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Unintended consequences: The snowball effect of energy communities

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  • Abada, Ibrahim
  • Ehrenmann, Andreas
  • Lambin, Xavier

Abstract

In 2019, the European Commission finalized a legal framework for “Citizens” and “Renewable Energy Communities”, paving the way for their deployment. While the benefits of such communities have been discussed, there is increasing concern that inadequate grid tariffs may lead to excess adoption of such business models. Furthermore, snowball effects may be observed following the effects these communities have on grid tariffs. We show that restraining the study to a simple financial analysis is far from satisfactory. Therefore, we use the framework of cooperative game theory to take account of the ability of communities to share gains between members. The interaction between energy communities and the distribution system operator then results in a non-cooperative equilibrium. We provide mathematical formulations and intuitions of such effects, and carry out realistic numerical applications where communities can invest jointly in solar panels and batteries. We show that such a snowball effect may be observed, but its magnitude and its welfare effects will depend on the grid tariff structure that is implemented, leading to possible over-investments in photo-voltaic panels. In particular, we find that setting a fixed grid tariff strongly mitigates such over-investments.

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  • Abada, Ibrahim & Ehrenmann, Andreas & Lambin, Xavier, 2020. "Unintended consequences: The snowball effect of energy communities," Energy Policy, Elsevier, vol. 143(C).
    • Handle: RePEc:eee:enepol:v:143:y:2020:i:c:s0301421520303359
    DOI: 10.1016/j.enpol.2020.111597
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    References listed on IDEAS

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    5. Felice, Alex & Rakocevic, Lucija & Peeters, Leen & Messagie, Maarten & Coosemans, Thierry & Ramirez Camargo, Luis, 2022. "Renewable energy communities: Do they have a business case in Flanders?," Applied Energy, Elsevier, vol. 322(C).
    6. Barbara Antonioli Mantegazzini & C?dric Clastres & Laura Wangen, 2022. "Energy communities in Europe: An overview of issues and regulatory and economic solutions," ECONOMICS AND POLICY OF ENERGY AND THE ENVIRONMENT, FrancoAngeli Editore, vol. 2022(2), pages 5-23.
    7. Gjorgievski, Vladimir Z. & Cundeva, Snezana & Georghiou, George E., 2021. "Social arrangements, technical designs and impacts of energy communities: A review," Renewable Energy, Elsevier, vol. 169(C), pages 1138-1156.
    8. Rossi, Federico & Heleno, Miguel & Basosi, Riccardo & Sinicropi, Adalgisa, 2021. "LCA driven solar compensation mechanism for Renewable Energy Communities: the Italian case," Energy, Elsevier, vol. 235(C).
    9. Cortade, Thomas & Poudou, Jean-Christophe, 2022. "Peer-to-peer energy platforms: Incentives for prosuming," Energy Economics, Elsevier, vol. 109(C).
    10. Bin Zhang & Li Sun & Mengyao Yang & Kin-Keung Lai & Bhagwat Ram, 2023. "A Robust Optimization Approach for Smart Energy Market Revenue Management," Energies, MDPI, vol. 16(19), pages 1-14, October.
    11. Zacharie De Grève & Jérémie Bottieau & David Vangulick & Aurélien Wautier & Pierre-David Dapoz & Adriano Arrigo & Jean-François Toubeau & François Vallée, 2020. "Machine Learning Techniques for Improving Self-Consumption in Renewable Energy Communities," Energies, MDPI, vol. 13(18), pages 1-17, September.
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