The energy transition is one of the major challenges that humanity has ever faced, and it is a battle that can’t be solved by passive individuals and countries imprisoned by bureaucracy. Citizen participation in urban renewable energy can make a difference in the spreading of this new way of producing energy and in its development. Individuals can behave as active citizens by wearing the clothes of energy producers and consumers at the same time, by becoming members of energy communities engaging in decision-making processes. Municipal governments on the other hand can include citizens in the design, ownership, and management of energy systems, providing sites and investments for small-scale distributed projects. 

Goodbye consumers, welcome PROSUMERS.

The prosumer, or self-consumer, is a figure that decides to produce and consume (and eventually store) its energy, maintaining the rights and obligations of consumers. The most widely spread technology for self-consumption is the rooftop solar photovoltaic panel because it can be easily built, at relatively low costs, on top of a house, both in cities and in the countryside. The expenses related to the presumption are lightened by many supporting policies that include feed-in tariffs, net metering schemes and full compensation for electricity and heat fed back to the grid. It is extremely important that the government supports the prosumers in a variety of ways and each country is creating a proper plan to do so. 

If the trends are right, it is estimated that 264 million EU citizens will become prosumers by 2050, generating 45% of the overall renewable electricity on the market. 

Starting from the idea of self-consumption, jointly acting self-consumers have been introduced in the market: at least to prosumers are needed and now they are permitted to arrange sharing of renewable energy produced on their sites between themselves. They are figures located in the same building or multi-apartment block and the shared configuration can be differed in two types of configurations: the physical configuration, in which the entire condominium is behind a single Point-Of-Delivery (POD) and each apartment has a submeter, or a virtual configuration, in which each apartment has a fiscal meter, and the amount of “virtually” self-consumed energy is based on an algorithm. By looking at both the solutions, a major advantage of the virtual configuration could be pointed out: it uses the existing public grid which allows more freedom to each member (we don’t need to forget that each member has the right of exiting the jointly acting self-consumption whenever it’s wanted).

What are energy communities? 

The concept of energy communities was shaped by the European legislation “EU 2019/994 – Directive on common rules for the internal electricity market” to enhance the energy transition in accordance with the general message delivered by the Clean Energy Package (CEP) for all Europeans: energy communities embody the concept of decentralization of the location of energy production. 

The last CEP contains two different definitions of “energy community”: Citizen Energy Community (CEC), which has been already introduced in the previously agreed Electricity Directive, and Renewable Energy Community (REC), which has been already defined in the Renewables Directive. They are both legal entities that can exercise rights and be subject to obligations and are autonomous and based on open and voluntary participation. Their aim is to produce and consume energy produced by the power production plant owned by the community itself. The community must be based on a “not-for-profit” approach, thus, ESCO and Energy providers cannot be part of a community. The members can access all suitable electricity markets directly or through the aggregation, but they must be considered non-commercial type of market actors. Moreover, they need to be shaped to provide environmental, economic or social community benefits for its members or to the local community rather than their financial profits. 

More specifically, regarding the differences between RECs and CECs, a few points need to be cleared out. First, RECs could be seen as a subset, or type, of CEC. Then, the participation, ownership and governance criteria are different among the two, with more stringent and stricter criteria seen for the RECs. The members of a REC need to be autonomous and need to be in the proximity of the power production plant. Finally, one major difference is that RECs can produce electricity or heat only from renewable energy sources, while CEC can use every type of energy sources, but only to produce electricity. 

Technology and energy communities

Fostering the creation of new energy communities to ease the energy transition cannot be done without the support of new technologies, such as more efficient renewable energy sources, smart grids, and new storage solutions. Why are they so important?

Storage. One of the main flows of non-programmable and unpredictable renewable energy sources is matching instantaneously the energy demand and production: that is when the storage system becomes essential. Thanks to a well-designed storage system the Energy Communities could maximise the use of locally produced electricity, lowering their costs, ensuring and increasing the reliability of their production plant. 

Additionally, this solution might be a turning point for the integration of the distributed renewables with the grid, avoiding imbalances, smoothening demand and generation picks and providing an ancillary service. 

The most common solutions employed nowadays are electrochemical storage systems (i.e. batteries). 

Smart Buildings. Easing the management of each power demanding item in the house can significantly improve the advantages of creating energy communities. The main component of smart homes is the energy box, which can graphically represent the behaviour of the main items of the house using sensors. The data are transmitted to a cloud, where they are stored and organised to compute a proper data analysis. Community means aggregation, thus, using the cloud to store all the data could be significant in the optimisation of the usage of the energy resources available. Thanks to the digital bonding created with the community and to the smart monitoring of the consumptions, the prosumers can become an active, and aware, character of the new green era. 

