IDEAS home Printed from https://ideas.repec.org/a/eee/appene/v389y2025ics0306261925004829.html
   My bibliography  Save this article

Renewable energy communities for sustainable cities: Economic insights into subsidies, market dynamics and benefits distribution

Author

Listed:
  • Basilico, Paolo
  • Biancardi, Alberto
  • D'Adamo, Idiano
  • Gastaldi, Massimo
  • Yigitcanlar, Tan

Abstract

Renewable energy communities (RECs) present a compelling pathway to achieving a just energy transition, particularly in regions such as Europe. Within this context, Italy stands out as a leader in REC development due to its favorable incentive policies, which support widespread adoption. The advancement of RECs requires robust quantitative analyses to illustrate the equitable distribution of economic benefits between prosumers and consumers. This paper presents an economic evaluation of photovoltaic (PV) systems within residential RECs, contributing to the development of sustainable and green urban environments. Using the discounted cash flow method with net present value (NPV) as the primary indicator, the research evaluates various scenarios influenced by subsidies and market dynamics. The findings reveal that PV-based RECs represent highly profitable investments characterized by low economic risk. The NPVs per kW range from €2042–5148 in low-market scenarios and €3347–8195 in high-market scenarios. For RECs comprising four prosumers, the distribution of benefits varies between 15 and 35 %. Additionally, the study introduces two innovative profit-sharing models among renewable self-consumers (RSCs). The first model incentivizes energy-conscious consumption by offering lower trading prices within the REC, while the second model prioritizes energy equity by providing greater support to lower-income households. Both models result in an 18–30 % reduction that encourages prosumer participation, irrespective of individual consumption patterns. Furthermore, the inclusion of consumers alters the distribution of benefits, reinforcing the role played by RECs in fostering socially inclusive energy systems. Ultimately, the economic viability of PV systems within RECs underscores their critical role in advancing energy-sustainable urban development. By simultaneously enhancing environmental resilience and promoting social equity, RECs may serve as a foundational element in the transition towards a greener and more equitable energy future.

Suggested Citation

  • Basilico, Paolo & Biancardi, Alberto & D'Adamo, Idiano & Gastaldi, Massimo & Yigitcanlar, Tan, 2025. "Renewable energy communities for sustainable cities: Economic insights into subsidies, market dynamics and benefits distribution," Applied Energy, Elsevier, vol. 389(C).
    • Handle: RePEc:eee:appene:v:389:y:2025:i:c:s0306261925004829
    DOI: 10.1016/j.apenergy.2025.125752
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0306261925004829
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.apenergy.2025.125752?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Riccardo Trevisan & Mara Ladu & Emilio Ghiani & Ginevra Balletto, 2024. "Achieving Net Zero Condominiums through Energy Community Sharing," Sustainability, MDPI, vol. 16(5), pages 1-28, March.
    2. Berg, Kjersti & Hernandez-Matheus, Alejandro & Aragüés-Peñalba, Mònica & Bullich-Massagué, Eduard & Farahmand, Hossein, 2024. "Load configuration impact on energy community and distribution grid: Quantifying costs, emissions and grid exchange," Applied Energy, Elsevier, vol. 363(C).
    3. Daniel Fett & Dogan Keles & Thomas Kaschub & Wolf Fichtner, 2019. "Impacts of self-generation and self-consumption on German household electricity prices," Journal of Business Economics, Springer, vol. 89(7), pages 867-891, September.
    4. Colarullo, Linda & Thakur, Jagruti, 2022. "Second-life EV batteries for stationary storage applications in Local Energy Communities," Renewable and Sustainable Energy Reviews, Elsevier, vol. 169(C).
    5. Braeuer, Fritz & Kleinebrahm, Max & Naber, Elias & Scheller, Fabian & McKenna, Russell, 2022. "Optimal system design for energy communities in multi-family buildings: the case of the German Tenant Electricity Law," Applied Energy, Elsevier, vol. 305(C).
