Energy Communities: citizens and territory join together for the energy transition

What is an energy community?

A Renewable Energy Community (REC) is an association composed of various citizens, companies, local businesses and territorial government agencies that choose to join together for the purpose of producing electricity from renewable sources and by doing so are able to meet their own energy needs with a clean, affordable and locally produced alternative.

For what purpose is an REC created?

Renewable Energy Communities offer an innovative and participatory response to the needs of the current energy market, but they also represent a virtuous example of how people can actively contribute to the energy transition and combat climate change.

In fact, through energy communities it is possible to reduce CO2 emissions and energy waste while at the same time decreasing spending related to energy consumption.

In addition, when the production of electricity exceeds the needs of self-consumption, the energy community can act as a supplier on the market, offering their excess electricity for sale and generating income for all of the community members.

Benefits

In line with the Sustainable Development Goals (SDGs) of the UN 2030 Agenda, energy communities initiate transversal benefits from an environmental, economic and social point of view:

• Environmental benefits
  Energy communities present a virtuous model where electricity is produced in a responsible way and consumed conscientiously. They are true hubs where “zero-mile” energy is produced without emitting CO2 into the atmosphere and then distributed locally to citizens and companies that are part of the same region.

• Economic benefits
  Each member of the energy community actively participates in the production of electricity and benefits from it in equal measure. Although those involved continue to pay their bills to energy suppliers, they periodically receive economic compensation generated by the sharing of benefits and revenues related to the activities of the energy community.
  This results in significant savings on utility bills, which in some cases can even match or exceed the amount paid to join the energy community.

• Social benefits
  Energy communities are capable of developing the local productive sector, creating new jobs for the community and facilitating the energy independence of a territory, region or entire country. This is in line with a broader energy transition process in which green energy is not just economically advantageous but becomes a tool capable of ensuring equity and security.

How to create an energy community

The establishment of an energy community as a legal entity is regulated by decree-law 162/19 (article 42-bis) and by its related implementation measures, such as the ARERA resolution 318/2020/R/eel and the Ministry of Economic Development’s DM of September 16, 2020. 

The Italian legislation includes the recommendations regarding renewable energy communities that are found within the broader European Directive No. 2001 of December 11, 2018 (“Renewable Energy Directive Recast”), otherwise known as RED II. This directive outlines the modalities and specific constraints that an REC is required to meet regarding energy sustainability.

Through Legislative Decree 199/2021, the Italian government wanted to encourage an increasingly widespread use of renewable sources and at the same time regulate the size of plants (overall power capacity of no more than 1 MWp) and their range of operation (plants must be connected to the electricity grid through the same primary substation).

The Renewable Energy Community regulatory framework is outlined by ARERA in the December 2022 publication of its resolution “Widespread Self-Consumption Integrated Text /Testo Integrato Autoconsumo Diffuso” (TIAD).

A further step towards completing the regulatory framework will be entrusted to the issuance of the MaSE Decree on incentives, which will be closely followed by Gestore dei Servizi Energetici/Energy Services Manager (GSE) publication of technical operating rules for RECs and self-consumption.

These regulations establish the ways through which members of an energy community can utilize shared energy. With this definition the amount of energy equal to the minimum, on an hourly basis, is identified as between the electricity fed into the grid by generating plants and the electricity withdrawn by consumers that they detect for the configuration.

The community’s shared energy also benefits from an economic contribution and incentives given by the GSE .

Requirements for joining a Renewable Energy Community

Any public or private entity can actively participate in the creation of a Renewable Energy Community.

The members of an energy community can in fact be individuals or legal entities. This allows even private citizens (for example, people who live in the same neighborhood) to organize and promote the development of an REC with the aim of sharing responsibilities and benefits.

Therefore, since the law defines a Renewable Energy Community as a non-profit entity, the most common forms used to create these freely formed initiatives by citizens or businesses is that of an unincorporated association or cooperative, as these represent the most dynamic, cost-effective and convenient choice.

Members of a Renewable Energy Community

Given that Renewable Energy Communities are legal entities that are based on active and voluntary participation, its members or shareholders (who exercise supervisory power) can be: individuals, small and medium-sized enterprises (SMEs), territorial entities or local authorities, including municipal governments, research and educational institutions, religious groups, third sector entities and environmental protection organizations.

At the same time, because the law identifies Renewable Energy Communities as not-for-profit entities, the only membership constraint concerns private companies whose participation is allowed only so long as this involvement is not the company’s main commercial or industrial activity.

Steps

The path that leads to the creation of an energy community can ideally be divided into four main steps, which include the active involvement of all members.

• Design: This is the step in which the tools and technologies are chosen that align most closely with the configuration of the energy community and its objectives.
• Establishment: The legal form that is best suited to achieving the stated objectives is analyzed and chosen. During this phase, the contractual and entity rules are defined that guide corporate governance relations.
• Implementation: This is the step where the project for the energy community comes to life. Plants and equipment are built and installed in the designated areas, giving priority to redevelopment of abandoned sites or buildings, and the members of the community receive the metering tools through which they monitor energy production that they manage themselves through the typical contractual forms for projects.
• Management: The energy community is managed by its members, who dictate its internal relationships and those with relevant authorities such as GSE for the purpose of achieving set individual and collective goals, monitoring the flow of the energy produced and incentives and tax benefits when available.

How to meet the proximity requirement needed for the creation of an energy community

The area occupied by an energy community’s plant must be in proximity to the community members, so it is necessary to select land, sites and buildings close to the consumers. This curtails costs and reduces waste related to the distribution of the electricity that is generated and further increases the environmental and economic benefits of the energy community.