(1)Executive Coordinator, Coopérnico
(2)Professor, Faculty of Engeneering of the University of Porto
(3)Senior Researcher, INESC TEC
Energy communities can contribute to the decarbonisation of the energy system, but their regulation and support mechanisms, and the administrative processes for licensing and commissioning, need to be improved to boost their fast development, also contributing to a more active role of end consumers in energy processes.
The role of the energy communities
Renewable energy communities (REC) and collective self-consumption (CSC) can play an important role when individual self-consumption (ISC) is difficult to implement due to lack of space, inadequate consumption profile, financing difficulties, or surplus valorisation. The motivations can be economic, but also self-sufficiency, environmental, and social.
The concept of REC was introduced by the European Directive No. 2018/2001 (European Government, 2018) which sets goals regarding the promotion of the use of energy from renewable sources. In Portugal, the first legislation on REC was Decree-Law 162/2019 (Portuguese Government, 2019), replaced by Decree-Law 15/2022 (Portuguese Government, 2022) on the organisation and operation of the national electric system, which includes improvements to several aspects of the previous regulation of self-consumption.
A CSS/REC can be a condominium, with a common photovoltaic plant on the roof. It can be a village or a neighbourhood, with one or several PV plants on neighbouring land. It can be a heterogeneous organisation of neighbouring consumers where the surplus from large rooftop industries or public buildings is shared among smaller bordering consumers. It can simply be an agglomeration of ISC, who wish to manage and share their surplus production with their neighbours.
REC are a process of local aggregation that grants strength and decision-making power to consumers, who turn to own and make the energy resource available - which, combined with increased energy literacy, will be an important transformation and democratisation driver of the electricity system, with the creation of new business models. However, the infrastructure to share energy locally will still be needed, so the public service network will continue to play a key role, with the need for smart metering equipment and more complex and innovative local electricity distribution protocols.
Summary of Portuguese Regulation
In a CSS/REC, consumers and producers close geographically join to produce energy and share the surplus with other members. The agreed sharing rules determine the allocation coefficients (AC) with which the distribution system operator (DSO) calculates, from the meter readings, a) how much energy is supplied by suppliers and how much is self-consumed from local production, and b) for each community resource that is injecting energy, the amount to allocate among consumers, thus defining the path followed by the energy. This path determines the access tariffs to be paid for the self-consumed energy (Rogério Rocha et al., 2021). Usually, no access tariffs are paid for the voltage levels of the supposedly unused grid. Additional subsidies may also apply, such as partial or total exemption of the CIEG in the case of Portugal.
AC can be fixed, proportional to consumption, or dynamic and calculated by the REC itself, the latter (already in Decree Law 15/2022) being the ones that actually allow implementing business models adapted to the requirements of each REC (Rogério Rocha et al., 2021).
While ACC are oriented towards simple energy sharing schemes (for buildings or condominiums), REC seem to be oriented towards more complex business models and need to be set up with a legal personality. Both must be not-for-profit initiatives. Finally, citizen energy communities can include non-renewable generation sources and own and manage their own distribution network, being subject to the same restrictions on proximity between the resources that comprise them. They primary goal cannot also be financial profit.
Business models
The way investments in generation resources (e.g., photovoltaic panels), flexible resources (e.g., batteries), and energy management systems are made, and the profiles and activity sectors of the members and actors involved in a REC, lead to different business and governance models (Moreno et al., 2022). Indeed, members with a consumer profile sought to reduce energy costs without engaging in production activities, while members with a promoter profile invest in generation assets to monetise them, and companies providing energy services may develop and operate the REC management systems. Moreover, surplus can be shared with simple rules or in local markets (Mello et al., 2020), for which financial compensation to the owners of the surplus must be specified, leading to the settlement rules as an integral part of the business model (Mello, Villar and Saraiva, 2022).
Important challenges to encourage the participation in CSS/REC are, for example, adding additional services for the members (USEF, 2019), and promoting their active role in the system operation through business models that encourage aggregation and participation in the provision of flexibility services to the system.
