The New Paradigms of Energy

Prosumption, or the transformation process of end[1]consumers into producer-consumers, is gaining more and more strength supported by the global trends of decarbonization and digitalization, which we might define as the ‘’Raison d’être’’ and the enabling mechanism for this change, respectively.

Customers are becoming increasingly aware of environmental issues and empowered by the convergence of digital innovation and the energy market, they are loudly demanding to become active participants in the game. For this reason, in this trilogy of articles we will explore the new paradigms of energy, imaging the future of the energy market, which will be increasingly clean, accessible and reliable. We’ll talk about Energy Communities and Demand Response, forms of virtual mechanisms that are acquiring the role of key enablers for sustainability, not only from an environmental perspective but also deeply social and economic.

The Relevance of Energy Communities

In an increasingly urbanized world, cities and municipalities play a key role in the energy transition of society. In fact, it is estimated that by 2050 about 70 percent of the global population will live in cities, resulting in a massive demand growth for urban energy infrastructure. However, establishing prosumption in cities is more challenging than in rural areas because of the limited space available for energy generation. To overcome this barrier, at the end of 2018 the European Union approved EU Directive 2018/2001, aimed at regulating and promoting the diffusion of distributed generation and the self-consumption of renewable energy in collective forms.

Specifically, the directive gave birth to the concept of Renewable Energy Communities, which allows citizens, businesses, governments, small and medium-sized enterprises, etc., to associate with the aim of producing, exchanging and consuming self-produced clean energy through the “virtual self[1]consumption” model, which takes advantage of the pre-existing connection to the public network. In this way, even end-users who do not have the economic or physical possibility to install renewable sources are enabled to take advantage of clean energy produced within the community, maximizing local energy use and lowering the CO2 emissions of community members.

"Customers are becoming increasingly aware of environmental issues and empowered by the convergence of digital innovation and the energy market, they are loudly demanding to become active participants in the game"

Energy communities therefore promote energy efficiency and help end-users to reduce their energy bills, effectively fighting energy poverty, which remains a major challenge to be further addressed in the EU, especially in vulnerable local communities. According to Eurostat’s figures, about 8 percent of the EU population was unable to keep their homes adequately warm in 2020.

The Future of Energy Generation

According to the Joint Research Centre’s (JRC) dedicated report for the European Commission, by 2020 there were around 3500 renewable energy communities in Europe, mainly located in North-Western Europe.

Looking into the future, the growth forecasts of energy communities are very promising: recent studies have estimated that by 2030 more than 50 GW of wind power and more than 50 GW of solar power could be owned by energy communities, representing respectively 17 and 21 percent of total installed capacity. Furthermore, it is estimated that by 2050 around 37 percent of all EU households will take part in energy communities and they will produce up to 45 percent of the entire EU’s renewable electricity.

Energy communities are thus shaping up as a crucial tool so that the transition we are experiencing is not only an energy transition. It is also a ‘’just transition’’, shifting from the corporate, centralized fossil fuel generation to one that is distributed, customer centric with acknowledgement of an extra premium for these are able to leverage on aggregation. A unity is strength and in this cases the difference.

The Italian Situation

Although in 2022 there were only 35 Italian RECs in operation, lagging behind nations with more ready and established regulations such as Denmark where Energy Communities have been a reality since the 1980s, Italy is now undergoing a period of strong transformation. Following the path laid out by the European directive, Italy is slowly closing the gap by introducing legislation and incentives, whose final approval is awaited, that will make the ground fertile for Energy Communities. Indeed, exponential growth is predicted to occur in the near future: a study by the Politecnico di Milano estimates that by 2025 Italian energy communities will number around 40,000 and will involve around 1.2 million households, 200,000 offices and 10,000 SMEs.