    6. Giuseppe Barone & Giovanni Brusco & Daniele Menniti & Anna Pinnarelli & Gaetano Polizzi & Nicola Sorrentino & Pasquale Vizza & Alessandro Burgio, 2020. "How Smart Metering and Smart Charging may Help a Local Energy Community in Collective Self-Consumption in Presence of Electric Vehicles," Energies, MDPI, vol. 13(16), pages 1-18, August.
    7. Paola Marrone & Federico Fiume & Antonino Laudani & Ilaria Montella & Martina Palermo & Francesco Riganti Fulginei, 2023. "Distributed Energy Systems: Constraints and Opportunities in Urban Environments," Energies, MDPI, vol. 16(6), pages 1-27, March.
    8. Petrovich, Beatrice & Carattini, Stefano & Wüstenhagen, Rolf, 2021. "The price of risk in residential solar investments," Ecological Economics, Elsevier, vol. 180(C).
    9. Ferdinando Chiacchio & Fabio Famoso & Diego D’Urso & Luca Cedola, 2019. "Performance and Economic Assessment of a Grid-Connected Photovoltaic Power Plant with a Storage System: A Comparison between the North and the South of Italy," Energies, MDPI, vol. 12(12), pages 1-25, June.
    10. Simona Barbaro & Grazia Napoli, 2023. "Energy Communities in Urban Areas: Comparison of Energy Strategy and Economic Feasibility in Italy and Spain," Land, MDPI, vol. 12(7), pages 1-24, June.
    11. Lang, Tillmann & Ammann, David & Girod, Bastien, 2016. "Profitability in absence of subsidies: A techno-economic analysis of rooftop photovoltaic self-consumption in residential and commercial buildings," Renewable Energy, Elsevier, vol. 87(P1), pages 77-87.
    12. O’Dwyer, Edward & Pan, Indranil & Acha, Salvador & Shah, Nilay, 2019. "Smart energy systems for sustainable smart cities: Current developments, trends and future directions," Applied Energy, Elsevier, vol. 237(C), pages 581-597.
    13. Thellufsen, J.Z. & Lund, H. & Sorknæs, P. & Østergaard, P.A. & Chang, M. & Drysdale, D. & Nielsen, S. & Djørup, S.R. & Sperling, K., 2020. "Smart energy cities in a 100% renewable energy context," Renewable and Sustainable Energy Reviews, Elsevier, vol. 129(C).
    14. Xue, Liya & Liu, Junling & Lin, Xiaojing & Li, Mengyue & Kobashi, Takuro, 2024. "Assessing urban rooftop PV economics for regional deployment by integrating local socioeconomic, technological, and policy conditions," Applied Energy, Elsevier, vol. 353(PA).
    15. Gjorgievski, Vladimir Z. & Velkovski, Bodan & Francesco Demetrio, Minuto & Cundeva, Snezana & Markovska, Natasa, 2023. "Energy sharing in European renewable energy communities: Impact of regulated charges," Energy, Elsevier, vol. 281(C).
    16. Gržanić, M. & Capuder, T. & Zhang, N. & Huang, W., 2022. "Prosumers as active market participants: A systematic review of evolution of opportunities, models and challenges," Renewable and Sustainable Energy Reviews, Elsevier, vol. 154(C).
    17. Francesca Ceglia & Elisa Marrasso & Samiran Samanta & Maurizio Sasso, 2022. "Addressing Energy Poverty in the Energy Community: Assessment of Energy, Environmental, Economic, and Social Benefits for an Italian Residential Case Study," Sustainability, MDPI, vol. 14(22), pages 1-22, November.
    18. Caferra, Rocco & Colasante, Annarita & D'Adamo, Idiano & Yilan, Gülşah & Lancialonga, Davide, 2024. "A strategic analysis of renewable energy communities in achieving sustainable development," Utilities Policy, Elsevier, vol. 90(C).
