A fairer energy system with energy communities

Energy communities, fostering decentralised, renewable supply, need support with their additional social responsibilities.

Energy communities—through which citizens can organise the production, consumption, storage, sharing and selling of energy—are increasingly emerging as an opportunity to shift toward a more decentralised, renewable-based and inclusive energy system.

Since 2018, the European Union has been driving the energy-community movement. Introducing ‘renewable energy communities’ (REC) and ‘citizen energy communities’ (CEC) in legislation has allowed the bloc to create a legal status for new actors in the energy market, operating locally and beyond profit-making.

Recent legislative developments, linked to the ‘Fit for 55’ package and the RePowerEU plan, have confirmed the EU’s ambition to promote smaller, decentralised and citizen-led energy-production systems. For instance, accelerating permits for renewable projects and rendering solar installations on buildings mainstream could be a game-changer for REC working with solar panels.

The EU Solar Energy Strategy introduced in May last year, though not legally binding, sent out another strong signal. It foresees REC in all municipalities of 10,000 inhabitants and above by 2025, with an Energy Communities Facility as a dedicated fund.

Unlike conventional market actors, energy communities are recognised as driven by a purpose, defined by the EU legislation as primarily to ‘provide environmental, economic, or social community benefits rather than financial profits’. Their integration into a liberalised market where other actors do not have these obligationsis bound to create tension. Member states are therefore required by EU law to establish enabling frameworks that address the specific needs and goals of energy communities and thus allow them to engage on a level playing-field.

The EU is right to highlight energy communities’ wider contribution to society. These projects have the potential to strengthen social cohesion, for instance by creating value at local and regional level and by sharing some of their profits or energy savings with the most vulnerable in their community. A community energy project might generate two to eight times more local revenue than one carried out by an external actor, since they are more likely to distribute their profits locally than large private initiatives.

Reaching the vulnerable

Examples of energy communities fulfilling such potential and tackling energy poverty abound across the EU. Sun4All, an EU-funded project, uses the revenues produced through the generation and sale of renewable energy to reduce the energy bills of vulnerable households. Enercoop in France introduced in 2019 a micro-donation scheme from customers’ energy bills to support local programmes to mitigate energy poverty.

Yet, looking at the bigger picture, most energy communities struggle to reach vulnerable groups and only a few redistribute profits to energy-poor households. Members tend to be homeowners with incomes sufficient to afford the membership and the investments in energy efficiency. Nor does being a member of an energy community systematically result in lower energy prices compared with the market, a red line for most on lower incomes.

Reaching out to vulnerable groups—who may not even be aware of energy communities—requires considerable time and resources. Yet many energy communities rely on volunteers. Hence size makes a difference: the more members an energy community possesses, and so the greater the available financial and human resources, the more likely it is to engage vulnerable groups.

Awareness also matters. Lack of understanding among energy-community members of the needs and living situations of vulnerable groups is likely to reproduce prevailing biases and injustices. Linking with local authorities and non-profit organisations can provide entrées to these groups and bridge the awareness gap, on both sides.

Appropriate support

Energy communities thus cannot be expected to comply with their additional responsibilities without appropriate support. Much effort is needed at national and local levels but the EU can and must also support energy communities in fulfilling their social role. First, the EU should require member states to adapt their enabling framework, so that energy communities are incentivised to act for energy justice, such as by attracting lower-income households via reduced membership fees and through collaboration with social-housing providers and social services.

Secondly, EU legislators should make support from the Energy Communities Facility conditional on redistribution of the benefits from energy communities, locally and socially, according to a set of criteria: number of low-income households involved, number of local businesses and/or associations involved, share of profits or energy savings distributed within the community and so on. And the EU should encourage member states to earmark or increase funding for energy communities themselves, as well as for municipal staff involved in fostering the participation of vulnerable households—using for instance the RePowerEU chapter in their Recovery and Resilience Plans.

Finally, the European Commission should ensure member states report on how they plan to support the social contribution of energy communities in their national energy and climate plans, especially given these are under review.

The EU is creating momentum for member states to take ownership of energy communities, but these citizen-led initiatives need more support to fulfil their overarching goals of social and territorial cohesion. That said, the role and support allocated to energy communities should by no means be used as an excuse to replace structural measures by European, national and local policy-makers—in particular as energy poverty across Europe is on the rise.