Sustainable development: the role of energy communities & the commitment of the Municipality of Modena

Last month, our member Modena was featured in the Italian magazine Forum PA for its efforts in the field of decarbonisation and sustainability transition. They highlighted the potential of energy communities, but also importance of being part of Energy Cities and the European Covenant of Mayors to achieve their goals. We translated part of the article below, you can read it in full in Italian here

Written by Alessandra Filippi, Councillor for Environment, Agriculture and Sustainable Mobility, Municipality of Modena

It was first the G20 summit in Rome followed by the COP26 in Glasgow that have clearly highlighted the health condition of our planet and the importance of taking action without further delay, as we are now reaching the point of no return. The climate of our planet is in a state of emergency, similar to the Covid-19 crisis, and therefore we need to act quickly by implementing an effective energy transition and developing an economic and production structure that takes environmental sustainability into account. The Municipality of Modena aims to be a protagonist in this energy transition by making a tangible contribution to the fight against climate change. Modena has been part of the Energy Cities network since 1998. This is a community of cities committed to making their economies future-proof, in perfect alignment with the intentions of the Paris Agreement (especially in reference to COP26) and the Sustainable Development Goals. On the other hand, before the global COVID-19 pandemic, millions of people took to the streets to demand climate justice and as seen recently on the news, they are still active in real and virtual spaces. The Energy Communities could provide them with the opportunity to personally engage and increase the production of renewable energy in their region. Given that the social, health and climate crises are interconnected, these issues need common solutions. In this respect the national recovery and resilience plans represent an excellent opportunity for governments to support Energy Communities by providing the necessary funding.

What are Energy Communities?

An Energy Community is based on a collaborative system between local public bodies, companies, businesses, and citizens, who choose to develop energy infrastructures from renewable sources and use self-consumption through a sharing-based model.

The Energy Communities are not merely an ideal tool to make a tangible contribution to fight climate change, but also combat energy poverty, which is affecting over 2 million Italian families. This approach has the added value of involving the community that knows all new members, and thus accelerates the necessary awareness and training on such fundamental issues.

Energy Communities are making a significant contribution to the fight against climate change. It is for this reason that people and communities must be recognized internationally as fundamental to achieving the objectives of the Paris Agreement. 2021 was undoubtedly the year of the Energy Communities, due not least to the fact that, following the favourable European legislation passed at the end of 2018, most European countries adopted the new legislation at the national level.

User awareness and involvement

Energy Communities can involve a large number of social actors in the challenge of decarbonization. The proximity of the plants to consumers will result, in many cases, in installations on roofs or in the vicinity of buildings, shifting attention to the issue of active citizens’ engagement.

The involvement of individual users and the economic benefits of these systems will lead the Communities members to more virtuous energy-efficient behaviours and, more generally, to a greater awareness of the dynamics that characterise the production, consumption and sale of electricity.

These elements can lead to the dissemination of innovative technological solutions. A model that in fact encourages energy production and its instant absorption by local users can act as a driving force for storage, behaviour and technological solutions designed for demand response, in other words to consumer actions that modify the load profile in response to the needs of the network.

By granting the end customers more responsibility, they will feel compelled to align their load and production profiles and carry out a first balancing of their own small system. Thus, Energy Communities could also reduce dispatching costs.

Pending the complete transposition of the directive

At present there are still obstacles in the transposition of directives at national level and a certain underestimation of the potential of participatory governance. However, it should be noted that the partial transposition of some provisions of the Renewable Energy Directive (RED II) which define the legal framework of the Energy Communities is very recent. The conversion into law of the so-called Milleproroghe decree dates back to March 2020 and establishes, in an experimental form pending the complete transposition of the directive, the possibility of creating communities that exchange energy for the purpose of both instant and deferred collective self-consumption.

The May 2021 Legambiente report entitled “Renewable Municipalities” surveyed at least 30 local configurations of Energy Communities using renewable sources and engaging in collective self-consumption. It is a movement running faster than the installations of large plants that shows a clear desire for a bottom-up approach.

The commitment of the Municipality of Modena and the role of AESS (the Energy and Sustainable Development Agency)

The decarbonisation process has undergone a sharp acceleration in recent years and the issues of environmental, economic, and social sustainability have become central not only at the European level, but also in the policies of local authorities. Modena has a location that is critical for air quality, and therefore the green energy shift is particularly urgent to improve people’s well-being.

The majority of AESS member municipalities have joined the Covenant of Mayors network and have drawn up or are drawing up Sustainable Energy and (Climate) Action Plans (SECAP). In the Municipality of Modena, for example, the Plan was approved in February 2021 with the stated objective to reduce CO2 emissions by at least 55% by 2030, in line with the EU objectives.