    19. Idiano D'Adamo & Alessandro Dell'Aguzzo & Marco Pruckner, 2024. "Residential photovoltaic and energy storage systems for sustainable development: An economic analysis applied to incentive mechanisms," Sustainable Development, John Wiley & Sons, Ltd., vol. 32(1), pages 84-100, February.
    20. Gómez-Navarro, Tomás & Brazzini, Tommaso & Alfonso-Solar, David & Vargas-Salgado, Carlos, 2021. "Analysis of the potential for PV rooftop prosumer production: Technical, economic and environmental assessment for the city of Valencia (Spain)," Renewable Energy, Elsevier, vol. 174(C), pages 372-381.
    21. Setyawati, Dinita, 2020. "Analysis of perceptions towards the rooftop photovoltaic solar system policy in Indonesia," Energy Policy, Elsevier, vol. 144(C).
    22. López Prol, Javier & Steininger, Karl W., 2017. "Photovoltaic self-consumption regulation in Spain: Profitability analysis and alternative regulation schemes," Energy Policy, Elsevier, vol. 108(C), pages 742-754.
    23. Dorahaki, Sobhan & Rashidinejad, Masoud & Fatemi Ardestani, Seyed Farshad & Abdollahi, Amir & Salehizadeh, Mohammad Reza, 2023. "An integrated model for citizen energy communities and renewable energy communities based on clean energy package: A two-stage risk-based approach," Energy, Elsevier, vol. 277(C).
    24. Federico De Santi & Matteo Moncecchi & Giuseppe Prettico & Gianluca Fulli & Sergio Olivero & Marco Merlo, 2022. "To Join or Not to Join? The Energy Community Dilemma: An Italian Case Study," Energies, MDPI, vol. 15(19), pages 1-20, September.
    25. Pagnini, Luisa & Bracco, Stefano & Delfino, Federico & de-Simón-Martín, Miguel, 2024. "Levelized cost of electricity in renewable energy communities: Uncertainty propagation analysis," Applied Energy, Elsevier, vol. 366(C).
    26. Barone, G. & Buonomano, A. & Cipolla, G. & Forzano, C. & Giuzio, G.F. & Russo, G., 2024. "Designing aggregation criteria for end-users integration in energy communities: Energy and economic optimisation based on hybrid neural networks models," Applied Energy, Elsevier, vol. 371(C).
    27. 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).
    28. 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.
    29. Weckesser, Tilman & Dominković, Dominik Franjo & Blomgren, Emma M.V. & Schledorn, Amos & Madsen, Henrik, 2021. "Renewable Energy Communities: Optimal sizing and distribution grid impact of photo-voltaics and battery storage," Applied Energy, Elsevier, vol. 301(C).
    30. Jiménez-Castillo, G. & Muñoz-Rodriguez, F.J. & Rus-Casas, C. & Talavera, D.L., 2020. "A new approach based on economic profitability to sizing the photovoltaic generator in self-consumption systems without storage," Renewable Energy, Elsevier, vol. 148(C), pages 1017-1033.
    31. D'Adamo, Idiano & Mammetti, Marco & Ottaviani, Dario & Ozturk, Ilhan, 2023. "Photovoltaic systems and sustainable communities: New social models for ecological transition. The impact of incentive policies in profitability analyses," Renewable Energy, Elsevier, vol. 202(C), pages 1291-1304.
    32. Inês, Campos & Guilherme, Pontes Luz & Esther, Marín-González & Swantje, Gährs & Stephen, Hall & Lars, Holstenkamp, 2020. "Regulatory challenges and opportunities for collective renewable energy prosumers in the EU," Energy Policy, Elsevier, vol. 138(C).
    33. Mariuzzo, Ivan & Fina, Bernadette & Stroemer, Stefan & Raugi, Marco, 2024. "Economic assessment of multiple energy community participation," Applied Energy, Elsevier, vol. 353(PA).
