The value in Local Energy Communities - new actors in the energy transition

Department of Industrial Engineering & Innovation Sciences Technology, Innovation & Society Research Group The value in Local Energy Communities - new actors in the energy transition Master’s Thesis Written as a part of MSc SELECT (Environomical Pathways for Sustainable Energy Systems) Programme by EIT InnoEnergy With the support from By: Aleksandra Radwanska Student number: 1375822 Department: Industrial Engineering & Innovation Sciences Research group: Technology, Innovation & Society Thesis supervisors: Dr. Ir. A.J. (Anna) Wieczorek (Faculty of Industrial Engineering and Innovation Sciences, TU/e) Prof. Dr. Ir. G.P.J. (Geert) Verbong (Faculty of Industrial Engineering and Innovation Sciences, TU/e) Dr. H.P. (Phuong) Nguyen (Department of Electrical Engineering, TU/e) Advisor: Dr.ir. Sandro Iacovella Place, date: Eindhoven, 19/07/2019 ii iii Title: The value in Local Energy Communities - new actors in the energy transition Keywords: Local Energy Community, Value, Energy transition Submitted by: A. Radwanska (1375822) Supervisors: Dr. Ir. A.J. (Anna) Wieczorek (Faculty of Industrial Engineering and Innovation Sciences, TU/e) Prof. Dr. Ir. G.P.J. (Geert) Verbong (Faculty of Industrial Engineering and Innovation Sciences, TU/e) Dr. H.P. (Phuong) Nguyen (Department of Electrical Engineering, TU/e) Advisor: Dr.ir. Sandro Iacovella Place, Date: Eindhoven, 19/07/2019 This report can be cited as follows: Radwanska, A. (2019). The value in Local Energy Communities - new actors in the energy transition (Master’s thesis). Eindhoven University of Technology, Eindhoven, Netherlands iv PREFACE With this Master’s Thesis I am finishing a great journey of international Master Programme. It has been both a beautiful and very demanding experience. However, looking back at this time, I am very happy that I had a chance to participate in this challenging programme, learn from the experts in the field of Sustainable Energy Technologies and I am convinced it was worth the effort! I started this Master Thesis with a lot of excitement and passion to investigate the topic touching not only the energy transition and energy flexibility, but also societal involvement in these crucial innovations. Today, I am very happy that this focus of study provided me with a lot of knowledge on role of the energy communities in the energy transition and granted me a great job in a very ambitious and innovative company. However, as every process of learning, writing a thesis also had its ups and downs. In the past 6 months, I felt thrilled about working on an emerging, not known and constantly shaping problem on the edge of technology and social studies. On the other hand, I had moments of feeling completely lost in the complexity of this research and I was unsure about my abilities to work on such a challenging topic. These low moments could not be overcome without invaluable mental support from my fiancé, Grzegorz, and the biggest motivator who made me believe I can do it. I would like to direct gratitude to all of the supervisors and especially to Anna Wieczorek, whose efforts not only to deliver the content, but also to work on the form of this Master Thesis have been absolutely invaluable to me. Truth to be told, this Master Thesis would not reach this quality if not her reliable and patient support. I am very thankful to the patience, guidance and mentoring as well as constant in-depth feedback received on the course of conducting this study. Her support in gaining the knowledge on social sciences and transition studies equipped me with right tools not only to look at interesting development of citizen-led energy initiatives, but at the world energy transition in general. Then, I would like to express my gratitude to Eryk Masiak and Sandro Iacovella from Thermovault for critical feedback that made me more aware of the practical implementations of my research and provided me with valuable insights on energy flexibility. I send the words of gratitude to the researchers from University of Twente and especially Gerwin Hoogsteen for providing expertise on the flexibility in the residential sector and allowing me to use the tool prepared by their group of researchers. In addition, I am very grateful to the interviewees, consultees and expert-referents for their time and effort, without which this work would not have been possible. I am particularly grateful to Simon Pannett and Ana Rita Nazário Marouço for agreeing to share their knowledge and expertise in the interviews as well as their time and effort in helping me reaching out to the members of Coopérnico. However, none of this would be possible without my parents Teresa and Lesław, that were supporting me during the whole SELECT adventure, until the very end at the TU/e and who enabled me to take this interesting and challenging path of international education. Thanks to their effort and support, I had a chance to meet my dearest friends that I shared wonderful moments with during the last 2 years of InnoEnergy Master programme and who will always have a special place in my memories. Aleksandra Radwanska, June 2019 v This page was intentionally left blank vi Table of contents 1 Introduction ........................................................................................................................ 1 1.1 Context ........................................................................................................................ 1 1.2 Problem Statement ...................................................................................................... 3 1.3 Research objective and research questions ................................................................. 4 1.4 Scientific and societal relevance ................................................................................. 4 1.5 Research design ........................................................................................................... 