Energy Communities: Customer-Centered, Market-Driven, Welfare-Enhancing?

By Fereidoon Sioshansi and David Robinson

Energy Communities explores core potential systemic benefits and costs in engaging consumers into communities, particularly relating to energy transition. The book evaluates the conditions under which energy communities might be regarded as customer-centered, market-driven and welfare-enhancing. The book also reviews the issue of prevalence and sustainability of energy communities and whether these features are likely to change as opportunities for distributed energy grow. Sections cover the identification of welfare considerations for citizens and for society on a local and national level, and from social, economic and ecological perspectives, while also considering different community designs and evolving business models.

• Defines and conceptualizes the energy community for the current generation of researchers and practitioners facing the energy transition
• Explores the main benefits and challenges in forming energy communities and to what extent they are welfare-enhancing
• Examines under what terms, conditions, regulations or policies energy communities can be beneficially and successfully organized and why
• Reviews the combination of business models and forms of organization which are conducive to economic feasibility and the commercial success of energy communities

• Language: English
• Publisher: Academic Press
• Release date: Jul 1, 2022
• ISBN: 9780323911399

Book preview

Introduction

Sabine Löbbe ¹

Fereidoon Sioshansi ²

David Robinson ³

¹ Reutlingen University, Germany      ² Menlo Energy Economics, United States      ³ The Oxford Institute for Energy Studies, United Kingdom

Traditionally, the power sector was organized from the top down: from large-scale and often distant generation to the end consumer, which was treated as the load to be served. The electricity system was load following, with dispatchable generation providing the flexibility needed to meet unpredictable demand while maintaining security of supply and system stability.

In today's world, three challenges require a reevaluation of the consumer's role:

• Distributed energy resources (DERs)—including generation, storage, heat pumps, and devices behind end-consumer meters—are growing rapidly. For example, distributed solar photovoltaic capacity is projected to grow from 2018 to 2024 by 150% (IEA, 2019), which will contribute to net power flows changing direction.

• Most of the energy produced close to or on consumers' sites is renewable and intermittent; it is fed into the grid stochastically. The resulting fluctuation needs to be managed, by the grid, by other producers or storage providers, or by the consumers themselves. The consumer might take responsibility for stability and security of supply by evolving from being a load to being a prosumer, a prosumager, and ultimately a provider of system services (see Sioshansi, 2019).

• The development of DERs is essential for the energy transition and citizens will be central to the development of those resources. However, DERs will involve important consumer investment decisions and changes in consumer behavior.

For these and other reasons, consumers start to question their traditional role as passive load, and regulation and policy must reflect the new role of active citizens. While the growth of DERs introduces complexity to the system, it also introduces new resources that can contribute to managing the same complexity.

Energy communities are one means to address these challenges, being themselves a possible institutional structure for organizing community energy, based on distributed resources and energy systems. As the World Economic Forum predicted (Burston, 2016), in 2030, individual and community energy generation contributes to more than 50 percent of the energy mix in developed countries, up from less than 5 percent in 2016. […] Politicians begin to see community energy ownership as the way to finally get citizens engaged in their energy future and to remove social and cultural barriers to the most affordable renewables.

To shape and support community energy, energy communities serve to integrate the consumer as an active part of the future energy system. Thus, as distributed generation, storage, and load management expand, the interest in energy communities increases. In customer-centered energy systems, just as with layers of an onion, the energy system needs to be redefined starting with the customer at the center. This transfers responsibilities to the end-consumer or to communities of consumers and those representing these stakeholders in the value chain. Worldwide, energy communities are emerging as part of the solution for a more sustainable, low-carbon, decentralized, resilient, and semi-independent energy systems.

Important challenges, however, need to be addressed to overcome hurdles to such a future. Energy communities have not been fully implemented at scale for a number of reasons including insufficient interest from consumers, technology that was not economically viable, and regulatory restrictions prohibiting viable business models from emerging. Moreover, as a number of chapters in this volume make clear, while the basic technology to do what is needed already exists, putting the pieces together and making them work at scale remains a challenge. However, as the political and regulatory support for energy communities grows, technology advances, and customers become more aware of and interested in local, ecologically sound alternatives and self-generation and consumption, the case for developing energy communities becomes more compelling. In this context, are energy communities going to play an important role in the future energy landscape? If so, what role, how, and when?

These questions inspired us to edit this book not knowing the answers when we started. The book presents a wide range of perspectives, some based on real case studies and others looking at emerging business models in different stages of maturity. Even more interesting, the volume reflects different—traditional and novel—perspectives and approaches from various disciplines and stakeholders, including policy makers, regulators, energy communities, technology providers, academics, as well as incumbent energy companies and new entrants providing services to energy communities.

As it turns out, the concept of energy communities is not new. On the contrary, they can be considered as the cradle of today's energy system, for electricity and gas. Homo sapiens probably formed communities when they settled—sharing all resources including energy, food, etc., within the community. In later stages, local leaders and politicians together with entrepreneurs ventured to bring energy services to communities, as Fig. 1 illustrates for the expansion of distribution lines to rural America. In many cases, the resulting organizations were the forebears of today's energy suppliers. However, to benefit from economies of scale and greater security of supply, most isolated local energy communities were eventually integrated into wider networks. Yet even today, many rural and municipal community-owned systems remain viable in the US, Europe, and