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What is a Renewable Energy Community? 
21 August 202310 minutes

The energy transition starts locally.

A Renewable Energy Community (REC) brings together local residents and organizations to generate, share and consume clean energy together. RECs enable communities to transition to clean, renewable energy while enjoying lower energy costs.

But exactly  what is a renewable energy community, how do they work, how are they created, who can join them? Find out everything you need in this blog!

Table of Contents: 

1. How do Renewable Energy Communities work?
2. What is the cost of establishing a REC?
3. Step-by-Step Guide to Creating a Renewable Energy Community
4. Benefits of Renewable Energy Communities
5. The need for decentralized power production
6. Getting Started Today!

1. How do Renewable Energy Communities work?

Renewable Energy Communities are made up of prosumers, who generate and use energy, and consumers, who consume energy.

Normally, a local organization with a large roof-space acts as the prosumer. It installs renewable energy assets like solar panels and produces a surplus of clean energy. The prosumer uses what it needs and shares the rest with members of the local community.

Every member of the energy community benefits from lower electricity prices and greater energy independence, all while protecting the environment.

How are Renewable Energy Communities formed? 

Renewable energy communities bring together people who are passionate about clean energy, and are founded on the principles of inclusivity, collaboration, and shared responsibility.

According to the Renewable Energy Directive, RECs are formed through:

“The open and voluntary participation of (…) natural persons, SMEs or local authorities, including municipalities” with the goal of providing “environmental, economic or social community benefits for its shareholders or members or for the local areas where it operates, rather than financial profits.”

European Commission

The structure of the energy community can take different forms:

Managed communities 

Given the complexity of originating and managing an energy community (described in detail below) it is useful to have an organization to handle the many steps involved.

These include planning, legal steps, financing, bureaucracy, permitting, installation, connecting to the grid and ongoing operation & maintenance of renewable assets and management of the REC, including recruiting and retaining new members.

This approach simplifies the process for community members by removing many of the hurdles which often hold back renewable energy projects. For example, Cleanwatts takes care of the entire process from origination, financing, build and operation of renewable assets at anchor clients, and the management and operation of the REC.

REC managed community

Grassroots Initiatives 

Alternatively, a community-driven approach is often the driving force behind the formation of RECs. These grassroots initiatives are formed by motivated individuals who rally their neighbors, friends, and local businesses to join the movement for clean energy.  

Collaboration with Local Governments and Organizations  

Many RECs collaborate with local governments and organizations to access funding, regulatory support, and technical expertise. These partnerships help streamline the establishment and operation of renewable energy projects within the community. In this case, Cleanwatts provides all the tools you need to create and manage renewable energy communities.

REC community managed

2. What is the cost of establishing a REC? 

The cost of establishing a Renewable Energy Community can vary widely based various factors, including project size, location, technology, and market conditions. When establishing a REC, the costs of all or most of the following items must be taken into consideration:

1. Energy generation assets: New communities need to choose which form of energy generation assets are best suited for their needs. Solar energy is a popular choice due to its accessibility and reliability.

The cost of solar panels can vary widely, depending on type, size, efficiency, and installation requirements. But prices have been decreasing steadily due to technological advancements and growing market competition.

2. Installation and Labor: Cost of installation is dependent on the project complexity, roof type, and local regulations. Labor costs, including skilled technicians, engineers, and construction workers, are crucial for a professional installation and should be factored into the total project cost.

REC labor installation

3. Inverter and Battery Storage: Solar panels produce direct current (DC) electricity, which must be converted to alternating current (AC) for household use. Inverters are essential components for this conversion process, and their cost changes with system size and type. Battery storage systems provide an efficient means of storing excess energy for use during periods of low solar generation.

4. Permitting and Compliance: REC projects must comply with rigorous permitting and regulatory requirements. Permitting costs can vary significantly depending on the project’s complexity and the country’s regulatory framework.

5. Operations and Maintenance: Large-scale renewable energy projects require ongoing operations and maintenance activities to ensure optimal performance. Energy management systems such as Cleanwatts™ OS are also needed to manage and optimize every aspect of energy consumption, generation, storage, trading and balancing within the REC.


solar panel installation

In total, establishing a 500 kWp Renewable Energy Community in Europe can cost as low as €250.000 and go all the way up to €2.000.000 depending on the location and scope of the project. For this reason, having a partner with the know-how, experience and partnerships to keep these costs on the lower side and take care of the entire process can be essential to set up your REC in a short timeframe.

At Cleanwatts, we bring Energy Communities together, providing the funding, installation, operation and management so everyone can enjoy lower energy costs and build a cleaner and more sustainable future, together.

