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Energy community
European Union Electricity Market Glossary

 

The legislative framework for “energy communities” has been introduced into European legislation by the Clean Energy Package (known also as “the Winter Energy Package”).

 

In this regard the term: “an energy community” is used in the context of:

 

- “citizen energy community” (CEC) in the Directive (EU) 2019/944 of the European Parliament and of the Council of 5 June 2019 on common rules for the internal market in electricity (recast) and

 

- “renewable energy community” (REC) in the 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 (recast), known as “the RED II”.

 

Despite important differences, both types of energy communities share some similarities, for example:

- they are are entities that are set up as a legal person,
- they must be effectively controlled by their shareholders or members, and
- their primary objective is to provide environmental, economic and social community benefits rather than financial profits.

 

In turn, among major differences between CECs and RECs are the membership issues (much more regulated in RECs than in CECs):
- in RECs there is an additional reservation for private undertakings that their participation must not constitute their primary commercial or professional activity,
- the shareholders or members in RECs must be located in the proximity of the renewable energy projects that are owned and developed by the REC.

CECs are free from the above restrictions.

 

Moreover, RECs are also able to engage in the collective management of other energy carriers, e.g.renewable gas, while the CECs’ scope is limited to electricity.
 

According to Article 2(11) of the recast electricity market Directive “citizens energy community” means a legal entity that:

(a) is based on voluntary and open participation and is effectively controlled by members or shareholders that are natural persons, local authorities, including municipalities, or small enterprises;

(b) has for its primary purpose to provide environmental, economic or social community benefits to its members or shareholders or to the local areas where it operates rather than to generate financial profits; and

(c) may engage in generation, including from renewable sources, distribution, supply, consumption, aggregation, energy storage, energy efficiency services or charging services for electric vehicles or provide other energy services to its members or shareholders.

 

More on CEC can be found in Article 16 of the recast electricity market Directive.

 

According to Article 2(16) of the RED II “renewable energy community” means a legal entity:

(a) which, in accordance with the applicable national law, is based on open and voluntary participation, is autonomous, and is effectively controlled by shareholders or members that are located in the proximity of the renewable energy projects that are owned and developed by that legal entity;

(b) the shareholders or members of which are natural persons, SMEs or local authorities, including municipalities;

(c) the primary purpose of which is to provide environmental, economic or social community benefits for its shareholders or members or for the local areas where it operates, rather than financial profits.

 

Recital 26 of the RED II requires the EU Member States to ensure that RECs can participate in available support schemes on an equal footing with large participants.

To that end, measures are allowed, such as providing information, providing technical and financial support, reducing administrative requirements, including community-focused bidding criteria, creating tailored bidding windows for renewable energy communities, or allowing renewable energy communities to be remunerated through direct support where they comply with requirements of small installations.

 

Further, specific provisions on RECs are laid down in Article 22 of the RED II.

 

However, as observed by the EU energy market regulators (Regulatory Aspects of Self-Consumption and Energy Communities, CEER Report, Customers and Retail Markets and Distribution Systems Working Groups, 25 June 2019, Ref: C18-CRM9_DS7-05-0, p. 14) energy sharing, be it directly or within energy communities, in some respects “defies the classical supplier-customer relationship”.

 

The regulators’ concern is involved with the fact that energy communities may act as a supplier, as a service provider (e.g. providing aggregation services) or, if allowed by the relevant Member State, as a grid operator (i.e. activities that are regulated in the energy market legislation).

 

The CEER Report of 25 June 2019 refers to the fact that some EU Member States, such as France and Austria, have developed a framework for collective self-consumption, where energy can be shared within a group of customers, without requiring the direct involvement of a supplier.

 

The regulators’ observation is that with the new provisions from the Clean Energy Package “this kind of direct sharing of electricity will become a right, without necessarily requiring active involvement from the supplier of the remaining electricity” (p. 17).

 

In this regard Article 16(3)(e) of the recast Electricity Directive states that citizens energy communities “are entitled to arrange within the citizen energy community the sharing of electricity that is produced by the production units owned by the community”, subject to other requirements laid down in Article 16 of the Directive and “subject to the community members retaining their rights and obligations as final customers”.


Where electricity is shared, this must be “without prejudice to applicable network charges, tariffs and levies, in accordance with a transparent cost-benefit analysis of distributed energy resources developed by the competent national authority”.

