Energy communities (ECs) selling renewable electricity into markets face particular challenges related to supply and pricing.
As new players in energy markets, energy communities (ECs) aiming to deploy renewables often found it difficult to compete with bigger market players that could offer lower prices to end-users. In line with EU Directives and targets to boost the overall share of renewables, many Member States stepped in with new financial schemes to ensure a reliable return on investment.
Often, this took the form of feed-in tariffs (FiTs) or feed-in premiums (FiPs). In FiTs or FiPs, the government sets a fixed price that producers will receive from utilities or suppliers when the energy produced is sold into the grid. Knowing that they would receive a guaranteed price for each unit of energy they expected to produce allowed ECs to develop viable business models.
As demonstrated by the Inspiring Practice of France, this approach was effective for boosting shares of renewables in energy systems, including shares produced by ECs.
The changing nature of energy markets and energy policy
Over time, however, it became clear that setting fixed prices for renewable energy had some drawbacks. This was particularly true within electricity markets that are otherwise liberalised and in which prices change constantly. At times when a large gap emerged between market and set prices, governments often had to pay the difference to renewable producers, making the schemes costly.
Increasingly, energy regulations are being adjusted to replace such fixed remuneration schemes with renewables support schemes based on competitive bidding (e.g. tenders and auctions). Unfortunately, ECs face significant hurdles in accessing these support schemes. Complex procurement rules and the focus on securing the best value at the lowest price make it difficult for ECs to compete against larger commercial actors.[1]
ECs that produce energy can also sell to an external supplier, which then sells it on the wholesale market. In some cases, suppliers set the price at which they are willing to compensate production; in others, ECs and suppliers negotiate the price.[1]
Using EC revenues for energy solidarity
Any profits an EC makes from selling production (whether to the grid or to a supplier) are typically distributed among its shareholders. In turn, shareholders may take the decision to re-invest in expanding the project or launching another one. Once the upfront investment has been recovered, the higher revenues may open up opportunities to convince members to direct funding towards energy solidarity projects.
Click through for more information on steering EC revenues to support energy solidarity.
Click through for more blogs related to ‘ACT’.
- Hosting Energy Cafés
- Distributing Energy Efficiency or Cosy Kits
- Energy Advice Home Visits
- Home Visits for advice and quick fixes
- Local energy production, self-consumption and supply
- Production of renewable energy for self-consumption
- Energy sharing: an emerging approach to energy solidarity
- Retail supply of renewable energy
- Shared and Supported Self-Renovation
- CEES Partner highlights
[1] Energy Communities Repository (2024). Barriers and Action Drivers for the Development of Different Activities by Renewable and Citizen Energy Communities.