Insights

Energy communities in the European Union (EU) are a concept designed to promote decentralized, community-based energy production and consumption. Energy communities are typically comprised of individuals, cooperatives, or local organizations that collectively own, operate, and share the benefits of renewable energy projects. The primary goal is to increase renewable energy adoption (through wind, solar and biomass), enhance energy efficiency, and promote energy self-sufficiency.

These communities empower local citizens, municipalities, and businesses to participate in renewable energy generation and distribution, ultimately fostering sustainability and reducing greenhouse gas emissions. Energy communities emphasize local engagement, democratic decision-making, and equitable sharing of the benefits among participants.

The EU has established a legal framework to support energy communities, mainly through the Clean Energy for All Europeans package^[1], which includes directives and regulations that provide guidance and support. Notable directives include the Renewable Energy Directive^[2], the Electricity Market Directive^[3], and the Governance Regulation^[4]. These laws aim to facilitate the creation, operation, and integration of energy communities into the energy market.

Implementing energy communities faces challenges related to regulatory complexity, administrative burdens, access to financing, and technical issues in grid integration. Member states in the EU are responsible for transposing EU directives into national legislation and designing specific support schemes for energy communities. This allows for flexibility to accommodate varying local conditions and needs.

However, in Malta’s case, there currently exists, amongst others, a derogation from the free choice of supplier. The free choice of supplier, article 4 of the Electricity Market Directive, provides that Member States shall ensure that all customers are free to purchase electricity from the supplier of their choice and shall ensure that all customers are free to have more than one electricity supply contract at the same time, provided that the required connection and metering points are established.^[5] Therefore, such derogation provides that article 4 shall not apply to Malta. Although the derogation expires in 2027 there is the possibility to extend same, however, considering the developments happening with respect to Malta’s Economic Exclusive Zone with specific reference to the National Policy for the Development of Offshore Renewable Energy there may be some reconsideration.

In summary, energy communities in the European Union are grassroots initiatives aimed at boosting renewable energy production and distribution at the local level. Energy communities are expected to play a significant role in achieving the EU’s renewable energy and carbon reduction targets; their growth and success will depend on continued policy support and local initiatives; and the EU has developed a regulatory framework to encourage their growth, with a focus on democratizing the energy sector and driving sustainability.

Listen to our podcast episode on the subject:

^[1] In 2019 the EU overhauled its energy policy framework to help us move away from fossil fuels towards cleaner energy – and, more specifically, to deliver on the EU’s Paris Agreement commitments for reducing greenhouse gas emissions.

^[2] The Renewable Energy Directive (2018/2001/EU) entered into force in December 2018, as part of the Clean Energy for all Europeans Package, aimed at maintaining the EU’s status as a global leader in renewables and, more broadly, helping it to meet its emissions reduction commitments under the Paris Agreement

^[3] Directive (EU) 2019/944 on common rules for the internal market for electricity and amending Directive 2012/27/EU, notably provides consumers with more tools for active participation in the energy market, introduces measures to improve retail market competition and sets out principles to ensure that aggregators can fulfil their role as intermediaries between customers and the wholesale market.

^[4] The Regulation on the Governance of the Energy Union (EU) 2018/1999 sets common rules for planning, reporting and monitoring. The Regulation also ensures that EU planning and reporting are synchronised with the ambition cycles under the Paris Agreement.

^[5] Derogations granted by the Commission shall be limited in time and subject to conditions that aim to increase competition in and the integration of the internal market and to ensure that the derogations do not hamper the transition towards renewable energy, increased flexibility, energy storage, electromobility and demand response.