5 2 Methods .............................................................................................................................. 7 2.1 Research Question 1: How can Local Energy Community be defined? ..................... 7 2.2 Research Question 2: What values drive Local Energy Communities? What are the most important values driving Local Energy Communities in Portugal? .............................. 8 2.3 Research Question 3: What economic value can Local Energy Community create to its members and other actors in residential sector? ................................................................ 9 2.3.1 Economic aspect .................................................................................................. 9 2.3.2 Technical realization .......................................................................................... 10 2.3.3 Case Study ......................................................................................................... 13 2.4 Research Question 4: What suitable organizational models for the operation of the Local Energy Communities can maximize the satisfaction of the values and needs of Local Energy Communities? .......................................................................................................... 15 2.5 Research quality ........................................................................................................ 15 3 Analytical framework ....................................................................................................... 16 3.1 Transition studies ...................................................................................................... 16 3.2 Multi-Level Perspective ............................................................................................ 17 3.2.1 Macro-level: the landscape ................................................................................ 17 3.2.2 Meso-level: the regime ...................................................................................... 17 3.2.3 Micro-level: the niche ........................................................................................ 18 3.3 Actor analysis ............................................................................................................ 19 3.3.1 Values of the actor – Local Energy Community ............................................... 19 3.3.2 Strategies and roles of the actor - New Business Models, USEF Framework ... 20 3.4 Analytical perspective ............................................................................................... 22 4 Results and discussion ...................................................................................................... 23 4.1 Research Question 1: How can Local Energy Community be defined? ................... 23 4.1.1 Local Energy Community in the literature ........................................................ 23 4.1.2 Defining Local Energy Community................................................................... 27 4.1.3 How does Local Energy Community differ from other Community Energy schemes? ........................................................................................................................... 31 vii 4.1.4 Summary ............................................................................................................ 34 4.2 Research Question 2: What values drive Local Energy Communities? What are the most important values driving Local Energy Communities in Portugal? ............................ 34 4.2.1 Values within community .................................................................................. 34 4.2.2 Results of study among the members of Coopérnico ........................................ 37 4.2.3 Prioritization of values among members of Coopérnico ................................... 44 4.3 Research Question 3: What economic value can Local Energy Community create to its members and other actors in residential sector? .............................................................. 46 4.3.1 Strategies to maximize economic value of Local Energy Community and their practical implementation .................................................................................................. 47 4.3.2 Decrease the costs .............................................................................................. 47 4.3.3 Increase the revenue ........................................................................................... 51 4.3.4 Summary of economic analysis ......................................................................... 53 4.3.5 Quantification of flexibility in Local Energy Community ................................ 53 4.3.6 Case study results ............................................................................................... 58 4.4 Research Question 4: What suitable organizational models for the operation of the Local Energy Communities can maximize the satisfaction of the values and needs of Local Energy Communities? .......................................................................................................... 61 4.4.1 Role of the Local Energy Communities in the changing energy market ........... 62 4.4.2 Specific aspects of Local Energy Communities in urban environment ............. 63 4.4.3 Expectations of Coopérnico towards their Local Energy Communities ............ 63 4.4.4 New Business Models ........................................................................................ 64 4.4.5 Proposal of New Business Model and organisational model for Local Energy Communities ..................................................................................................................... 66 5 Conclusions and discussion .............................................................................................. 