Unintended consequences: The snowball effect of energy communities

Ibrahim Abada, Andreas Ehrenmann and Xavier Lambin

Energy Policy, 2020, vol. 143, issue C

Abstract: In 2019, the European Commission finalized a legal framework for “Citizens” and “Renewable Energy Communities”, paving the way for their deployment. While the benefits of such communities have been discussed, there is increasing concern that inadequate grid tariffs may lead to excess adoption of such business models. Furthermore, snowball effects may be observed following the effects these communities have on grid tariffs. We show that restraining the study to a simple financial analysis is far from satisfactory. Therefore, we use the framework of cooperative game theory to take account of the ability of communities to share gains between members. The interaction between energy communities and the distribution system operator then results in a non-cooperative equilibrium. We provide mathematical formulations and intuitions of such effects, and carry out realistic numerical applications where communities can invest jointly in solar panels and batteries. We show that such a snowball effect may be observed, but its magnitude and its welfare effects will depend on the grid tariff structure that is implemented, leading to possible over-investments in photo-voltaic panels. In particular, we find that setting a fixed grid tariff strongly mitigates such over-investments.

Keywords: Energy communities; Cooperative game theory; Non-cooperative game theory; Decentralized power production; Consumer participation; Micro-grids (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (18)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:enepol:v:143:y:2020:i:c:s0301421520303359

DOI: 10.1016/j.enpol.2020.111597

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