Last June, the Council of European Energy Regulators (CEER) published an interesting study on collective self-consumption from the perspective of regulators. This study, based on the analysis of several cases of collective self-consumption across Europe, encourages the development of these initiatives but stresses the need to put in place a transparent and reliable regulatory framework to ensure the durability of these new models of consumption and ensure equity among all energy consumers.
A model supported by Europe
While self-consumption is allowed in most European countries, Europe has decided to go a step further by formally establishing a framework for collective self-consumption during the revision of the Directive on the promotion of renewable energies in December 2018. The recent development of the shared economy, which has fostered the emergence of new energy consumption patterns based in particular on the sharing of electricity between producers and consumers, has led Europe to introduce the concept of renewable energy community (REC) in the regulation to provide it with a legal entity.
In this context, the RECs are authorised on the one hand to produce, consume, store and sell renewable energy and, on the other hand, to share, within the community, the renewable energy produced by the renewable energy units owned by the community. Europe believes that collective self-consumption and the resulting models will contribute to the goal of carbon neutrality in 2050, participate in the democratisation of energy systems and promote local economic and social development.
Various models of collective self-consumption
The lack of a clear legal framework in the different European countries has favored the emergence of multiple and specific models of collective self-consumption within pilot initiatives or through an existing legal framework (case in France).
Following its analysis of several cases of collective self-consumption in Europe, the CEER categorized the projects into 3 categories:
- Community owned generation assets : This is the most common case. In this case, the renewable energy produced is not self-consumed by members of the community but resold to a supplier. Revenues are shared among members or reinjected into other renewable production projects. Typically, citizen cooperatives for renewable energy production fall within this framework.
- Virtual sharing over the grid : Here, the community produces and shares renewable energy between its members through the public electricity grid. This type of sharing is organised by a common energy supplier that is responsible for matching production and consumption to maximise self-consumption rate.
- Sharing of local production through community grids : In the latter case, the energy produced is physically shared on a private network owned by the energy community. This is the case of the microgrid. Historically, this model has been developed on disconnected islands of the continent. But initiatives based on this model have also emerged in regions with a public network, motivated by the desire to produce and consume energy locally and reduce transport costs.
The challenges of setting up energy communities
The wild European definition to the notion of a renewable energy community obliges European countries to set up a legal framework to guide the development of these new consumption models that are shaking up the traditional supplier-client relationship. Indeed, the energy community could play the role of supplier, aggregator and even in some cases network managers.
The CEER identifies several constraints to be raised in order to secure the model, the main are summarised below:
- In-depth knowledge of grid operation:
One of the main advantages advanced in (collective) self-consumption projects is the reduction in the use of the public grid and consequently the reduction of distribution costs.
However, according to the CEER, these distribution costs will only decrease if users are encouraged to change their consumption behaviours and if their consumption is actively managed to maximise self-consumption rate and reduce peaks on the grid. This task requires a thorough knowledge of grid’s technical current and voltage limits adjusted for real-time losses current and to avoid network constraints. It also requires that participants in the system receive price signals to match their consumption to production.
- Coordination between the local supplier and the « back-up »:
Shared local production will provide a part of a customer’s energy needs but in most cases a back-up supplier will still be needed to meet demand when the local production is not generating.
This implies that the same delivery point could be supplied by several sources:
– The local supplier (energy community);
– The back-up provider (historical supplier);
– The energy purchased through a virtual sharing platform.
In this case, the balancing issue must be addressed. The challenge concerns the allocation of energy volumes between the local supplier, the back-up provider and the virtual platform. According to the CEER, if the balancing must be managed by the back-up provider, two cases may appear:
– Or the back-up supplier who will probably provide energy when it is the most expensive, will also have to charge the energy bill with balancing service to the customer member of the energy community. As a result, the cost of the residual kWh will increase.
– Either the back-up supplier will be constrained by the authorities not to charge the additional cost of balancing, which will therefore lead to an increase in the average cost of energy on the public grid, which will have to be supported by all customers.
The risk of creating a significant difference between members of an energy community and other consumers is important.
- The freedom of choice for consumers :
Europe has inforced in its Renewable Energy Promotion Directive that every consumer must remain free to join or not an energy community. For example, an owner of an apartment, located in a building with a PV installation shared between the different owners, must retain the freedom to choose between the community self-consumption model or a traditional energy supplier. For example, contracts with energy communities will have to guarantee participants their right to change supplier freely. Therefore, the business model of the energy community must be flexible enough to address the risk of the entry and exit of participants.
- Ensuring the long-term financial sustainability of microgrids:
Microgrids are designed to manage local energy demand and maximise the use of local resources. This has many advantages at the local level: reducing the pressure on the public grid, reducing the need for new infrastructures and reducing losses and increasing the resilience of the local grid.
The challenge for microgrids is to ensure that the local grid is operated at efficient operating costs and to ensure the financial and technical viability of the local grid in the long term. Indeed, the operator of the microgrid will, in the long term, face investments to ensure the operation of the grid. Replacing a transformer can be a significant cost if shared among a limited number of users. The energy community will then have to provide maintenance costs for users who take into account long-term financial needs but also monitoring costs, network protection costs (cyber security), etc. The business model must here also be strong enough to deal with the exit of one of the users.
The need of a legal framework
The success of this initiative will depend on the ability of each European country to develop a framework that ensures the sustainable development of energy communities. According to the CEER, this type of model should be clearly encouraged when community activities bring benefits, such as reducing network costs.
Where are we in Wallonia?
At the level of community owned generation assets, many citizen cooperatives for the production of renewable energy exist in Wallonia. Most of them are grouped together in RESCOOP Wallonia, which brings together 15 cooperatives that produce electricity mainly from wind turbines, photovoltaic systems, biomass and biomethanisation. All these cooperatives include 10,700 cooperators and raised € 15.4 million of capital. These cooperatives also created the cooperative electricity supplier, COCITER. In 2018, the cooperative supplier distributed 40 million kWh, enough to power 11,500 households (3500 kWh / household).
Alongside citizen initiatives, there are several pilot initiatives that are developed in partnership with the grid operators. We can mention the case of Merygrid, project carried by RESA, which is a microgrid located in the town of Esneux, in the Liege region. This network, connected to solar panels, a hydroelectric turbine and a storage unit, supplies 3 companies. An artificial intelligence system (EMS) manages the optimisation of the microgrid and should allow a saving of 15% on the energy bill of the users. This case corresponds to the sharing of local production through community grids, presented above.
A second initiative, E-Cloud, carried by ORES, exists in Tournai region where a virtual micro-network has been set up within an industrial zone. Common production units are virtual shared into a corporate community. Unlike the first case, companies remain connected to the public distribution network. The exchange of energy is carried out within a virtual platform. This model corresponds to the virtual sharing over the grid, presented above.
These two pilot projects were authorized by the CWaPE, Walloon Energy Commission, on the condition that these projects met the following criteria :
– Project aimed to study the implementation of optimal technological solutions for the Walloon electricity market (energy efficiency, demandside flexibity, management of decentralised energy production, promotion of local self-consumption) ;
– Present an innovative character;
– Not to have as main objective to evade all forms of taxes and charges of which the participants would be indebted if they were not in the scope of the project;
– Present a replicable character.
From a regulatory point of view, Wallonia will rely on the various pilot projects to develop legislation on the development of energy communities. At present, the legislator is moving towards the option of virtual sharing over the grid.