70 5.1 Summary of findings ................................................................................................. 70 5.2 Discussion and outlook ............................................................................................. 72 5.3 Limitations of the study............................................................................................. 74 5.4 Further research ......................................................................................................... 76 6 List of figures.................................................................................................................... 78 7 List of tables ..................................................................................................................... 79 8 References ........................................................................................................................ 80 9 APPENDIX: Local Energy Communities in literature ..................................................... 94 10 APPENDIX: Energy communities in the literature .......................................................... 96 11 APPENDIX: Nodes in the literature ................................................................................. 98 12 APPENDIX: Interview protocol – Simon Pannett ......................................................... 104 viii 13 APPENDIX: Interview protocol – Ana Rita Nazário Marouço ..................................... 115 14 APPENDIX: Community member survey (English) ...................................................... 128 15 APPENDIX: Community member survey (Portuguese) ................................................ 132 16 APPENDIX: Results of the survey ................................................................................. 138 17 APPENDIX: Codes in the interviews ............................................................................. 141 18 APPENDIX: Tariffs ....................................................................................................... 143 19 APPENDIX: Consent forms ........................................................................................... 146 1 1 Introduction 1.1 Context The world is increasingly concerned about climate change and high carbon dioxide emissions, resulting from the use of fossil fuels and the increasing degradation of the natural environment (IPCC, 2018). The energy system is particularly important and has contributed significantly to global warming (IPCC, 2018), as global emissions of greenhouse gases from the sector increased by 90% between 1970 and 2011, mostly because of providing electricity and heat by means of fossil fuels based power stations (IPCC, 2018; United States Environmental Protection Agency, 2017). In European Union, energy sector is responsible for 77.9% of all greenhouse gases emissions (European Environment Agency, 2019). Although the amount of carbon dioxide and other gases emitted by European Union is decreasing year by year with 24.4 % reduction in 2014 compared to 1990 (EEA, 2016), the pace of this change is not fast enough to prevent the unequivocal warming of the climate (IPCC, 2018). There is a growing urgency to address the pressing challenges. To decarbonize the energy system various measures have been adopted, including: an increased use of renewable energy generation techniques, the application of clean fuel alternatives, carbon capture and storage, the development of smart grids and ICT-based solutions (Burke & Stephens, 2018; Koirala, Araghi, et al., 2018). Since twentieth century, the energy system has operated in a centralized way and has been dominated by large energy companies selling the electricity in long-term contracts (Verbong & Geels, 2007). By planning far in advance, the energy companies were able to adjust the supply to the demand of the large industrial users. The difference in long-term plans and the actual demand for the electricity was balanced by means of producing power from fossil fuels and inflexible or expensive nuclear energy produced by the big energy companies. The high market concentration in the hands of a few market players did not allow for perfect competition, did not prevent the incumbents from transferring the costs of these activities to the end consumers, and continuously put the global climate at risk (Burke & Stephens, 2018; REScoop.eu, 2019). Increasingly however, many countries have pledged to end fossil fuel based electricity generation and rapidly implement wind and solar photovoltaics technologies (EU, 2018). The energy transition has received increasing public attention and has begun to contribute to increased awareness among the general population (Frederiks, Stenner, & Hobman, 2015; Rogers, Simmons, Convery, & Weatherall, 2012). Additionally, because of decreasing costs of renewables (Dóci, Vasileiadou, & Petersen, 2015) growing number of citizens are able to invest in the renewable generation and participate in the fight against climate change (Holstenkamp & Kahla, 2016; Middlemiss & Parrish, 2010; Van Der Schoor & Scholtens, 2015; Van Summeren, Wieczorek, & Verbong, 2019). More and more citizens purchase renewable energy generation equipment, mainly photovoltaics, or purchase systems facilitating flexible use of energy in their houses such as heat pumps, electric vehicles, and batteries with the aim to get actively involved in the energy transition (Sajjad, Chicco, & Aziz, 2014; Sossan, Kosek, Martinenas, Marinelli, & Bindner, 2013; van der Klauw, 2017). The use of renewable energy is thus on the raise (Eurostat, 2019; Hamelink & Opdenakker, 2019; Ilieva, Wang, & Rajasekharan, 2018; Koirala, Koliou, Friege, Hakvoort, & Herder, 2016; Mengelkamp et al., 2018; Rogers et al., 2012) but is not without its flaws. Some renewable energy sources are intermittent, with the yield varying throughout the day and year (Boscán & Poudineh, 2016; Di Somma, Graditi, & Siano, 2019; Hamelink & Opdenakker, 2019). Additionally, the current state of technology does not allow the storage of energy at the desired scale (van der Klauw, 2017). For these reasons, it is impossible to assure the sufficiency of their supply at any moment of time in a way that meets the demand (Boait, Snape, Morris, Hamilton, & Darby, 2019). It is also difficult to balance the supply and demand at any given point in time. As a result, the supply of energy becomes less controllable, endangering the stability of the energy system and the reliable supply of electricity to consumers (Essakiappan, Shoubaki, Koerner, Rees, & Enslin, 2017; G. Hoogsteen, 2017). The most critical element to the stability of the electrical system is the aging transmission and distribution grid infrastructure that is currently under increasing strain from intermittent renewable energy and increasing electricity consumption. These 8 of the definition or are described in the texts completing the definitions, are marked with symbol X. Afterwards, their occurrence was summarized and counted which attributes are present in 50% or more definitions. The goal of the analysis was to identify the factors differentiating Local Energy Communities from other types of organisations and propose the definition for Local Energy Communities. 2.2 Research Question 2: What values drive Local Energy Communities? What are the most important values driving Local Energy Communities in Portugal? Data collection: The second research question was answered based on the semi-structured qualitative interviews and survey among members of energy community. The knowledge base needed for construction of the interviews and survey was built with the use of scientific literature as well as grey literature. For scientific papers, Scopus was used as the main source. Relevant scientific papers were found in the domain of social sciences and energy generation. The keywords searched for during the research are: “value proposition”, “values”. Special attention was paid to the classification of values according to FIETS model prepared by cVPP project (A. Wieczorek, 2018). This classification of the values was used to conduct social research among an existing energy community. The chosen researched group were members of Coopérnico, a Citizen Energy Community connecting ten Local Energy Communities operating in Portugal. Their aim is to be a cooperative of renewable energies with a social focus that operates to support projects promoting solidarity, education or environmental protection. It was founded by 16 citizens coming from diverse background and professional experiences but sharing a common concern for sustainable development. The chosen group of respondents was considered appropriate for the research due to the fact that they have already been consciously involved in the community activities supporting implementation of renewable energy. Their vision is to foster a fair and responsible energy model based on renewables, contributing to a social, environmental and energy sustainable future. They aim to involve citizens and companies in the creation of a new energy paradigm - renewable and decentralized - for the benefit of society and the environment (Coopérnico, 2019). Specifically, they aim to conduct projects to generate economic benefits, from the sale of the produced electricity, as well as environmental benefits with the production of clean electricity (without emissions of carbon dioxide and other pollutants). The electricity produced is integrated into the electricity grid and serves to supply families and businesses. To support their local community, the foundation of the operation is to distribute the benefits generated by society, investors and the environment. After the literature review, semi-structured interviews with two representatives and survey among members and representatives of a local energy community were conducted. The aim of the qualitative interviews and the survey was twofold: • to contribute to a deeper understanding of the values and needs of local energy community members • to prioritize the values present in given community The qualitative interviews were considered an appropriate method for this goal, because it allows the discovering of meaning and is an inductive bottom-up approach is the qualitative interview (Weiss, 1994; Cresswell, 2009). For this purpose, two face-to-face, semi-structured interviews were conducted in order for indicative themes to emerge. The interview was partially structured, though the researcher was ready to adapt the questions to the direction of the conversation. The questions are collected in APPENDIX: Interview protocol – Simon Pannett and APPENDIX: Interview protocol – Ana Rita Nazário Marouço. Additionally, there are verbatim transcripts attached to each interview. The interviews were coded with codes from the classification of values presented on Figure 10 Community values FIETS representation in order to analyse them and compare them with the results of the survey. Because of the friendly attitude of the interviewees in the correspondence prior to the moment of the 9 interview, the conversational tone was chosen in order to create more natural environment. They were recorded on an audio-recorder and transcribed afterwards with ensuring the consent of the interviewee. The form of survey was with open and multiple choice questions. The survey was distributed in two forms: printable version and the online version done with Google Forms and attached to the communication newsletter of the Coopérnico. The survey was prepared in two language versions to adapt to the respondents. The original English version can be found in APPENDIX: Community member survey (English) and the version translated to Portuguese with help of the coordinator of the Coopérnico can be found in APPENDIX: Community member survey (Portuguese) First of all, the members were asked to rank the factors motivating