 

 

Energy communities as the DSOs

 

 

The recast Electricity Market Directive (Art. 16(2)(b) envisions that the EU Member States may provide that CECs are entitled to own, establish, purchase or lease distribution networks and to autonomously manage them subject to conditions set out in the directive (note that no such provisions exist with respect to RECs in the RED II).

However, the regulators consider as the “challenge for both NRAs and project developers, regardless of whether they are CECs or not, is to unleash the benefits of microgrids in a way that is compatible with the principles of the European energy market.”

 

Regulators underline that “in the role of a market facilitator, it is key that the DSO acts in a non-discriminatory manner to all parties involved.

This remains true if a CEC essentially takes on the role of DSO – for example after successfully participating in a tender for a concession.

In such cases, CEER believes that CECs should fall under the regulatory regime applicable to any other DSO of the same size under the national regulatory regime.

In many MS, if the DSO has less than 100 000 customers, the unbundling regime is less stringent.

In those cases, the CEC owned DSO could act as a producer or supplier through the same legal entity as the DSO and would not need to create a separate brand for its non-DSO activities.

However, the CEC acting as DSO would not be exempt from the obligation to act in a non-discriminatory way towards other suppliers, producers, aggregators, service providers or connected customers that are not members of the CEC.

It would consequently be difficult for such a grid to be designed and operated in a way that prioritises the CEC’s assets” (Regulatory Aspects of Self-Consumption and Energy Communities, op.cit. p. 30).

 

 

Regulatory challenges

 

 

The CEER observes that the provisions of the Winter Energy Package are “relatively open to interpretation, and transposition into national law will be critical to the viability and role of energy communities”.

 

Regulators also warn against interpreting these provisions in a way enabling energy communities to become “a vehicle to circumvent existing market principles, such as unbundling, consumer rights or the cost sharing principles applied to energy grids”.

 

Regulators, in particular, stress that adequate grid charges need to be applied to any sharing or peer to peer trading activities insofar that exchanges are carried out using the public grid.

 

In this context situations where a point of delivery is supplied by more than one entity create, in the regulators’ view “a new layer of complexity for the consumers’ balancing situation”.

 

Regulators observe that the said issues “are similar to those raised by aggregation and should be addressed through well-designed contractual arrangements and data transparency”.

 

 

 

Directive (EU) 2019/944 of the European Parliament and of the Council of 5 June 2019 on common rules for the internal market in electricity (recast), Recitals 43 - 47, Article 16, Article 38(2)

 

Recital 43

 

Distributed energy technologies and consumer empowerment have made community energy an effective and cost-efficient way to meet citizens' needs and expectations regarding energy sources, services and local participa­tion. Community energy offers an inclusive option for all consumers to have a direct stake in producing, consuming or sharing energy. Community energy initiatives focus primarily on providing affordable energy of a specific kind, such as renewable energy, for their members or shareholders rather than on prioritising profit- making like a traditional electricity undertaking. By directly engaging with consumers, community energy initiatives demonstrate their potential to facilitate the uptake of new technologies and consumption patterns, including smart distribution grids and demand response, in an integrated manner. Community energy can also advance energy efficiency at household level and help fight energy poverty through reduced consumption and lower supply tariffs. Community energy also enables certain groups of household customers to participate in the electricity markets, who otherwise might not have been able to do so. Where they have been successfully operated such initiatives have delivered economic, social and environmental benefits to the community that go beyond the mere benefits derived from the provision of energy services. This Directive aims to recognise certain categories of citizen energy initiatives at the Union level as ‘citizen energy communities’, in order to provide them with an enabling framework, fair treatment, a level playing field and a well-defined catalogue of rights and obligations. Household customers should be allowed to participate voluntarily in community energy initiatives as well as to leave them, without losing access to the network operated by the community energy initiative or losing their rights as consumers. Access to a citizen energy community's network should be granted on fair and cost- reflective terms.

