Energy Communities

While dealing with the topic of energy cooperatives, several other terms come to mind, such as energy communities, renewable energy communities (RECs), citizens energy communities (CECs), which will first be briefly introduced in order to be able to classify them later.

First, a fundamental distinction: Energy communities and energy cooperatives are both collaborative initiatives aimed at managing and promoting sustainable energy, but they differ in their structure, scope, and operational focus.

In general an …

• … energy community is a collaborative initiative where individuals, households, businesses, and/or local organizations come together to produce, manage, and consume energy collectively. These communities aim to enhance local energy security, promote the use of renewable energy sources, reduce carbon emissions, and empower members by giving them more control over their energy resources. Energy communities can take various forms and operate under different structures, including cooperatives, municipal projects, and informal associations.
• … energy cooperative is a member-owned and member-governed organization that produces, distributes, and/or manages energy resources for the benefit of its members. These cooperatives operate based on cooperative principles, emphasizing democratic decision-making, community involvement, and equitable distribution of benefits. Energy cooperatives can be involved in various aspects of the energy sector, including generation, distribution, and retailing, and they often focus on renewable energy sources such as solar, wind, and biomass.

The Covenant of Mayors – Europe defines citizen cooperatives as follows:

“Energy cooperatives refer to a business model where citizens jointly own and participate in renewable energy (RES) or energy efficiency (EE) projects. In energy cooperatives citizens are involved in both the decision making and financial & economical participation. All citizens are eligible to participate. After purchasing a cooperative share and becoming a member or co-owner of local RES and EE projects, members share in the profits and often are given the opportunity to buy the electricity at a fair price. In addition, members can actively participate in the cooperative: they can decide in what and where the cooperative should invest, and are consulted when setting the energy price.” (CoM)

Following CEE Bankwatch & REScoop.eu “An energy community is first and foremost an organisational concept based around three main principles:

• It is owned and controlled by private consumers, municipalities and/or small and medium-sized enterprises (SMEs). It is usually controlled through a democratic governance mechanism.
• It is open and guarantees voluntary participation. All participants should be welcome and enjoy similar governance rights.
• It is primarily dedicated to social and environmental benefits, rather than financial profits.

To put it briefly, an energy community is a group of citizens cooperating on an energy transition project. The most commonly used model is citizens collectively owning renewable energy systems, such as wind turbines and solar photovoltaics. These communities always take a collective approach with democratic governance, irrespective of what legal form, business model, or technologies are used.” (CEE 2022, p2)

The main difference between energy cooperatives and energy communities lies in the legal status that cooperatives have.

Anchoring in EU policy

“Through the Clean energy for all Europeans package, adopted in 2019, the EU introduced the concept of energy communities in its legislation, notably as citizen energy communities and renewable energy communities.

More specifically, the Directive on common rules for the internal electricity market (EU/2019/944) aims to support the uptake of energy communities. It introduced new rules to enable active consumer participation, individually or through citizen energy communities, in all markets, by generating, consuming, sharing or selling electricity, or by providing flexibility services through demand-response and storage.

The revised Renewable energy directive (2018/2001/EU) strengthens the role of renewables self-consumers and renewable energy communities. EU countries should enable this through available support schemes, ensuring energy communities can participate on equal footing with larger participants.” (Energy communities (europa.eu)

In brief:

• Energy Communities and Citizen Energy Cooperatives (or Energy Cooperatives) are groups of individuals or organizations that collaborate to produce, manage, and distribute renewable energy locally. These initiatives empower communities to reduce reliance on large energy corporations and promote sustainability.
• Energy Cooperatives operate democratically, with members owning and controlling the energy projects collectively. By pooling resources, they can invest in renewable technologies such as solar, wind, or biomass, making clean energy more accessible and affordable for local participants.