Examples of CSS/REC
Collective renewable energy production in Portugal is starting more with the CSS model and less with REC, but there is still no public information about how these projects work. In several cases, the initiatives are stuck in a bureaucratic limbo, waiting for approval from national entities. The following examples are projects that are in the design and registration phase at the DGEG.
The parish of Vila Boa do Bispo is setting up a local REC. The legal form is Cooperative of Public Interest, because this REC is an initiative of the Parish Council. The first project of this REC will produce photovoltaic energy to share between the local Fire Brigade, Casa do Povo and the Parish Council itself.
In Alta de Lisboa, a condominium with more than 150 apartments in eight buildings is expanding its solar photovoltaic production systems: from simple self-consumption systems for the common parts of the buildings to an CSS, in order to share local production among all the condominium owners, in addition to the common parts of the buildings.
In Oeiras, a condominium of six apartments took the initiative to install a small solar photovoltaic plant to start a collective self-consumption model and share electricity among its condominium owners.
Regulatory Limitations and Improvements
Limitations to CSS/REC projects still exist and solutions are needed.
The payback of CSS/REC is still not very favourable when compared to the payback of ISC, but access tariffs for shared energy could also consider the direct and indirect benefits to the country of individuals and companies investing in decentralized renewable production.
Bureaucratic and administrative support tools must be made available, such as support in drafting the regulations governing the operation of the CSS and support in contacting the official entities (DGEG, Energy Services Regulatory Authority and E-Redes).
The implementation of dynamic sharing systems should be accelerated to accommodate the business models appropriate to each situation. The role of the DSO in the energy sharing processes could also be reduced. The current model relies on virtual meter readings, which do not need to be managed by the DSO and could be the responsibility of a third-party entity. This would open new opportunities for new technological innovation services, reducing the difficulties that the DSO is facing in adapting to this new form of energy sharing.
Therefore, and since other technologies s (feed-in tariffs for renewables, tax exemptions on the purchase of electric vehicles, etc.) benefited from aids, it would be beneficial to acknowledge the positive externalities in the energy transition technologies and support them to accelerate the implementation of CSS/REC for their contribution to this transition and the resilience of the electricity system.
References
European Government (2018) ‘Directive (EU) 2018/2001 of the European Parliament and of the Council, of 11 December 2018, on the promotion of the use of energy from renewable sources (text with EEA relevance)’. Available at: http://data.europa.eu/eli/dir/2018/2001/oj/por (Accessed: 14 December 2020).
Mello, J. et al. (2020) ‘Power-to-Peer: a blockchain P2P post-delivery bilateral local energy market’, in 2020 17th International Conference on the European Energy Market (EEM). 2020 17th International Conference on the European Energy Market (EEM), pp. 1–5. Available at: https://doi.org/10/gjq3gh.
Mello, J., Villar, J. and Saraiva, J.T. (2022) ‘Conciliating the settlement of local energy markets with self-consumption regulations’, Preprint article, not reviewed. Available at: https://dx.doi.org/10.2139/ssrn.4097357.
Moreno, A. et al. (2022) ‘Investments and Governance Models for Renewable Energy Communities’, in. 2022 18th International Conference on the European Energy Market (EEM).
Portuguese Government (2019) ‘Decree-Law no. 162/2019 | DRE’. Available at: https://dre.pt/dre/detalhe/decreto-lei/162-2019-125692189 (Accessed: 20 January 2022).
Portuguese Government (2022) ‘Decree-Law no. 15/2022, organisation and operation of the National Electrical System'. Available at: https://dre.pt/ (Accessed: 5 February 2022)
Rogério Rocha et al. (2021) ‘Comparative Analysis of Self-Consumption and Energy Communities Regulation in the Iberian Peninsula’, in. PowerTech 2021, p. 6.
USEF (2019) USEF White Paper: Energy and Flexibility Services for Citizens Energy Communities. Available at: https://www.usef.energy/app/uploads/2019/02/USEF-White-Paper-Energy-and-Flexibility-Services-for-Citizens-Energy-Communities-final-CM.pdf (Accessed: 31 January 2021).