 

Recital 44

 

Membership of citizen energy communities should be open to all categories of entities. However, the decision- making powers within a citizen energy community should be limited to those members or shareholders that are not engaged in large-scale commercial activity and for which the energy sector does not constitute a primary area of economic activity. Citizen energy communities are considered to be a category of cooperation of citizens or local actors that should be subject to recognition and protection under Union law. The provisions on citizen energy communities do not preclude the existence of other citizen initiatives such as those stemming from private law agreements. It should therefore be possible for Member States to provide that citizen energy communities take any form of entity, for example that of an association, a cooperative, a partnership, a non- profit organisation or a small or medium-sized enterprise, provided that the entity is entitled to exercise rights and be subject to obligations in its own name.

 

Recital 45

 

The provisions of this Directive on citizen energy communities provide for rights and obligations, which are possible to deduce from other, existing rights and obligations, such as the freedom of contract, the right to switch supplier, the responsibilities of the distribution system operator, the rules on network charges, and balancing obligations.

 

Recital 46

 

Citizen energy communities constitute a new type of entity due to their membership structure, governance requirements and purpose. They should be allowed to operate on the market on a level playing field without distorting competition, and the rights and obligations applicable to the other electricity undertakings on the market should be applied to citizen energy communities in a non-discriminatory and proportionate manner. Those rights and obligations should apply in accordance with the roles that they undertake, such as the roles of final customers, producers, suppliers or distribution system operators. Citizen energy communities should not face regulatory restrictions when they apply existing or future information and communications technologies to share electricity produced using generation assets within the citizen energy community among their members or shareholders based on market principles, for example by offsetting the energy component of members or shareholders using the generation available within the community, even over the public network, provided that both metering points belong to the community. Electricity sharing enables members or shareholders to be supplied with electricity from generating installations within the community without being in direct physical proximity to the generating installation and without being behind a single metering point. Where electricity is shared, the sharing should not affect the collection of network charges, tariffs and levies related to electricity flows. The sharing should be facilitated in accordance with the obligations and correct timeframes for balancing, metering and settlement. The provisions of this Directive on citizen energy communities do not interfere with the competence of Member States to design and implement policies relating to the energy sector in relation to network charges and tariffs, or to design and implement energy policy financing systems and cost sharing, provided that those policies are non-discriminatory and lawful.

 

Recital 47

 

This Directive empowers Member States to allow citizen energy communities to become distribution system operators either under the general regime or as ‘closed distribution system operators’. Once a citizen energy community is granted the status of a distribution system operator, it should be treated as, and be subject to the same obligations as, a distribution system operator. The provisions of this Directive on citizen energy communities only clarify aspects of distribution system operation that are likely to be relevant for citizen energy communities, while other aspects of distribution system operation apply in accordance with the rules relating to distribution system operators.

 

Article 16

Citizen energy communities

 

1.Member States shall provide an enabling regulatory framework for citizen energy communities ensuring that:

(a) participation in a citizen energy community is open and voluntary;

(b) members or shareholders of a citizen energy community are entitled to leave the community, in which case Article 12 applies;

(c) members or shareholders of a citizen energy community do not lose their rights and obligations as household customers or active customers;

(d) subject to fair compensation as assessed by the regulatory authority, relevant distribution system operators cooperate with citizen energy communities to facilitate electricity transfers within citizen energy communities;

(e) citizen energy communities are subject to non-discriminatory, fair, proportionate and transparent procedures and charges, including with respect to registration and licensing, and to transparent, non-discriminatory and cost-reflective network charges in accordance with Article 18 of Regulation (EU) 2019/943, ensuring that they contribute in an adequate and balanced way to the overall cost sharing of the system.

 

2.Member States may provide in the enabling regulatory framework that citizen energy communities:

(a) are open to cross-border participation;

(b) are entitled to own, establish, purchase or lease distribution networks and to autonomously manage them subject to conditions set out in paragraph 4 of this Article;

(c) are subject to the exemptions provided for in Article 38(2).

 

3.Member States shall ensure that citizen energy communities:

(a) are able to access all electricity markets, either directly or through aggregation, in a non-discriminatory manner;

(b) are treated in a non-discriminatory and proportionate manner with regard to their activities, rights and obligations as final customers, producers, suppliers, distribution system operators or market participants engaged in aggregation;

(c) are financially responsible for the imbalances they cause in the electricity system; to that extent they shall be balance responsible parties or shall delegate their balancing responsibility in accordance with Article 5 of Regulation (EU) 2019/943;

(d) with regard to consumption of self-generated electricity, citizen energy communities are treated like active customers in accordance with point (e) of Article 15(2);

(e) are entitled to arrange within the citizen energy community the sharing of electricity that is produced by the production units owned by the community, subject to other requirements laid down in this Article and subject to the community members retaining their rights and obligations as final customers.

