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Financial viability of energy communities: The role of flexible assets, balancing market participation and peer-to-peer trading

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  • Imset, Ole Herman
  • Ishmam, Rubab
  • Kleinau, Jakob
  • Lavrutich, Maria
  • Yen, Dung-Bai

Abstract

Energy communities accelerate the green transition by enabling prosumers and non-generating households to benefit from electricity exchange and cost savings. At the same time, there is a need for more flexibility providers in the balancing markets, creating opportunities for energy communities to reduce energy costs and enhance grid stability. This paper examines the financial viability of energy communities equipped with electric vehicles, photovoltaics, and battery energy storage systems, that are actively engaged in peer-to-peer trading and participating in the balancing markets. Our optimization model applied to a case study in Norway shows a substantial reduction in energy costs for the energy community through peer-to-peer trading and participation in reserve markets. Balancing market participation is crucial to ensure profitability of investment in photovoltaics and battery energy storage systems. However, solar investments only yield negative net present values even if the revenue of the balancing markets is present. To account for uncertainties in future costs of battery energy storage systems and photovoltaics, we develop a real option investment valuation model, which reveals additional value by deferring solar investments, making them more profitable. Furthermore, an important finding is that incorporating the operational flexibility of assets in the optimization model substantially reduces exposure to the volatility of spot and balancing market prices in the long-term investment model.

Suggested Citation

  • Imset, Ole Herman & Ishmam, Rubab & Kleinau, Jakob & Lavrutich, Maria & Yen, Dung-Bai, 2025. "Financial viability of energy communities: The role of flexible assets, balancing market participation and peer-to-peer trading," Energy Economics, Elsevier, vol. 152(C).
    • Handle: RePEc:eee:eneeco:v:152:y:2025:i:c:s0140988325008151
    DOI: 10.1016/j.eneco.2025.108985
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    References listed on IDEAS

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    JEL classification:

    • C02 - Mathematical and Quantitative Methods - - General - - - Mathematical Economics
    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
    • G50 - Financial Economics - - Household Finance - - - General
    • Q40 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - General
    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices
    • Q42 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Alternative Energy Sources

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