Electric mobility. By the integration of wall boxes and charging columns into an energy community, the number of electric vehicles in circulation would rapidly increase. Not only would the green mobility be enhanced, but also the grid could take advantage of it. Charging cars could provide important ancillary services and the competent authorities could provide a proper remuneration for the community members for the guaranteed service.

Why are energy communities so advantageous?

The energy transition needs to start from the top of the social pyramid as much as within the society. If families and small businesses work together to enhance energy efficiency, environmental and economic benefits will be exploited by the entire community.

The economic advantages are linked to proximity and ownership of the power production plant: because of the short distances, the transportation and distribution costs will tend to be zero. Additionally, the self-consumed energy will not only save money but it will be remunerated according to specific government’s incentives, active in many European Countries. 

Due to the economic advantages, Energy Communities could be seen as a way of fighting the energy poverty issue, which is still concerning in many European (and non-European) countries. “Energy poverty” refers to the condition of not being able to afford the primary energy services such as heating, lighting, electricity needed to live a respectable life. It has been stated that in 2018 around 54 million people have not been able to afford the primary energy services. In accordance with Goal 11, but also Goal 1 and 7, of the “Agenda 2030” of the United Nations, the European Member States need to find a way to ensure cheap, reliable, sustainable and modern electricity access to all, fighting the problem of energy poverty. 

Moreover, the economic benefits come with the environmental ones. With the increase of energy communities (especially RECs) the centralised emissions of pollutants will significantly decrease, increasing the number of distributed sources that can be handled by the grid. When renewable energy sources are used, a significant amount of CO2 can be saved. It has been estimated that 352,4 g of equivalent CO2 is emitted per kilowatt-hour consumed. The consumption is also reduced by the rising awareness of consumption, leading to wiser exploitation of the energy resources and a reduction in the consumption by reducing the use of lighting in the house, increasing the efficiency in the use of electrical appliances and by selecting appliances that consume less. It has been rated that by the monitoring of the consumption the savings could reach 20%.

Energy communities in Italy. What is happening?

Legally speaking, energy communities and jointly acting self-consumers are explained in the 42-bis Article in the “Decreto Milleproroghe” released in February 2020. The specific laws and regulations per each form of aggregation are summarized in the table below. 

 

Jointly acting self-consumers	Energy communities
Virtual model (1)	The members need to be in the proximity of the same secondary transformation unit
P ≤ 200kW	P ≤ 200kW
Power plants built after 1/3/2020 or new additional parts of older power plants	Power plants built after 1/3/2020 or new additional parts of older power plants
Instantaneous self-consumption (also through the storage system)	Instantaneous self-consumption (also through the storage system)
The relationship between the members needs to be handled by private law and a referent needs to be selected	The juridical form is not pre-defined (associations, cooperatives, entities of the third sector….)

 

These new forms of aggregation are economically supported by the government through incentives, tax deductions and exonerations. 

Concerning the jointly acting self-consumers, according to the DM 16/9/20, an incentive (feed-in premium (2)) of +100 €/MWh of shared electricity for 20 years is ensured. Additionally, jointly acting self-consumers have the right of a tax deduction according to the “ECOBONUS 110%” applicable to the expenses related to a power installed of 20kW. The remaining power (up to reaching the upper limit of 200 kW) is subject to a tax deduction equal to 50% of the expenses. Moreover, the surplus energy (the one that is not shared within the condominium) could be sold to the market at the correspondent zonal prize (3). Finally, the taxes related to the distribution and transmission don’t have to be paid and a monetary recognition is accounted for the avoided losses on the grid. 

The economic advantages for the energy communities are similar, except for a few differences: the feed-in premium incentive is equal to +110 €/MWh because of the larger social impact given by the energy communities. In contrast to the jointly acting self-consumers, energy communities are not remunerated for the avoided losses on the grid because the community usually has a bigger extent than condominiums. 

The economic advantages are briefly summarised in the table below.

Jointly acting self-consumers	Energy communities
FIP = +100€/MWh	FIP = +110€/MWh
Tax deduction	Tax deduction
The energy could be sold to the market or given to the authority	The energy could be sold to the market or given to the authority
The transmission and distribution taxes are not paid	The transmission and distribution taxes are not paid
Remuneration for the avoided losses on the grid

Conclusions

The United Nations have set 17 targets to be reached by 2030, and the achieving of those goals depends on the paths we decide to follow. The rising figure of prosumers and the new formula of energy communities could be a turning point toward a cleaner and more efficient way to produce electricity, a better cooperative spirit and a more active understanding of how to handle climate change. 

Governments and institutions are helping to make the transition toward jointly acting systems, energy communities and self-consumption easy; now, it’s your turn to handle the elephant in the room. Are you ready?

Notes

(1) Only the public distribution line can be used to share electricity

(2) This incentive is added to the value of energy on the market

(3) If the ECOBONUS 110% tax deduction has been used, the surplus energy must be given to the authority (GSE).