 

For the purposes of point (e) of the first subparagraph, where electricity is shared, this shall be without prejudice to applicable network charges, tariffs and levies, in accordance with a transparent cost-benefit analysis of distributed energy resources developed by the competent national authority.

 

4.Member States may decide to grant citizen energy communities the right to manage distribution networks in their area of operation and establish the relevant procedures, without prejudice to Chapter IV or to other rules and regulations applying to distribution system operators. If such a right is granted, Member States shall ensure that citizen energy communities:

(a) are entitled to conclude an agreement on the operation of their network with the relevant distribution system operator or transmission system operator to which their network is connected;

(b) are subject to appropriate network charges at the connection points between their network and the distribution network outside the citizen energy community and that such network charges account separately for the electricity fed into the distribution network and the electricity consumed from the distribution network outside the citizen energy community in accordance with Article 59(7);

(c) do not discriminate or harm customers who remain connected to the distribution system.

 

Article 38(2)

 

Closed distribution systems shall be considered to be distribution systems for the purposes of this Directive. Member States may provide for regulatory authorities to exempt the operator of a closed distribution system from:

(a) the requirement under Article 31(5) and (7) to procure the energy it uses to cover energy losses and the non- frequency ancillary services in its system in accordance with transparent, non-discriminatory and market-based procedures;

(b) the requirement under Article 6(1) that tariffs, or the methodologies underlying their calculation, are approved in accordance with Article 59(1) prior to their entry into force;

(c) the requirements under Article 32(1) to procure flexibility services and under Article 32(3) to develop the operator's system on the basis of network development plans;

(d) the requirement under Article 33(2) not to own, develop, manage or operate recharging points for electric vehicles; and

(e) the requirement under Article 36(1) not to own, develop, manage or operate energy storage facilities.

 

 

 

 

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 (recast), Recitals 26, 70, 71, Article 2(16), Article 22

 

Recital 26

 

Member States should ensure that renewable energy communities can participate in available support schemes on an equal footing with large participants. To that end, Member States should be allowed to take measures, such as providing information, providing technical and financial support, reducing administrative requirements, including community-focused bidding criteria, creating tailored bidding windows for renewable energy communities, or allowing renewable energy communities to be remunerated through direct support where they comply with requirements of small installations.

 

Recital 70

 

The participation of local citizens and local authorities in renewable energy projects through renewable energy communities has resulted in substantial added value in terms of local acceptance of renewable energy and access to additional private capital which results in local investment, more choice for consumers and greater participa­tion by citizens in the energy transition. Such local involvement is all the more crucial in a context of increasing renewable energy capacity. Measures to allow renewable energy communities to compete on an equal footing with other producers also aim to increase the participation of local citizens in renewable energy projects and therefore increase acceptance of renewable energy.

 

Recital 71

 

The specific characteristics of local renewable energy communities in terms of size, ownership structure and the number of projects can hamper their competition on an equal footing with large-scale players, namely competitors with larger projects or portfolios. Therefore, it should be possible for Member States to choose any form of entity for renewable energy communities, provided that such an entity may, acting in its own name, exercise rights and be subject to obligations. To avoid abuse and to ensure broad participation, renewable energy communities should be capable of remaining autonomous from individual members and other traditional market actors that participate in the community as members or shareholders, or who cooperate through other means such as investment. Participation in renewable energy projects should be open to all potential local members based on objective, transparent and non-discriminatory criteria. Measures to offset the disadvantages relating to the specific characteristics of local renewable energy communities in terms of size, ownership structure and the number of projects include enabling renewable energy communities to operate in the energy system and easing their market integration. Renewable energy communities should be able to share between themselves energy that is produced by their community-owned installations. However, community members should not be exempt from relevant costs, charges, levies and taxes that would be borne by final consumers who are not community members, producers in a similar situation, or where public grid infrastructure is used for those transfers.