Case Study: Miranda do Douro 

In the town of Miranda do Douro in Portugal, the Porguguese charity and social institution, the Holy House of Mercy (Santa Casa da Misericórdia), partnered with Cleanwatts to establish a Renewable Energy Community. They installed 239 PV panels with a total capacity of 73,3 kWp onto the rooftops of their buildings. Cleanwatts fully financed, installed, and managed the project, which launched in August 2021.


Since forming the REC in August 2021, the Santa Casa da Misericórdia has already seen significant benefits. If the energy produced through the PV panels during the first year was purchased on the OMIE market (valued around 0.35 Euro/kWh), the organization would have spent an additional 18.000 euros on its energy costs.

In addition, the REC also benefited over 100 local families who joined the community and shared excess energy produced. Community members are able to purchase clean energy which is around 30% cheaper than their normal bills. Finally, the initiative was able to reach 44% carbon neutrality, saving approximately 19 tons of CO2 in a single year.

3. Step-by-Step Guide to Creating a Renewable Energy Community

Here’s the step-by-step process of creating a Renewable Energy Community:

1. Identify and Engage Community Stakeholders
2. Proposal and signing of contract.
3. Licensing from national permitting authority.
4. Installation of the energy generation assets
5. Establishment of the Energy Community.
6. Deployment of energy management software to manage the REC.
7. Ongoing maintenance of the installed assets

1. Identify and Engage Community Stakeholders

The first step in creating a REC is to identify individuals, organizations, and businesses interested in renewable energy. Engaging them through community meetings, workshops, and online platforms fosters a sense of ownership and collective responsibility.

2. Proposal and signing of contract

After finding sufficient interest from potential prosumers and consumers, the community leaders then must create a proposal for the project. At this stage conducting an energy audit can help to understand the community’s current energy consumption and to identify opportunities for renewable energy integration.

Collaboratively developing an action plan with clear objectives and targets is crucial. This plan should outline the community’s vision, specific renewable energy projects, timelines, and necessary resources. When the needs of the community are understood, a contract for the REC can be created.

REC signed contract

3. Licensing from national permitting authority

Obtaining licensing to establish the energy community can be a long and tedious process. Depending on the country, the REC creators must apply to one or numerous national permitting authorities to create a legal energy community.

As pioneers in the creation of RECs, Cleanwatts has the know-how and experience to streamline this process and set-up the energy community swiftly and without the hassle of lengthy bureaucracy.

4. Installation of the energy assets

When a permit has been granted, the energy generation assets can be installed at the properties of the REC. With solar energy, PV solar capacity is installed on rooftops or nearby terrains to start generating the locally sourced clean energy that will power the energy community.

5. Establishment of the Renewable Energy Community

Once the community receives its permits and has fully installed the REC can be legally established and it can begin producing energy! Community prosumers can begin producing and consuming energy produced at their properties, while also sharing excess energy with community consumers.

Febres Renewable Energy Community Santos e Santos

6. Deployment of energy management software to manage the REC

To control the multiple processes involved in managing the energy community, including energy generation, consumption, storage and sale, as well as front-of-the-meter flexibility, grid resiliency, and transaction management, it is highly recommended that the community deploy an energy management software platform.

7. Maintenance of the installed assets

Finally, Renewable Energy Communities require continual controls and maintenance to ensure that the installed assets last for the duration of the community. Communities therefore need to schedule regular operations and technical visits to correct any issues that may occur.

REC maintenance installed-assets

4. Benefits of Renewable Energy Communities

Renewable Energy Communities are reframing society’s relationship with energy and paving the way for a cleaner, fairer and more sustainable future. They are a ‘win-win’ for everyone involved, including individual households as well as private businesses.

Benefits of Renewable Energy Communities for Individuals

Participating in a renewable energy community brings numerous benefits to individuals. Let’s explore some of them.

Cost Savings through Collective Purchasing Power

  • By the collective purchasing power of the community, individuals can negotiate better deals for renewable energy systems and equipment. Bulk purchasing and group discounts can significantly reduce the upfront costs of renewable energy installations.

Income Generation from Renewable Energy Investments

  • Individuals who invest in community-owned renewable energy projects can receive dividends or returns on their investments. These financial rewards provide an additional incentive for community members to actively participate.

Improved Energy Efficiency

  • Empowering renewable energy communities to produce, consume, store and sell renewable energy will also help advance energy efficiency in households, support the use of renewable energy and at the same time contribute to fighting poverty through reduced energy consumption and lower supply tariffs.