The Covenant of Mayors initiative had a positive impact on the national territory, with the involvement of a large number of cities and stakeholders and an increase in awareness of the climate issue. Nonetheless, the municipalities have encountered internal problems, especially the small and medium-sized ones, which have hindered adequate participation in the initiative. Therefore one should provide greater support at national level to these Municipalities in the implementation of their Action Plans, enabling new tools and/or making existing ones more effective.

Nevertheless, an increasing number of cities are proactively engaging with their local stakeholders and successfully creating Energy Communities. However, the process is lengthy and convoluted and should be facilitated by better national regulations.

Specific projects of Energy Communities

As a result of the co-financing of the EIT Climate-KIC European fund, in September 2019 AESS, ENEA and the University of Bologna have launched the GECO (Green Energy Community) project with the participation of citizens, local associations and local businesses. By 2023 it will lead to the creation of the first virtual Energy Community of Emilia-Romagna, namely in Bologna, more specifically in the districts of Pilastro and Roveri, using the existing network in areas where there is currently an electricity consumption of 430 MWh per year.

At the centre of the Community, citizens and companies will play an active role in the creation, production, distribution, and consumption of energy. The development area includes a residential area of 7,500 inhabitants, a commercial area of 200,000 square meters which houses an agro-food park, two shopping centres and an industrial area of over 1 million square meters, where there are photovoltaic solar systems for a total of 16 MW, and respectively solar plants for a total of 2 MW in the Roveri industrial area.

GECO will facilitate the development of 8 new renewable energy power plants with corresponding storage systems, transforming companies and citizens into prosumers. This will translate in a 200-kW plant for the CAAB/FICO agro-industrial centre, a 20 kWe and 30 kWt biogas plant for the disposal of organic waste, a 100-kW photovoltaic solar plant on several residential buildings, and an additional 200 kW of solar power in the Pilastro shopping centre and for neighbouring apartment buildings. In addition, there will be two solar plants of 200 kW each, on the roofs of the Fashion Research Institute, ZR Experience and neighbouring companies. All this for a total of 14 MW of new power generated by photovoltaic plants, which by 2023 will produce over 15.4 million kWh/year, with a reduction of 120 MWh/year of energy, avoiding the emission of 58,000 tons of CO2/year into the atmosphere.

The project is underway and involves the development of a platform for the analysis of energy flows (production, storage, and consumption), which is useful for securing energy flexibility within the Communities. This platform will be supported by technologies capable of identifying the optimal configuration of smart appliances and thus allowing Community members to monitor their energy consumption and contribution to the Community. It will also include a blockchain system for recording the self-consumption of electricity.

Energy communities: open questions

The partial transposition of European directives regarding self-production and energy exchange has allowed the start of many initiatives, with incredible results considering that the law was approved just over a year and a half ago. But the final transposition must also be an opportunity to overcome the still open issues as well as the critical issues that have emerged. Such issues include the sizing of the perimeter of the Energy Communities, the power of the plants, the problems related to secondary stations, the definition of incentives, and the governance of the mechanism. In addition, there are issues regarding the excluded entities who cannot be part of the Energy Communities such as NGOs and third sector entities.

The sizing of the Energy Communities

The sizing of the Energy Communities, based on an electrotechnical parameter, i.e. the medium and/or low voltage substation, often turns out to be limiting concerning the participation potential that usually occurs in project experiences, especially for structures above 150 kW.

Incentives today only reward shared energy through a tariff regardless of the size of the plants. One of the critical issues identified is linked to the configurations of small plants, which prove to be sustainable only through tax deductions and the superbonus. To ensure the perpetuation of these bottom-up experiences, these projects need to be economically viable as well.

Governance of the mechanism

A delicate issue is the governance of the mechanism: challenged in Europe by an amendment that provides for the unbundling of the benefits due to members directly from their bills, it creates a series of potential complexities in the very management of these experiences and it risks the invalidation of business models currently developed. Furthermore, in terms of governance, it is necessary not only to simplify, as it happens with many models currently under development but also to think of models that can be managed bottom-up for small configurations, without risking that complex management costs could affect the benefits and make them lose their appeal. We should also think of an active role for the managers in this sense, by applying the deduction directly in the bill, but in a free and not mandatory form.

NGOs and third sector entities, not stipulated by the European directive, must have the same prosumer rights as citizens, businesses, and local authorities. Governments should intervene in this regard, providing for their participation in the transposition.

Climate-neutrality, an unattainable goal within the proposed time frame?

Today, in Italy, more than 1.1 million renewable energy source plants satisfy 37.6% of the total electricity consumption and 19% of the total energy consumption, through a mix of technologies aimed at producing electric and/or thermal energy spread throughout all municipalities. However, when taking into account the average output of current installations and the parallel reduction in consumption through increased efficiency, it will take Italy almost 70 years to achieve the EU’s objectives.

In order to keep the commitments made and respect the deadlines, quick and concrete intervention is necessary to speed up the process. In this sense, a valid contribution could come from the energy community.