IEA: Empowering people – the role of local energy communities in clean energy transitions

Digital platforms and tools are making it easier to set-up cooperatives, engage stakeholders, make investments and exchange electricity. An increasing number of countries are allocating significant funds to support community-based clean projects. The Italian National Recovery and Resilience Plan has allocated EUR 2.2 billion 1 to support energy communities and self-consumption, while the USD 370 billion United States Inflation Reduction Act of 2022 offers additional financial incentives for community-based clean energy projects. The IEA recently organised discussions to explore and share experiences about the role that energy communities can play in supporting clean energy transitions.

With ever growing pressure to accelerate decarbonisation and to mitigate impacts of the energy crisis on households and businesses, community-based energy communities can help address numerous challenges faced by power systems, including losses, grid congestion and the need to accommodate growing peak demand. Recently, the IEA estimated that one gigatonne of carbon dioxide emissions come from grid losses, equal to almost 3% of current global energy-related CO2 emissions. Local community-based generating, sharing and consuming of electricity can significantly avoid these losses and enhance energy efficiency. For example, in northern Perth in Australia, a battery resource shared by 119 households resulted in collective savings of over AUD 81 0002 during a five-year period. The battery also helped ease the strain on the grid by enabling an 85% reduction in consumption of electricity from the grid at peak times for participating households. The energy community of Magliano Alpi in the Italian Alps developed tools to forecast energy generation and demand and share electricity, enabling the community to more effectively use their solar photovoltaic systems and cover 35% of their electricity needs. Increased reliance on their own generation resources during peak demand periods alleviated grid stress and helped defer expensive infrastructure upgrades.

Providing customers with access to their energy production and consumption data is crucial to the success of energy communities, raising awareness about the impacts of individual behaviour and underscoring the economic benefits of being part of the community. Software based on machine-learning is also widely used to optimise energy efficiency and deliver financial savings. Recently, peer-to-peer digital trading on blockchain platforms have been tested to enable citizens to exchange energy within the community. Such initiatives foster collaboration and trust among prosumers and consumers. For example, in the Indian city of Lucknow, residents were able to sell their rooftop electricity production at 43% below the central market price through the use of digital tools, allowing other residents to benefit from local clean energy while also cutting their electricity bills.

Developed by people for people, local energy communities are an effective means of maximising socioeconomic empowerment. As they depend on trust, both within and outside the community, these systems involve and educate people who would otherwise be excluded or passive in clean energy transitions. More than this, they have become tools to help overcome historical societal inequalities in energy systems. For example, the RevoluSolar energy initiative was the first photovoltaic community founded in a Brazilian favela, enabling renewable energy access for 30 families. The community opted to re-invest the profits from the projects into charities and jobs training to tackle rising rates of local unemployment. This ability to determine where, how and to whom the revenues from the project are distributed, improved overall citizen welfare in the favela. Not only this, but it enabled the community to protect the citizens from rising energy prices.

Energy communities also help develop local value-chains, jobs, and skills. The Lyndoch residential community microgrid project, which interconnected over 30 homes via a tiered grid system (from household to household, to the village, to the national grid) was the first smart embedded residential rooftop microgrid in South Africa. The pilot project is co-owned and maintained by the utility (Eskom), but members of the community were taught and certified by industry to assume roles in the development, installation, maintenance, operation, and ownership of the energy system. Such initiatives help ensure the sustainability and longevity of projects while also demonstrating the value of enhancing citizen engagement in localised clean energy transitions.

Energy community models can be effective mechanisms to deliver clean energy transitions. They not only illustrate the benefits of place-specific interventions, but also highlight the added value of inclusive people-centred approaches. Better access to financing and support, regulatory reforms, and sharing of experiences could give communities around the world greater access to local, clean and affordable energy. For instance, the European Parliament has recently provided funding for the creation of an advisory hub and support service to help collect and disseminate best practices and provide technical assistance for community initiatives across the European Union. Further mapping of initiatives and benefits is underway as part of the IEA People-Centred Clean Energy Transitions Programme and the Digital Demand-Driven Electricity Networks Initiative (3DEN).

This work forms part of the Digital Demand-Driven Electricity Networks Initiative, supported by the Clean Energy Transitions Programme, the IEA’s flagship initiative to help energy systems worldwide move towards a secure and sustainable future for all.