Study on Community Energy in Practice: Seven Recommendations from seven EU Countries

The study addresses issues such as the choice of sharing methods, involved entities, territorial scope or technical security of sharing. These are already operational within the EU and can be applied in the Czech Republic and countries where community energy is not yet established or where regulations are under revision. These aspects will have a significant impact on the economic viability of future projects. The study substantially contributes to the current debate on the conditions for community energy in the Czech Republic, and in the Central and Eastern Europe region.

Legislation on community energy varies widely in the seven examined countries, and the rules contained in European directives are satisfactorily implemented only in Brussels and Austria. Deficiencies in other states, on the other hand, highlight the mistakes from which we can learn – these are equally important because they show which solutions did not work in practice.

“In countries where community energy functions well, governments have unequivocally chosen it as a meaningful path not only for meeting a portion of energy needs but also for the overall development of regions. Legislators there prioritise mainly local initiatives, trust them, and adopt a bottom-up approach. While we do not have a good experience with centralised administration, we still strive to make centralised decisions in the energy sector. From experience, I know that local governments and communities, in general, can manage by themselves, as well as draw inspiration from it. That's why I'm pleased that such a study has been conducted in the Czech Republic, as it is relevant for countries outside EU as well," say ‍Michal Svoboda, the energy manager of the Association of Local Governments of the Czech Republic and the Local Action Group Czech North.

“Austria is usually mentioned as the model for setting up energy communities. Our analysis confirms it. The Austrian legal framework very effectively balances the rights and obligations of energy communities. For example, the discount on distribution fees is balanced with territorial restrictions on electricity sharing," says Václav Prais, an expert from Frank Bold and the main author of the study.

For the return on investment of energy community projects, and the motivation to use electricity locally, the key is the configuration of the sharing method, the so-called allocation key. The freedom to choose the method of electricity distribution is also one of the key recommendations for Czech legislators. “France and Portugal serve as examples of good practice in terms of electricity sharing methods. Both countries allow a flexible choice between static, dynamic, and hybrid allocation keys. In France, it is even possible for the community to choose its own specific method if the DSO (distribution system operator) allows it,” adds Prais.

Poor legal regulations bring higher costs for all actors in the energy industry. “Examples from Poland, Greece, and Italy demonstrate how harmful the use of net metering is for both communities and distributors. Net metering is a form of imperfect sharing as it does not incentivize local or simultaneous consumption – factors which reduce the burden on the distribution network. Only Italy tries to compensate for this negative effect with feed-in tariffs that motivate consumption during production time,” summarises Prais.

Seven Recommendations for Czech Republic

The amendment to the energy law has passed the first reading in the Chamber of Deputies. The Senate of the Czech Republic will deliberate on the amendment on December 20th. Following its final approval, only the President's signature remains pending. The goal is to have the law in effect by January 1, 2024, with the commencement of electricity sharing from July 1, 2024. It is crucial that the legal framework be of high quality, eliminating the need for further early amendments.

“A key recommendation is the existence of multiple methods for distributing shared electricity (e.g., static, dynamic, or hybrid  methods) among which community members can choose. The legal regulation must clearly define the chosen methods and allow communities to consume as much of their own electricity as possible. It is also advisable to introduce a deadline for the installation of smart meters, which will significantly expedite and facilitate the implementation of the project and the initiation of sharing. In the analysed countries, deadlines most commonly range between 2 to 4 months,” says Jan Bakule, a lawyer from Frank Bold and one of the authors of the study.