 

Article 2(16)

 

’renewable energy community’ means a legal entity:

(a) which, in accordance with the applicable national law, is based on open and voluntary participation, is autonomous, and is effectively controlled by shareholders or members that are located in the proximity of the renewable energy projects that are owned and developed by that legal entity;

(b) the shareholders or members of which are natural persons, SMEs or local authorities, including municipalities;

(c) the primary purpose of which is to provide environmental, economic or social community benefits for its shareholders or members or for the local areas where it operates, rather than financial profits.

 

Article 22 Renewable energy communities

 

1.Member States shall ensure that final customers, in particular household customers, are entitled to participate in a renewable energy community while maintaining their rights or obligations as final customers, and without being subject to unjustified or discriminatory conditions or procedures that would prevent their participation in a renewable energy community, provided that for private undertakings, their participation does not constitute their primary commercial or professional activity.

 

2.Member States shall ensure that renewable energy communities are entitled to:
(a) produce, consume, store and sell renewable energy, including through renewables power purchase agreements;
(b) share, within the renewable energy community, renewable energy that is produced by the production units owned by that renewable energy community, subject to the other requirements laid down in this Article and to maintaining the rights and obligations of the renewable energy community members as customers; (c) access all suitable energy markets both directly or through aggregation in a non-discriminatory manner. 3.Member States shall carry out an assessment of the existing barriers and potential of development of renewable energy communities in their territories.

 

4.Member States shall provide an enabling framework to promote and facilitate the development of renewable energy communities. That framework shall ensure, inter alia, that:
(a) unjustified regulatory and administrative barriers to renewable energy communities are removed;
(b) renewable energy communities that supply energy or provide aggregation or other commercial energy services are subject to the provisions relevant for such activities;
(c) the relevant distribution system operator cooperates with renewable energy communities to facilitate energy transfers within renewable energy communities;
(d) renewable energy communities are subject to fair, proportionate and transparent procedures, including registration and licensing procedures, and cost-reflective network charges, as well as relevant charges, levies and taxes, ensuring that they contribute, in an adequate, fair and balanced way, to the overall cost sharing of the system in line with a transparent cost-benefit analysis of distributed energy sources developed by the national competent authorities;
(e) renewable energy communities are not subject to discriminatory treatment with regard to their activities, rights and obligations as final customers, producers, suppliers, distribution system operators, or as other market participants;
(f) the participation in the renewable energy communities is accessible to all consumers, including those in low-income or vulnerable households;
(g) tools to facilitate access to finance and information are available;
(h) regulatory and capacity-building support is provided to public authorities in enabling and setting up renewable energy communities, and in helping authorities to participate directly;
(i) rules to secure the equal and non-discriminatory treatment of consumers that participate in the renewable energy community are in place.


5. The main elements of the enabling framework referred to in paragraph 4, and of its implementation, shall be part of the updates of the Member States' integrated national energy and climate plans and progress reports pursuant to Regulation (EU) 2018/1999.


6. Member States may provide for renewable energy communities to be open to cross-border participation.


7. Without prejudice to Articles 107 and 108 TFEU, Member States shall take into account specificities of renewable energy communities when designing support schemes in order to allow them to compete for support on an equal footing with other market participants.

 

 

 

 

chronicle

Energy community - regulatory chronicle

  

 

 

 

25 June 2019

 

Regulatory Aspects of Self-Consumption and Energy Communities, CEER Report, Customers and Retail Markets and Distribution Systems Working Groups, Ref: C18-CRM9_DS7-05-03

 

 

 

 

IMG 0744

    Documentation    

 

 




Directive (EU) 2019/944 of the European Parliament and of the Council of 5 June 2019 on common rules for the internal market in electricity (recast), Article 2(11), Article 16, Article 38(2), Recitals 43 - 47

 

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 (recast), Article 2(16), Article 22, Recitals 26, 70, 71



 

 

 

 

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    Links    

 

 

 

 

http://www.eastonenergygroup.org/

https://www.eon.se/en_US/samhaelle---utveckling/local-energy-systems/we-are-renewing-simris.html

https://www.localenergy.scot/media/42447/Udny-Case-Study.pdf

https://www.owensquare.coop/

http://regengower.co.uk/

http://www.energylocal.co.uk/cyd-ynni/

http://www.isleofeigg.org/eigg-electric/

Self-generation

 

 

 

 

 

 

Last Updated on Monday, 30 December 2019 20:16
 

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