Local energy communities: Member benefits and grid impact under various regulatory frameworks

Abstract

Due to global warming, there is a need to electrify fossil fuel processes and increase the amount of renewable energy. A way to include citizens in this green shift is by making it easier to invest in renewable technology and share electricity locally. This can be done through the formation of energy communities, whose purpose is to provide environmental, economic or social community benefits for its members or to the local area. Energy communities can therefore have different goals, such as cost savings, CO2 emission reduction or increased locally produced renewable energy. Although energy communities might prove to bring economic and social benefits for the members, it is not clear how they will impact the distribution grid where they are located. The distribution grid is a crucial part of reaching our climate goals, since we need more electrification and distributed renewable energy production. Furthermore, the regulation for energy communities has not yet been fully developed in European countries. To ensure that the new regulations give the right incentives and do not induce stress on the grid, there is a need to investigate how the energy communities impact it. Proposed regulatory frameworks such as collective self-consumption or local collective grid tariffs might reduce the costs for the members but could potentially increase system costs. The aim of this thesis is to investigate the member benefits of forming local energy communities, and how they will impact the distribution grid, under various regulatory frameworks. This is done by formulating optimisation models for minimising energy community costs when subject to different price signals. Further, how different cases impact the grid, particularly the peak demand, is investigated. The optimisation models in this research cover both operation and investment problems for various technologies present in the energy community — PV generation, battery storage, thermal storage and shiftable loads; various members – residential, commercial and industrial; volumetric and capacity-based grid tariffs; and two regulatory frameworks — local collective grid tariff and collective self-consumption. The findings of this PhD research give valuable insights for different stakeholders, which can further be used to develop country-specific regulations for energy communities. The regulator can observe how local collective grid tariffs and collective self-consumption impact the peak load of energy communities and how this relates to cost reduction under different grid tariffs. The most interesting finding, in that sense, is that capacity-based grid tariffs do not always lead to peak demand reduction. Members of energy communities, or other end-users considering forming them, can observe that battery energy storage systems are for the most part too expensive and that thermal energy storage should be prioritised if cost reduction is the most important motivation, and a part of the demand is thermal. Although expensive, battery systems can be valuable if the energy community wants to reduce CO2 emissions and increase self-consumption. Smart control of shiftable loads such as domestic hot water tanks and space heating are also flexibility resources that should be investigated before investing in battery energy storage systems. Distribution system operators and regulators should note that local collective grid tariffs can be an effective tool to reduce peak demand in the grid if combined with a capacity-based grid tariff. Energy communities are a flexible resource that can both create and solve problems in the grid, depending on which assets are present and which price signals they respond to. On a larger scale, the increased knowledge about energy communities can contribute to facilitating the integration of renewable energy resources and electrification as a means to reach our climate goals in a socio-economic way.