Local energy communities, another way of generating and consuming energy

Imagine a city council promoting the installation of 100 kW solar panels the roof of the municipal sports centre with a capacity for generating 140 MWh / year.

This is a joint project by 99 neighbours who contribute, in this case, a share capital of 100 euros each. The equivalent participation for each partner is 1 kW and they will receive the energy generated by this power (1,400 kWh / year) as a self-consumption discount on their bill.

The cost of installation and implementation is 100 thousand euros, but the installation can be financed. The simplest thing is for the community to go to an Energy Services Company to finance the operation and manage it.

The city council makes an extra contribution, the roof of the sports centre, which needs to be transferred to the electricity community for at least 15 years. This assignment can be translated into a monetary amount which will increase the participation of the city council in the generation of the project, although in the case of the local administration, they are usually assignments without economic return.

This is just one example of how a local energy community, also known as a local renewable energy community, can be formed. A phenomenon that is not new but that has been gaining importance in recent years.  

Citizen participation in the energy sector

An energy community makes it easier for a group of neighbours to jointly benefit from the same local electricity or thermal generation installations. This joint venture not only means making better use of this generation but also provides environmental and social benefits, such as improved energy efficiency and the development of sustainable mobility systems.

Energy communities may include ordinary citizens, businesses, public administrations and small and medium-sized enterprises. They are the result of a model for citizen participation in the energy system and their main function is to generate renewable energy through collective generation plants for shared self-consumption. These communities can undertake multiple activities that include producing, consuming, storing and sharing energy.

Who can be part of an energy community?

Any natural or legal person and, in general, any public or private entity, may be a member of a renewable energy community.

To create one, the members need to identify the area where the production plant will be established. As this is a local feature, it will need to be close to consumers and meet the requirements for size, location and use.

According to EU data, energy communities are becoming more common. In 2019 there were already about 1,800 in Germany, 700 in Denmark and 500 in the Netherlands. These are the countries with the highest number. In the case of Spain, these communities are much less common than in other European countries: In that same year only 33 were registered.

However, this trend is expected to increase, as energy communities not only promote the circular economy, they also support the growth of small and medium-sized enterprises, enabling them to be part of the development of renewable plants.  

Benefits: From environmental to economic

The benefits derived from the activity and development of local energy communities include greater use of electricity or thermal generation capacity, improved energy efficiency, the development of sustainable mobility systems and even economic savings for some families. However, these are not the only ones. There are many other environmental, social and economic benefits. 

Undoubtedly, most of the benefits are of an environmental nature: A reduction of CO₂ emissions, abandoning the use of fossil fuels, a reduction of energy waste and investments in renewables.

With regard to social benefits, we should highlight the commitment of society to clean energy, the reduction of energy poverty, the promotion of the local economy and the generation of employment.

Finally, the economic benefits feature the possibility of generating income that results in the development of the neighbourhood or local community. Each member of the energy community continues to pay the full bill to their electricity provider, but is periodically credited with an amount corresponding to the distribution of the profits guaranteed by the community. This remuneration is equivalent to a reduction in the bill.

All these benefits convince us that local energy communities will undoubtedly play a key role in accelerating the decarbonisation process.

How to create an energy community: Step by step

1. Find or join a group with the same goal as you. Surround yourself with people who are decisive, flexible and responsible.
2. Select the legal format for your project in accordance with your requirements: Cooperative, consortium, community interest company, foundation, non-profit organisation, trust or association.
3. Contact your local town hall. Having the support of your municipal government can help you in many ways.
4. Choose the objective for your project. Remember that an energy community is not restricted to electricity, but can also function in the heating and transport sectors.
5. Choose the technology that will help you produce and sell energy, where this is your main activity. The technologies you can opt for are the following: Wind, solar, hydroelectric and biomass.
6. When deciding what you want to build, you should submit a design and feasibility study, a business plan, building permits and other permits.
7. Get financing. This can be done through: Aid, crowdfunding, bank loans, third-party financing, leasing, cooperative funds or municipal support.

For more information, visit the website of the IDAE (Institute for the Diversification and Saving of Energy).