    34. Madurai Elavarasan, Rajvikram & Pugazhendhi, Rishi & Irfan, Muhammad & Mihet-Popa, Lucian & Campana, Pietro Elia & Khan, Irfan Ahmad, 2022. "A novel Sustainable Development Goal 7 composite index as the paradigm for energy sustainability assessment: A case study from Europe," Applied Energy, Elsevier, vol. 307(C).
    35. García-García, Jersson & Sarmiento-Ariza, Yennifer & Campos-Rodríguez, Lizeth & Rey-López, Juan & Osma-Pinto, German, 2023. "Evaluation of tax incentives on the financial viability of microgrids," Applied Energy, Elsevier, vol. 329(C).
    36. Leprince, Julien & Schledorn, Amos & Guericke, Daniela & Dominkovic, Dominik Franjo & Madsen, Henrik & Zeiler, Wim, 2023. "Can occupant behaviors affect urban energy planning? Distributed stochastic optimization for energy communities," Applied Energy, Elsevier, vol. 348(C).
    37. Francesca Ceglia & Elisa Marrasso & Carlo Roselli & Maurizio Sasso & Guido Coletta & Luigi Pellegrino, 2022. "Biomass-Based Renewable Energy Community: Economic Analysis of a Real Case Study," Energies, MDPI, vol. 15(15), pages 1-24, August.
    38. Cédric Terrier & Joseph René Hubert Loustau & Dorsan Lepour & François Maréchal, 2024. "From Local Energy Communities towards National Energy System: A Grid-Aware Techno-Economic Analysis," Energies, MDPI, vol. 17(4), pages 1-16, February.
    39. Iazzolino, Gianpaolo & Sorrentino, Nicola & Menniti, Daniele & Pinnarelli, Anna & De Carolis, Monica & Mendicino, Luca, 2022. "Energy communities and key features emerged from business models review," Energy Policy, Elsevier, vol. 165(C).
    40. Zhang, Yang & Campana, Pietro Elia & Lundblad, Anders & Yan, Jinyue, 2017. "Comparative study of hydrogen storage and battery storage in grid connected photovoltaic system: Storage sizing and rule-based operation," Applied Energy, Elsevier, vol. 201(C), pages 397-411.
    41. An, Young-sub & Kim, Jong-kyu & Joo, Hong-Jin & Lee, Wang-Jae & Han, Gwang-woo & Kim, Haneul & Kim, Min-Hwi, 2023. "Experimental performance analysis of photovoltaic systems applied to an positive energy community based on building renovation," Renewable Energy, Elsevier, vol. 219(P1).
    42. Casalicchio, Valeria & Manzolini, Giampaolo & Prina, Matteo Giacomo & Moser, David, 2022. "From investment optimization to fair benefit distribution in renewable energy community modelling," Applied Energy, Elsevier, vol. 310(C).
    43. Heldeweg, Michiel A. & Séverine Saintier,, 2020. "Renewable energy communities as ‘socio-legal institutions’: A normative frame for energy decentralization?," Renewable and Sustainable Energy Reviews, Elsevier, vol. 119(C).
    44. Tatiana Tucunduva Philippi Cortese & Jairo Filho Sousa de Almeida & Giseli Quirino Batista & José Eduardo Storopoli & Aaron Liu & Tan Yigitcanlar, 2022. "Understanding Sustainable Energy in the Context of Smart Cities: A PRISMA Review," Energies, MDPI, vol. 15(7), pages 1-38, March.
    45. Vernay, Anne-Lorène & Sebi, Carine & Arroyo, Fabrice, 2023. "Energy community business models and their impact on the energy transition: Lessons learnt from France," Energy Policy, Elsevier, vol. 175(C).
    46. Aruta, Giuseppe & Ascione, Fabrizio & Bianco, Nicola & Mauro, Gerardo Maria, 2023. "Sustainability and energy communities: Assessing the potential of building energy retrofit and renewables to lead the local energy transition," Energy, Elsevier, vol. 282(C).