Reducing Carbon Footprint

  • By generating clean energy locally, renewable energy communities significantly reduce greenhouse gas emissions. This reduction contributes to mitigating climate change and creating a healthier environment for all.

Improving Air and Water Quality

  • Shifting away from fossil fuel-based energy sources leads to improved air quality, reducing respiratory issues and improving overall public health. Additionally, renewable energy projects often prioritize sustainable water management practices, ensuring the conservation and preservation of this vital resource.

REC solar panels air quality

Benefits of Renewable Energy Communities for Businesses

Renewable energy communities also offer numerous advantages for businesses. Let’s explore the benefits.

Driving Sustainability and Success

  • As we face the pressing need to reduce greenhouse gas emissions and combat climate change, renewable energy communities (RECs) have emerged as beacons of hope. These communities are founded on the principles of inclusivity, collaboration, and shared responsibility. By pooling resources, knowledge, and efforts, RECs create a synergy that drives positive change in the energy landscape.

Meeting Corporate Social Responsibility Goals 

  • Businesses that actively participate in renewable energy communities showcase their commitment to sustainability and corporate social responsibility. This dedication enhances their brand image and differentiates them from competitors.

Cost Savings through Renewable Energy Integration 

  • By adopting renewable energy solutions, businesses can reduce their energy costs in the long run. Investing in renewable energy technologies like solar panels or wind turbines can lead to significant savings on electricity bills.

Business-to-Business Partnerships and Networking Opportunities

  • Renewable energy communities provide a platform for businesses to collaborate and form partnerships. This collaboration fosters knowledge sharing, innovation, and the development of new business opportunities within the renewable energy sector.

REC partnership networking

5. The need for decentralized power production

A decentralized energy system is characterized by having energy production facilities closer to the site of energy consumption. It allows for a more optimized use of renewable energy, reduces fossil fuel use and increases energy efficiency.

A decentralized energy system has three main components:

1. Distributed Generation

  • Energy is produced near it will be consumed

2. Energy Storage

  • Energy storage equipment such as batteries, can help keep the grid stable by storing energy when supply exceeds demand and feeding it back into the grid during peak hours.

3. Demand Response

  • Demand response is important to manage grid stability and consists of reducing or shifting electricity usage during peak periods to better match the demand for power with the supply.

REC decentralized energy

There are several reasons why decentralized energy systems are needed, such as:

Economic Reasons

Communities with low population densities are usually supplied with more power than needed and cannot keep up with the electricity costs. With decentralized systems, the power supply becomes more tailored to suit the precise needs of the consumers.

Distributed generation sources often have lower capital costs per project, compared to large central power plants, and can reduce the need for expensive transmission and distribution network expansion.

Environmental Reasons

Decentralized energy systems can facilitate the integration of renewable energy sources, such as solar, wind, and biomass, at a local level.

This enables communities to generate clean energy closer to the point of consumption, reducing transmission losses and the need for long-distance energy transportation. It also promotes the use of smaller-scale technologies that are more compatible with renewable energy sources.

Social Reasons

A decentralized system is suitable in rural areas where the population density is low. Often much more economically feasible than central grid expansions, decentralized approaches can achieve rural electrification faster and help fight energy poverty.

Energy Resilience

Decentralization reduces the vulnerability of energy systems to disruptions. In a centralized system, a single point of failure, such as a power plant or transmission line, can lead to widespread blackouts.

Decentralized energy systems, on the other hand, distribute energy generation across multiple smaller sources, making the overall system more resilient to failures or natural disasters.

Grid Flexibility and Efficiency

Decentralization allows for better management of energy supply and demand. Localized generation and storage enable a more flexible grid, where excess energy can be stored and distributed to meet demand fluctuations. This improves overall grid efficiency and reduces the need for costly infrastructure upgrades.

Empowerment and Local Economic Development

Decentralized energy systems empower local communities by allowing them to participate in energy production and decision-making processes. This can create new opportunities for local businesses, job creation, and economic development.

Community-owned renewable energy projects, for example, can provide income streams for local residents and keep the economic benefits within the community.

REC house solar panels

6. Get Started Today!

Renewable energy communities are transforming the energy landscape and paving the way for a sustainable future. By participating in a renewable energy community, you contribute to the energy transition, reduce your carbon footprint, and unlock numerous financial and environmental benefits. Let’s build a better tomorrow together.

By coming together, individuals, organizations, and businesses can create a powerful force for change. Join a renewable energy community today and be part of the solution.

Energy Community
Energy Efficiency
Did you know...

Cleanwatts fully finances, installs, and manages energy communities. Talk to us today about how we can help you make one!

Want to create a REC with Cleanwatts?
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