Europe is leading the way in Collective Energy Consumption – now the rest of the world must follow
It’s two years since Europe legalised collective self-consumption of energy and things are starting to move fast. Find out where it’s at and why the rest of the world must start to follow suit sooner rather than later.
By Scott Kessler
Sharing energy from local renewable resources not only makes sense, it’s essential for the goal of carbon neutrality in 2050 – and Europe is well ahead of the rest of the world on this one.
For the average utility customer, owning and managing their own individual solar panel is simple right now. Just install the panel, use the energy it produces and either sell excess back to the grid or buy in extra if you don’t produce enough.
Now imagine a collection of panels on top of an apartment building, collectively owned by the people that live there. In a sensible world, the same situation would apply – just collectively. So, ANY resident could buy energy produced on their rooftop from the collective and if any excess energy was produced or additional energy was required, it would be managed through a central meter with a single retailer.
Now imagine that same situation for a housing complex, where every house has its own solar panel on its roof and a battery in the garage; or a commercial industrial park that does the same, perhaps even with its energy consuming devices controlled by a building automation system that determines when to use grid energy and when to reduce energy use on site.
Collective self consumption (CSC) is what the world is moving towards, and that’s why it is one of the most important mechanics being talked about in the energy industry right now.
In these new scenarios, existing electricity product offerings no longer apply.
In all of these instances, energy usage would be managed within the collective, with consumption of local energy such as solar or battery and price-influenced demand shifting to reduce peaks preferential to buying in energy from afar.
By using local wires, rather transporting energy over long distances, it would be far more financially beneficial for the residents or industrial building owners to do local trades before reaching out to an external supplier.
And once it is all balanced in the community, if there is any excess generation, the revenue made through the sale of that energy back into the wider grid would be shared by the collective.
BENEFITS AND CHALLENGES
One of the major benefits of collective self consumption is that it reduces the use of the long-distance transmission grid and consequently reduces the transportation costs of energy.
It also, crucially, has the potential to reduce peaks in usage by encouraging consumers to change their behaviors to maximize the self-consumption rate.
The physical constraints of the grid, such as current and voltage limits, need to be adjusted to avoid network constraints and a market that uses price signals to match consumption to production needs to be put in place, with the costs of this service built in to this pricing.
The problem is, it’s not that simple.
What if one person doesn’t use any of the energy and another uses lots? How does it all get measured and balanced within that local network? Who gets paid what? How is it all managed? And who covers the costs of management?
Right now, policy makers around the world are rapidly trying to work out how to deal with that.
In 2018, the EU revealed the Clean Energy Package, which recognized the CSC model for the first time and made the term Renewable Energy Community (REC) a legal entity. These RECs are authorized to produce, consume, store and sell renewable energy produced by the distributed energy resources (DERs) within the community AND to share that energy within the community.
That legislation came after two years of intense negotiations – but even now, it’s not quite all cut and dried.
One of the most challenging aspects of it all is grid tariffs.
It’s ok when energy is shared within a building, because it’s the building’s own wiring and it’s own management system that takes the strain. But as CSCs begin to expand further afield, when they contain a number of individual buildings connected by the distribution wires used by the traditional grid and managed by independent companies, that it becomes complicated.
Compensation needs to be made for the cost of that local infrastructure, but there are also benefits to the grid from local communities using CSC. Greater reliance on local energy reduces reliance on long distance sources, cutting transmission losses and reducing investment required to manage the wider grid.
Spreading those costs accurately and fairly is something that needs a lot of work – but at the core is a requirement for transparent information about energy flows, the physics of the grid.
That’s where new technologies like LO3’s Pando platform, which enables local energy marketplaces for utilities and retailers, come into play.
By monitoring, logging and sharing data on the production and consumption of all these local resources, Pando can automatically manage energy flows to ensure all those involved in a CSC scheme are suitably compensated.
Further, it also makes it possible to implement market logic and enable communities to achieve a variety of optimization results – whether that be optimizing for carbon, cost, or comfort.
EUROPE LEADING THE WAY
So where are we at with it all?
Well, in Europe there is a long history of local residents coming together to form cooperatives that manage local networks and generation. And increasing numbers of countries are formalizing it into law.
A report funded by the EU and completed in June set out the different approaches to CSC so far:
Currently, Austria, Belgium, Germany, Spain, France, Greece, Slovenia and Switzerland have all introduced laws permitting CSC, while Portugal and Luxembourg are also working towards regulatory frameworks.
All except Greece specify the CSC must be restricted to a local area – such as distance or a specific transformer station. And all apart from Slovenia, Spain and Belgium state that the CSCs must be run by an official electricity supplier or must itself become one.
In most cases, CSCs are restricted to multi-family houses or to mixed use developments with offices and/or small to medium-sized enterprises (SMEs). In some places the allowance has been expanded to allow connections between different individual buildings.
In 2017, Austria, Germany and France became the first to permit CSC laws. Austria began by allowing it in private and commercial buildings and, next year, will extend that to energy communities. Germany already allows energy communities CSCs up to 1MW. In France, a contract is required between the DSO and a central legal entity that represents the different participants and determines the sharing scheme between them.
In 2018, Greece and Switzerland rolled out their laws. Greece now allows CSCs in energy communities up to 1MW while Switzerland allows CSCs that exceed 100MWh per year to choose their electricity provider, which is not normal in that country.
In 2019, new CSC laws were passed in Spain, Belgium and Slovenia. Spain allows CSCs by groups of apartment owners or in industrial estates. Belgium, or more specifically Wallonia, permits CSCs within a local perimeter anywhere downstream of one or more local transformers. And Slovenia permits CSCs in multi apartment buildings and communities, both of which must run behind a single metering point connecting to the wider grid.
LO3 Energy has been at the heart of these developments, supporting EU discussions and speaking with many regulatory bodies around Europe to help shape the rules we are now seeing coming through.
With regulatory evolution starting to roll around the world, we are developing projects that are bringing CSC to commercial reality. And in the US, we are now involved in several commercially focused projects aiming to help bring the country’s progress in collective self consumption up to speed with Europe and the rest of the world.
We are working with well known retailers and utilities, who recognize the need to make progress – and given the momentum, there is clearly huge potential to develop and grow this area in the same way as in Europe.