Energy Communities – which models exist?

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The energy industry has been transformed in recent decades by the rapid development and spread of renewable energies and the subsequent more and more decentralised energy supply. These innovations, which are driving decentralisation, decarbonisation and digitalisation, include energy producers and consumers united in energy communities. How energy communities can be implemented and how they differ depends on various factors. Basically, energy communities can be divided into two different types:

  • physical community
  • virtual community

What is the difference between the different types of energy communities?

The main difference between the different types of energy communities lies in the way the electricity grid is used and in the accounting and billing of the generated and consumed energy. In the case of the physical community, a distinction can be made between collective self-consumption (private grid, e.g. neighbourhood or apartment building) and community self-consumption (private and public grid). The virtual community is often defined by its broader geographical context as a regional community. However, there are also other energy communities which are not based on the geographical proximity of their members – these types of energy communities are summarised as cloud communities. In summary, energy communities can thus be classified into four sub-types:
  • Collective Self-Consumption
  • Community Self-Consumption
  • Regional Community
  • Cloud Community

Physical Energy Communities

In this variant, there is a direct connection between the source of power generation and the consumption points using that electricity. This is because decentrally generated electricity should not simply be fed into the grid and treated like any other kilowatt hour of electricity. Rather, the direct geographical proximity is intended to create a simultaneity of generation and consumption at the lowest grid level and thus lead to a relief of the overall system.

Collective Self-Consumption

Energy communities that use a private grid infrastructure (“private grid only”) are called Collective Self-Consumption. The participants, mainly “consumers”, are located behind the common grid connection point and use the locally generated electricity. Other features are:

  • a generation plant (often PV) supplies the community within the private grid.
  • the power generators supply the community jointly, i.e. there is usually no individual self-consumption for a prosumer
  • Electricity surplus and additional power demand is exchanged with the public grid.
  • The community maximises self-consumption or minimises grid consumption via an appropriate measurement concept and, if necessary, optimisation algorithms.
  • A battery storage system and electric vehicles can be used as local flexibilities.
  • The incentive to participate in such a private community will be strengthened through appropriate tariffs, e.g. a tenant electricity tariff.
Examples include the tenant electricity models known on the German market, neighbourhood projects and area networks in the commercial sector. From an international perspective, there are also similar models of energy communities with a private grid structure, which are generally oriented towards the Renewable Energy Directive (RED 2018/2001/EU) and Energy Market Directive, EMD, (EMD 2019/944/EU).

Community Self-Consumption

Community self-consumption also refers to local self-consumption communities that, in contrast to communities in the private grid, also use the public electricity grid. The aggregation, distribution and balancing of the energy takes place locally behind the grid transfer point (transformer station) at the low-voltage level. Further characteristics of this energy community are:
  • All participants are located on one grid level (behind the transformer station), where installed generation capacities and consumer loads are brought together.
  • The principle of optimisation applies as with the private community vis-à-vis the next higher grid level.
  • Incentive structures via special feed-in tariffs or reduced purchase prices can favour the design of these supply communities (cf. law on renewable energy communities in Italy).

Virtual Energy Communities

If a direct physical, grid-based connection between generation and consumption cannot be guaranteed, an energy community can still be created. We then speak of virtual communities. Decentralised producers and consumers are thus not bound to a common location, but are nevertheless optimised in comparison to electricity procurement outside the community. With virtual communities, we distinguish between a (classic) regional structure, as we know it from municipal utilities, for example, and a comprehensive and geographically unlimited implementation, so-called cloud communities.

Regional Communities

As the name suggests, a regional virtual community connects prosumers and consumers in a specific region. Providers of such supply communities are often local energy suppliers or municipal utilities that are further developing their product portfolio in the context of the energy transition. Appropriate tariff models are used to link prosumers and consumers into a community, who are then billed via periodic accounting of generation and consumption. There is no mandatory physical correlation to the electricity grid. A local community can emerge from a regional virtual community through appropriate metering concepts.

Cloud Community

A cloud or virtual community basically works like the regional virtual community in terms of implementation. Where the regional community is defined by geography, the overarching virtual or cloud community is based on other commonalities between the participants (common technical requirements or same types of hardware they use, e.g. home storage units). Providers of such energy communities are, for example, manufacturers of decentralised generation or storage technology, such as sonnen or SENEC.