Energy Communities: Emerging as Key Players in the Ecological Transition

Becoming protagonists of the ecological transition, creating cohesion and development in the territory, is possible through participation in an energy community. Sharing the energy produced by renewable energy plants can take place through the coming together of businesses, territorial entities and even simply citizens.

There are at least 30 renewable energy communities and collective self-consumption experiences in Italy, as surveyed by Legambiente in the Renewable Communities Report 2021.

What is an energy community?

A renewable energy community is an autonomous legal entity, in which one participates on a voluntary basis, controlled by shareholders or members located in the vicinity of renewable energy production facilities belonging to and developed by the community.

From a regulatory perspective, the Directive (EU) 2018/2001 so-called “RED II” required EU member states to allow the establishment of consumers into self-consumers of renewable electricity by ensuring non-discriminatory and disproportionate treatment. Previously, in the residential and commercial sector, sharing of self-generated electricity was not allowed, as it was only possible in particular configurations “from a producer to a consumer.”

Italy has begun to anticipate the transposition of the RED II directive with Decree Law 162/2019 (the so-called“Milleproroghe“), authorizing the activation of collective self-consumption from renewable sources and the realization of renewable energy communities, and identifying in a transitional phase the modalities of realization and the related incentives.

In order to qualify for the benefits of an energy community, one must meet specific requirements and there are certain constraints to be met:

• individuals, SMEs, territorial bodies or local authorities, research and training institutions, religious, third sector and environmental protection bodies may participate. For end customers, however, self-consumption must not be the main activity
• power generation plants must be exclusively powered by renewable energy sources, have come into operation after 12/15/2021, and each have a capacity of no more than 1 MW (pending the adoption of measures by the Ministry of Ecological Transition and the Regulatory Authority for Energy Networks and Environment, pursuant to Decree Law 199/2021, plants that came into operation after 1/3/2020 and have a rated capacity of up to 200 kW are still allowed). In addition, plants can be equipped with electricity storage systems, but they must be less than 30 percent of the community’s total capacity.
• the sharing of the electricity produced must be done using the existing distribution network, and the low voltage (LV) lines must be subtended to the same primary high/medium voltage (HV/MV) substation (however, pending the adoption of the measures of the Ministry of Ecological Transition and the Regulatory Authority for Energy Networks and Environment, pursuant to D. L 199/2021, plants and consumers subtended to the same MV/LV transformation substation are still allowed). There is no need to change existing internal and external distribution networks, as the legislature has stipulated that energy sharing should be virtual.

In addition to the actors identified by the regulations-members, electricity producer, and Responsible Party in dealing with the Energy Services Manager (GSE)-the energy community involves other actors including financiers, community promoters, and technical, legal, and tax advisors.

What are the economic benefits?

There are three sources of remuneration, two of which are related to regulatory aspects and one to the energy market.

• Exemption from tariff components that are not technically applicable to shared energy
  The GSE recognizes for a period of 20 years a unit fee for each shared kWh equal to the sum of the transmission tariff for low-voltage utilities (7.78 €/MWh for the year 2022), and the higher value of the variable distribution component for other low-voltage utilities (0.59 €/MWh for the year 2022). In the case of groups of collective renewable energy self-consumers, there is an additional contribution due to avoided grid losses (variable depending on the voltage level and the Hourly Electricity Zonal Price).
• A premium tariff provided by the GSE
  The unit fee per shared kWh recognized by the GSE for a period of 20 years is 110 €/MWh. This contribution takes the form of a certain and constant incentive throughout the reference period and starts from the date of commercial operation of the plant.
• Energy that is not self-consumed by the energy community can be fed into the grid and valued at the market price
  In fact, at the same time as the application for access to the electricity valorization and incentive service, the take-back service of energy fed into the grid by the GSE can be activated.

What are the steps of establishing an energy community?

Five stages can be identified:

1. Identification of potential self-consumers of energy
2. identification of a suitable area
3. Establishment of the energy community as a legal entity
4. construction of a RES (Renewable Energy Sources) plant
5. Application for incentives to the GSE.

The stages of member search and aggregation, identification of plant installation areas, technical-economic and financial feasibility analysis are certainly the most delicate.

The benefits of implementing an energy community are not only economic (incentives, electricity savings), but also environmental and social impact. With respect to the environment, in fact, it makes it possible to reduce grid losses and, consequently, energy loss. Moreover, by decreasing the consumption of fossil sources, it contributes to the reduction of CO2 and climate-altering emissions, ensuring the production of clean energy.

Finally, benefit sharing among multiple parties also has a social impact, as it allows for the sharing of economic profits and GSE contributions, not to mention that the creation of an energy community can be part of the 17 Sustainable Development Goals of the United Nations2030 Agenda, helping to “Ensure access to affordable, reliable, sustainable and modern energy systems for all” (Goal 7) and “Make cities and human settlements inclusive, safe, durable and sustainable” (Goal 11).