    47. Daniel Wuebben & Juan Romero-Luis & Manuel Gertrudix, 2020. "Citizen Science and Citizen Energy Communities: A Systematic Review and Potential Alliances for SDGs," Sustainability, MDPI, vol. 12(23), pages 1-24, December.
    48. Matthew J Page & Joanne E McKenzie & Patrick M Bossuyt & Isabelle Boutron & Tammy C Hoffmann & Cynthia D Mulrow & Larissa Shamseer & Jennifer M Tetzlaff & Elie A Akl & Sue E Brennan & Roger Chou & Jul, 2021. "The PRISMA 2020 statement: An updated guideline for reporting systematic reviews," PLOS Medicine, Public Library of Science, vol. 18(3), pages 1-15, March.
    49. Luthander, Rasmus & Widén, Joakim & Munkhammar, Joakim & Lingfors, David, 2016. "Self-consumption enhancement and peak shaving of residential photovoltaics using storage and curtailment," Energy, Elsevier, vol. 112(C), pages 221-231.
    50. D'Adamo, Idiano & Gastaldi, Massimo & Morone, Piergiuseppe, 2022. "Solar collective self-consumption: Economic analysis of a policy mix," Ecological Economics, Elsevier, vol. 199(C).
    51. Emanuele Cutore & Alberto Fichera & Rosaria Volpe, 2023. "A Roadmap for the Design, Operation and Monitoring of Renewable Energy Communities in Italy," Sustainability, MDPI, vol. 15(10), pages 1-26, May.
    52. Ramli, Makbul A.M. & Hiendro, Ayong & Sedraoui, Khaled & Twaha, Ssennoga, 2015. "Optimal sizing of grid-connected photovoltaic energy system in Saudi Arabia," Renewable Energy, Elsevier, vol. 75(C), pages 489-495.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. D'Adamo, Idiano & Mammetti, Marco & Ottaviani, Dario & Ozturk, Ilhan, 2023. "Photovoltaic systems and sustainable communities: New social models for ecological transition. The impact of incentive policies in profitability analyses," Renewable Energy, Elsevier, vol. 202(C), pages 1291-1304.
    2. D'Adamo, Idiano & Gastaldi, Massimo & Morone, Piergiuseppe, 2022. "Solar collective self-consumption: Economic analysis of a policy mix," Ecological Economics, Elsevier, vol. 199(C).
    3. D'Adamo, Idiano & Gastaldi, Massimo & Morone, Piergiuseppe & Ozturk, Ilhan, 2022. "Economics and policy implications of residential photovoltaic systems in Italy's developed market," Utilities Policy, Elsevier, vol. 79(C).
    4. Cavana, G. & Becchio, C. & Bottero, M., 2025. "Feasibility and evolution studies on renewable energy communities in cities," Renewable and Sustainable Energy Reviews, Elsevier, vol. 213(C).
    5. D'Adamo, Idiano & Gastaldi, Massimo & Morone, Piergiuseppe, 2020. "The post COVID-19 green recovery in practice: Assessing the profitability of a policy proposal on residential photovoltaic plants," Energy Policy, Elsevier, vol. 147(C).
    6. Caferra, Rocco & Colasante, Annarita & D'Adamo, Idiano & Yilan, Gülşah & Lancialonga, Davide, 2024. "A strategic analysis of renewable energy communities in achieving sustainable development," Utilities Policy, Elsevier, vol. 90(C).
    7. D’Adamo, Idiano & Falcone, Pasquale Marcello & Gastaldi, Massimo & Morone, Piergiuseppe, 2020. "The economic viability of photovoltaic systems in public buildings: Evidence from Italy," Energy, Elsevier, vol. 207(C).
    8. Santiago, Isabel & Palacios-Garcia, Emilio J. & Gonzalez-Redondo, Miguel & Arenas-Ramos, Victoria & Simon, Bernardo & Hayes, Barry P. & Moreno-Munoz, Antonio, 2024. "Assessment of generation capacity and economic viability of photovoltaic systems on urban buildings in southern Spain: A socioeconomic, technological, and regulatory analysis," Renewable and Sustainable Energy Reviews, Elsevier, vol. 203(C).
