Adoption of energy community legislation across Europe is opening the door for new opportunities.

Traditional energy networks since the early days of Edison, were very much a ‘top down’ system – with energy flowing in one direction from large power plants to consumers.  That paradigm has been shifting noticeably and rapidly following trends of decarbonization and self-sufficiency. This is in part thanks to rapidly and continuously declining prices of solar panels.

The trend of installing solar for household users has become commonplace – especially where subsidies are present, however the economics of solar have improved so much that, especially in countries with a lot of sunlight, subsidies aren’t needed. Financing schemes such as PPAs allow for solar panels to be financed at a lower cost than electricity that comes from traditional retailers. Rooftop solar now accounts for almost 70% of all solar installations as of the end of 2023.

We are on the verge of a major shift in the rooftop solar market however, as renewable energy community legislation continues to adapt and grow, and markets are maturing across the European continent. It is now possible (and profitable!) in many EU states to share and sell locally produced renewable energy within community structures of varying shapes and sizes.

This is a profound shift in the way that solar will be financed in the future – whereas historically rooftop solar projects have been designed to cover self-consumption the evolution to a community or collective-self consumption model significantly improves the economics of rooftop solar in a variety of ways. Probably the most important way in countries such as Portugal is the reduction in grid-fees for renewable energy communities – in cases where high or medium voltage networks are not used, which is common in locally shared energy those costs are avoided. This is important because no one really ‘loses out’ here. The grid benefits from reduced traffic, because they are limiting congestion and will avoid the need to install additional capacity which will be increasingly necessary in the coming years due to adoption of EVs and Heat pumps.

The huge increase in solar panel installations following the Russian invasion of Ukraine and resulting energy crisis has come with its own set of problems. Solar is an intermittent source of energy and not directly tied to consumption. In some cases, issues with grid-congestion, and market price swings have occurred. This is an issue that is mitigated in the renewable energy community model with the introduction of self-balancing energy communities. New technology which can manage multi-site energy and balance use on a community level is able to efficiently manage energy in local networks, increase grid reliability and stabilize energy prices.

Renewable energy communities solve the issue of too much intermittency by creating local marketplaces where rooftop solar producers can effectively create local marketplaces and sell the energy directly to their neighbors. This bypasses the wholesale market – which is how physics actually works – electrons, naturally follow the path of least resistance. In a localized grid, where a solar power generator is near potential consumers, the electricity produced will naturally flow to the nearest point of demand.

It’s this principle which shows how locally managed energy communities shine – it’s better to sell energy directly to your neighbors rather than the bulk system because of the fundamental laws of physics – and markets should be structured in a way that reflects that.

One of the challenges of such a system comes in managing all the resulting transactions, what energy is self-consumed, what energy is traded within the community and what if any is still offered to the bulk power system? It’s a complex accounting problem that hasn’t existed before. Systems like Cleanwatts OS – that centralize and simplify community transaction as well as perform self-balancing on the community level are the solution to managing and solving that complexity.

As more consumers join local power networks through platforms like Cleanwatts – market forces and price competition could lower energy prices for everyone. The cost powering gadgetry like EVs, and heat pumps – will also fall, making travel and heating & cooling more affordable simply by adhering to the laws of physics and the free market.

The global shift towards decarbonization will continue to boost the uptake of rooftop solar systems. This trend is likely to be driven further by the growing popularity of renewable energy communities. These communities not only facilitate energy savings but also serve as an additional income stream for those who establish them. The immediate benefit of this model is more clean energy at a neighborhood level, which is a significant plus. Additionally, advancements in energy efficiency and the resulting reduction in grid congestion will lead to lower energy costs. This impact, although gradual, will be felt across the entire energy system.