What are energy communities?

Energy communities represent a new model of energy production, distribution and consumption that promotes the active participation of citizens and businesses in the energy transition process. They are collective initiatives in which groups of people, companies or public bodies come together to produce renewable energy locally and share it among community members. This model not only reduces dependence on fossil energy sources, but also promotes a fairer distribution of the economic and environmental benefits of renewable energy use.

Definition, functioning and typologies

Introduced in Europe by the RED II Directive 2018/2001/EU, energy communities consist of the aggregation of entities, such as households, small and medium-sized enterprises or local authorities, that organise themselves to produce and consume renewable energy. The main objective is to promote decarbonisation and increase energy sustainability, through the generation of energy from sources such as photovoltaic, wind, hydroelectric or biomass.

How is an energy community created? The first step is to set up a legal entity among the future members of the community, whether they are individuals, small or medium-sized enterprises, local authorities or public administrations. By law, an energy community cannot have profit as its purpose and, for this reason, the most common form chosen as legal expression is the Association.

The next step after setting up the association is to identify the area in which to install the generation plant, which must be in a location close to those who will actually consume the energy generated. The functioning of energy communities, in fact, is based on locally installed renewable energy generation plants and, therefore, this implies, for example, that a company or a state body may install a photovoltaic plant near a school or a manufacturing plant and share the energy with the citizens of the municipality who have joined the initiative. It should be added, however, that the plant does not have to be owned by the community: it can be made available by one or more of the participating members or even by a third party.

The energy produced is then distributed among the members of the community itself, who benefit in terms of reduced energy costs and reduced greenhouse gas emissions: each member of the group, in fact, normally continues to pay the utility bill to their supplier, but at the same time receives a periodic sum from the energy community for sharing in the benefits of the community. This translates, in effect, into a drastic reduction in utility costs. In addition, surplus energy that is not consumed can be sold to the national grid, generating additional revenue.

Benefits and challenges of energy communities

The energy community model offers numerous benefits, both environmentally, economically and socially, such as

• emissions reduction: energy communities promote the use of renewable energy, contributing to the reduction of CO₂ emissions and to the decarbonisation goal;
• economic savings: community members can benefit from lower energy bills due to self-production and shared consumption of energy;
• energy independence: by increasing local energy production, communities reduce dependence on external energy sources, stabilising costs and improving energy security;
• participation and involvement: energy communities actively involve citizens in energy management, promoting a culture of sustainability and a sense of ownership;
• local benefits: economic resources from the production and sale of renewable energy remain within the community, stimulating the local economy.

Despite the many obvious benefits that energy communities are able to bring to the community, they also face some challenges that are not always easy to manage. The European RED II Directive is rather recent (2018) and, consequently, national regulations are not yet fully adapted to the realities they address, often creating legal and bureaucratic hurdles.

Another rather relevant aspect to consider is also that of initial costs. Setting up energy production plants requires significant initial investments, which can be an insurmountable barrier for small communities that lack sufficient funding and space to start the project.

Finally, the technical knowledge to run an energy community cannot but be prioritised. Starting an energy community requires specific technical skills for the design and maintenance of installations, as well as for the management of the grid and electricity distribution.

The role of energy communities in the energy transition

Energy communities are a concrete response to the challenges of energy transition and climate change. By promoting a distributed and participatory energy model, they can accelerate the transition to a more sustainable, decentralised and democratic energy system. Moreover, they can contribute significantly to achieving the European targets set for 2030 and 2050 to reduce emissions and increase the use of renewable energy.