An Economic Theory of Market Interactions within Energy Communities

In addition to self-production and individual disconnection from the national grid, the ongoing decentralization of the electricity market increasingly relies on energy-sharing mechanisms such as energy communities (ECs). This paper presents a parsimonious model that captures key features of the ECs, focusing on how cost and benefit allocation among community members influences net producers' energy contributions and, consequently, the total amount of energy shared within the community. The model accounts for heterogeneity among net producers in terms of residual generation capacity and distinguishes between two net consumer groups with different energy needs. It also incorporates crucial factors such as participation fees, the distribution of economic benefits among market participants, and the impact of sharing congestion externalities. The analysis shows how different sharing rules affect total energy exchange within the community and, in turn, the welfare distribution among participants.