Conference, Proceedings. https://doi.org/10.1109/UPEC49904.2020.9209893