Energy Communities: Energy Saving through Local Production and Consumption

The energy transition, supported by growing public awareness of climate change has led to the emergence of energy communities around the world.

What are these Communities and what are their Contributions and Benefits?

Based on individual self-consumption, these communities have been formed to generate and benefit from the electricity generated locally by collaborating with companies, local councils and neighbours. This demonstrates that an increasing number of consumers wants to be active and responsible and thus, are becoming “prosumers” (producers and consumers) of energy.

In this article, you will find out what an energy community is, how this model is evolving in the UK and how it can benefit from the use of an EMS.

The first energy communities were built before a name or a specific regulation was established for them. To regularise and encourage their implementation, the European Union has implemented a regulation defining two concepts: the Citizen Energy Community (Directive (EU) 2019/944) and the Renewable Energy Community (Directive (EU) 2018/2001). 

Like other entities, energy communities need governance and regulatory arrangements as they face higher investment risks compared to commercial energy providers. Therefore, the UK government decided that they will benefit from tax-advantaged investment under the SITR (Social Investment Tax Relief).

Before you keep reading, it is important to clarify that energy communities are not competitors of energy providers. They are just another player in the energy market with a local and non-commercial vision. In fact, in many cases, they continue to collaborate with them and with energy services companies to initiate or manage projects. In this article, you can find out more about the role of utilities in self-consumption in the UK.

Key Elements of an Energy Community

As a relatively new model, it can vary, but there are a number of characteristics for a collective self-consumption project to be considered as an Energy Community.

These are:

• Renewable energy. The type of energy produced and consumed in these communities is, by definition, renewable. The project may include electrification, installation of solar panels, district heating networks, heat pumps, biomass or hydroelectric production.
• Geographical location. These are local projects, with buildings and installations within a radius of 500m, typically.
• Legal entity. An energy community is not just a group of consumers, it requires a legal entity to be constituted.
• Voluntary participation. No company or neighbour in the vicinity should be forced to participate. In general, these projects seek consensus and community building. Therefore, they are attractive to many but are not compulsory.
• Collaboration and diversity of participants. Members of communities can be both individuals and legal entities. They can include residential and local administrations, as well as offices, factories or sports facilities. For instance, a residential development that collaborates with a school and an office block, a municipality that cooperates with agriculture, or even a hotel working with its neighbours.
• Search for economic savings without a profit motive. Economic saving is a clear objective along with sustainability, but these communities are not aiming at generating money. Although they can “sell” unused energy to the main grid, this will have an impact on the bills with discounted prices for the community.

Therefore, energy communities create small energy grids (microgrids), independent from the main ones. As seen above, their aim is to benefit local actors by controlling their production, reducing their consumption, making them more efficient and creating community.

If you are thinking of setting up an energy community, the advice of a specialised company can help you in the evaluation and start-up process. Energy Management Systems such as the DEXMA Platform will also be useful in this context. You will be able to analyse the consumption of existing installations, make predictions of your energy production and consumption and also monitor the change once solar panels or other energy generation is installed. If you already have some knowledge on this subject, you can learn more about how DEXMA’s Microgrids application works here.

How are Energy Communities Financed?

The long-term goal is to generate savings, but before this can be achieved, an initial investment is required to install panels, windmills, meters, etc. This first investment can be covered by public subsidies, by companies, energy services companies or neighbours.

The European Union’s Next Generation funds are expected to be a major boost, with the main focus on green energy development and the ecological transition. DEXMA is actively involved in these funds, helping our clients to get funding for their energy efficiency projects.

In the UK, there exist many funding options that fall under six main categories: Grant Funding, Location-based Grant Funding, Council Climate Funds, Grant Funding Organisations, Crowdfunding and Coronavirus Emergency Funding. These fundings cover various aspects of the energy community such as initial advice, installation of panels and meters, energy generation, energy storage, energy efficiency and mobility.

Discover more about these communities in the UK by reading the full article