Achieving increased autonomy, sustainability and efficiency in terms of energy requirements is, today, an established strategic goal. A potential instrument in contributing to attain these results are energy communities.

Development of Energy Communities and the strategic implications for the Country and its economy

published by City Life Magazine – N. XII – June 2016
by Lorenzo Tavazzi, Head of Scenario practice – The European House – Ambrosetti
and Pio Parma, Senior Consultant – The European House – Ambrosetti

Achieving increased autonomy, sustainability and efficiency in terms of energy requirements is, today, an established strategic goal. A potential instrument in contributing to attain these results are energy communities.

In fact, this production and consumption paradigm represents a number of potential benefits—for both end-consumers and the country itself—that range from a reduction in supply costs, to the optimization of the profile for drawing energy from the grid, improved supply quality and reliability, and enhanced integration of renewable sources and optimization of the profile of the global energy load.

In this article, we will be presenting a summary[1] of the analysis we have developed regarding the impacts of the spread of energy communities in Italy.

Energy Communities:
an overview and the potential for their spread in Italy

By energy community is meant a community of users (private sector, public sector or mixed) located in a given reference area in which end-users (the public, companies, public administration, etc.), market players (utilities, etc.), design engineers, planners and politicians actively work together to develop high levels of “smart” energy supply to promote the optimization of the use of renewable sources and technological innovation in distributed generation, and enable the application of efficiency measures in order to obtain benefits in terms of energy costs, sustainability and security.

For this paradigm to take hold, five factors are important:

  1. The structure of the energy system and the generation of renewable sources.
  2. The political aspect, seen as the overall legal/regulatory framework.
  3. The market and the technologies/solutions that are available.
  4. Sustainability/low costs or, in other words, the cost-effectiveness for the energy system, utilities and end-users.
  5. “Energy citizenship” tied to knowledge of the opportunities offered and the social-cultural aspects which can promote or impede the adoption of given innovative solutions.

In terms of the first point (the others will be discussed further on), Italy has a significant base of renewable generation,[2] with a structure of small-to-medium sized installations spread throughout the country. In 2013, there were 515,000 installations, of which nearly 500,000 were small photovoltaic systems with a total gross power output of 23 GW (about 20% of gross power output of national generating capacity) and gross production of 34 TWh[3] (about 12% of national electrical energy production).

A significant share of distributed generation[4] is part of the Efficiency System for Users (SEU) and Existing Equivalent Systems of the Efficiency System for Users (SEESEU) which—together with Internal Networks of Users (RIU)—produce over 30 TWh a year.

Distributed generation (along with microgeneration) is the technological element which, through ICT, makes it possible to involve communities of individuals and entities in generation by enabling smart energy community solutions and providing capital for investment into renewable sources.[5]

To assess the impacts of energy communities in Italy, we started from their potential to spread.  In terms of four application environments—residential, tertiary, industrial or mixed (a combination of two or more environments)—according to estimates by the Milan Polytechnic, on a national basis, there is a potential for the creation of nearly 500,000 energy communities, of which about 80% within a residential context.

On the basis of this figure, we have identified three penetration scenarios: a “base-line” scenario of 5% of the hypothetical potential, an “optimistic” scenario of 10% and a “study” scenario of 15%. For each of these, we estimated:

  • Its contribution to national energy efficiency goals.
  • The net economic impact for energy community members.
  • The effects on the electrical system.

In terms of the first point, the energy communities could be a tool for attaining high levels of energy efficiency. For example, simulating the contribution to energy saving goals established in the National Energy Strategy (“savings scenario to 2020”[6]), energy communities would make it possible to realize between 10% (in the 5% penetration scenario) and 30% (in the 15% penetration scenario) of reduction goals. The most positive benefits would be felt in the tertiary (with a contribution between 15% and 43% towards the savings goal) and industrial sectors (between 12% and 36%).

Figure 1_Total end-consumption of energy

Figure 1. Total end-consumption of energy (Mtoe) and contribution of energy communities to the savings delta of a range of penetration scenarios in Italy.
Source: The European House – Ambrosetti elaboration of Milan Polytechnic data, 2014.

In terms of the environment, reduced CO2 emissions due to the growing presence of energy communities, especially in the industrial and residential sectors, could be between 3.6 (5% scenario) and 11 million tonnes per year (15% scenario), with savings in CO2-related costs at current values of between 26 and 78 million euros per year.

Figura 2_Benefici ambientali

Figure 2. Environmental benefits of the different EC penetration scenarios in Italy.
Source: The European House – Ambrosetti elaboration of Milan Polytechnic data, 2014.

For end-users who are members of energy communities, the economic benefit[7] on an aggregate level would be between 2 and 6 billion euros per year, again in terms of the spread across the 5% and 15% penetration scenarios. Of the various sectors, the impact on the industrial sector is especially positive, between 1.4 and 4.3 billion euros per year.

The energy community paradigm can also result in structural benefits for the electrical system in terms of: 1) reducing demand peaks (peak shaving) during daytime hours; 2) load shifting in managing these peaks;[8] 3) reduction—when stockpiles are available—in the variability of the impact of energy communities on the electrical power market. The effects are shown in the figure below.

Figure 3_Daily electrical demand-Italy

Figure 3. Daily electrical demand on an average day in Italy (MWh, hypothetical 5% EC scenario, average hourly demand in the first 3 months of 2104).
Source: The European House – Ambrosetti elaboration of GME and Milan Polytechnic data, 2014.

Read the full article
on City Life Magazine – XXII issue

[1] For a more in-depth analysis, please refer to the study prepared for GDF-SUEZ Italia in collaboration with the Milan Polytechnic, “Energy Community: a New Paradigm for Energy Innovation in Italy”, 2014.
[2] In 2013, renewable energy sources covered over 29% of end-use electrical consumption and nearly 14% of total consumption.
[3] Of this, nearly 44% was produced in small-sized generation systems (generating capacity up to 1 MW).
[4] This involves installations with nominal power under 10 MVA. Microgeneration involves installations to produce electrical energy, including in cogeneration, with generating capacity of less than 50 kWe.
[5] The output of renewable installations improves if supply chain management technologies are taken advantage of through shifting consumption and grouping multiple users. In addition, the introduction of storage technologies can promote a further push towards renewable sources by lessening planning-related problems. In some European countries, such as Germany and Denmark, the penetration of renewable sources has developed spontaneously, including through energy communities.
[6] The “2020 Savings” scenario also includes consumption in transport sectors. The total impact of energy communities and the contribution to the savings delta refer to the four “pure” energy community paradigm models examined, plus two “mixed” models: urban energy communities (residential and hospital complexes) and extra-urban energy communities (industrial, shopping centers and logistics hubs).
[7] This refers to revenues from energy added to the grid from renewable sources, savings in energy purchased from the grid, savings in terms of thermal energy generated from traditional technologies, etc., net of investment in energy community technologies. Indirect and induced effects were not taken into consideration.
[8] Thanks to stockpiles, renewable energy production is not added to the grid, but is stored in batteries for self-consumption, thus reducing energy community consumption from the electrical power grid.

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