    9. Luo, Shunjun & Zhang, Shaohui, 2022. "How R&D expenditure intermediate as a new determinants for low carbon energy transition in Belt and Road Initiative economies," Renewable Energy, Elsevier, vol. 197(C), pages 101-109.
    10. Mariuzzo, Ivan & Fina, Bernadette & Stroemer, Stefan & Corinaldesi, Carlo & Raugi, Marco, 2025. "Grid-friendly optimization of energy communities through enhanced multiple participation," Renewable and Sustainable Energy Reviews, Elsevier, vol. 208(C).
    11. D'Adamo, Idiano & Gastaldi, Massimo & Morone, Piergiuseppe, 2022. "The impact of a subsidized tax deduction on residential solar photovoltaic-battery energy storage systems," Utilities Policy, Elsevier, vol. 75(C).
    12. Ciambellini, Giulia & D'Adamo, Idiano & Gastaldi, Massimo & Smol, Marzena, 2025. "Sustainability and competitiveness: Economic analysis of a photovoltaic plant with storage in an Italian textile company," Innovation and Green Development, Elsevier, vol. 4(2).
    13. Anna Mutule & Olegs Borscevskis & Victor Astapov & Irina Antoskova & Paula Carroll & Evita Kairisa, 2025. "PV Energy Communities in Residential Apartments: Technical Capacities and Economic Viability," Sustainability, MDPI, vol. 17(7), pages 1-21, March.
    14. Volpato, Gabriele & Carraro, Gianluca & De Giovanni, Luigi & Dal Cin, Enrico & Danieli, Piero & Bregolin, Edoardo & Lazzaretto, Andrea, 2024. "A stochastic optimization procedure to design the fair aggregation of energy users in a Renewable Energy Community," Renewable Energy, Elsevier, vol. 237(PA).
    15. Anita Tatti & Sibilla Ferroni & Martina Ferrando & Mario Motta & Francesco Causone, 2023. "The Emerging Trends of Renewable Energy Communities’ Development in Italy," Sustainability, MDPI, vol. 15(8), pages 1-18, April.
    16. Gjorgievski, Vladimir Z. & Velkovski, Bodan & Markovski, Blagoja & Cundeva, Snezana & Markovska, Natasa, 2024. "Energy community demand-side flexibility: Energy storage and electricity tariff synergies," Energy, Elsevier, vol. 313(C).
    17. Zhao, Linhai & Chau, Ka Yin & Tran, Trung Kien & Sadiq, Muhammad & Xuyen, Nguyen Thi My & Phan, Thi Thu Hien, 2022. "Enhancing green economic recovery through green bonds financing and energy efficiency investments," Economic Analysis and Policy, Elsevier, vol. 76(C), pages 488-501.
    18. Shoaib Ahmed & Amjad Ali & Antonio D’Angola, 2024. "A Review of Renewable Energy Communities: Concepts, Scope, Progress, Challenges, and Recommendations," Sustainability, MDPI, vol. 16(5), pages 1-34, February.
    19. Giulia Taromboli & Laura Campagna & Cristina Bergonzi & Filippo Bovera & Vincenzo Trovato & Marco Merlo & Giuliano Rancilio, 2025. "Renewable Energy Communities: Frameworks and Implementation of Regulatory, Technical, and Social Aspects Across EU Member States," Sustainability, MDPI, vol. 17(9), pages 1-32, May.
    20. Roberta Roberto & Gabriella Ferruzzi & Viviana Negro & Michel Noussan, 2023. "Mapping of Energy Community Development in Europe: State of the Art and Research Directions," Energies, MDPI, vol. 16(18), pages 1-29, September.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:appene:v:389:y:2025:i:c:s0306261925004829. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/wps/find/journaldescription.cws_home/405891/description#description .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.