them to participate in Coopérnico on a scale from 0 to 5 (0 – not important at all, 1 – a bit important, 2 - somewhat important, 3 – quite important, 4 – very important, 5 – my top priority). Thanks to this division, the participants were able to indicate the aspects of the energy community that play the biggest role for them as well as the ones they consider not crucial. In the following question, the participants of the survey were asked to indicate factors that would discourage them from participation in the energy community. This multiple choice questions was not aiming at choosing one most discouraging barrier, rather than finding out which aspects would be the least desired by the most participants of the survey. The first and third question asked about similar aspects of operation of energy community in a slightly different way in order to check if the respondents understand the questions and give honest answers. Data analysis: The literature review technique used in this part was a secondary data analysis, meaning that it analysed data collected by other researchers (in this case, mostly cVPP project (A. Wieczorek, 2018)). This technique uses secondary data to provide detail and context to a sociological analysis, which avoids unnecessary data duplication, saving time and research effort (Cheng & Phillips, 2014). The data was used to synthetize the existing knowledge on the values of the energy communities as well as the motivations of individuals joining them. The answers from members of Coopérnico were summarised with use of Excel. The answers were counted and the average scores as well as standard deviations were calculated. This simple technique allowed prioritization of values. The answers from first and third question were compared to check the understanding of the questions and honesty of the respondents. The interviews with the representatives of Coopérnico were coded with the lenses derived from the FIETS classification of values using the program NVivo according to the coding procedure based on the work of Saldana (Saldana, 2009). They were compared with the answers to the survey. The outcome of the social study was one of the inputs of the analysis of flexibility potential in the analysed neighbourhood representing Local Energy Community. 2.3 Research Question 3: What economic value can Local Energy Community create to its members and other actors in residential sector? 2.3.1 Economic aspect Data collection: The economic data was obtained from current tariffs applied by electricity retailers with the biggest consumer base in Portugal, from the Portuguese Regulatory Entity for Energy Services and from the database of wholesale electricity prices for the year 2018. Data analysis: The information on the current tariff structure among electricity retailers was coupled with the output data from the tools used for quantification of available flexibility - ALPG tool and DEMkit platform. In this way, the constructed economic tool was used to assess the economic value possible to derive from the community energy compared to the Business-as-Usual scenario. The value obtained was used 10 to prove the bankability of Local Energy Communities. The tool was done in programming language Python with an add-on in Excel. The details of analysed case study are in subchapter 2.3.3 Case Study. 2.3.2 Technical realization Data collection: In order to quantify the economic value in the Local Energy Communities and verify their economic profitability in the urban context, first the model provided by the University of Twente on “Generation of Flexible Domestic Load Profiles to Evaluate Demand Side Management Approaches” (Gerwin Hoogsteen, Molderink, Hurink, & Smit, 2016) was used. Artificial Load Profile Generator (ALPG) This tool explicitly generates the available flexibility offered by the devices in households (G. Hoogsteen, 2017). This tool was chosen due to the quality and outstanding accuracy compared to other open source tools. The validity and accuracy of the tool was tested in the Dutch town of Lochem and has proved to be accurate when comparing simulation results with the measurement data. Basing on the demographic data and the information about the devices in the household, it simulated the occupancy profiles of individual inhabitants and the flexibility information of devices depending on these occupancy profiles. In this way, it allowed a convenient creation of realistic simulation use-cases to evaluate the performance of decentralized energy management approaches in residential areas (G. Hoogsteen, 2017). Additionally, the tool accounts for the weather data, real solar irradiation and temperature data and is easily customized when it comes to changing the location and time zone as well as the demographic data of the inhabitants of the simulated community. The system, given the demographic information as an input, simulates the households in the network together with the inhabitants and the devices in the household. For persons, an occupancy profile and behaviour patterns are being generated basing on the information such as age category, employment and customs like wake up times and arrival times from work. As the next step, the randomization is performed in order to account for spontaneous behavioural changes such as a day off or a visit of a family, sporting days, washing days, home working days (Gerwin Hoogsteen et al., 2016). Additionally, the simulation of persons accounts for differences between weekend days and workdays. Afterwards, the static load profile or flexibility information of the devices are being simulated. This order is very important due to the fact that the tool assumes low or no penetration of the smart automated devices and no interruption of the behavioural patterns of the users to respect the preference for no comfort violation of the members of the energy community. Therefore, it is stated that behaviour of the inhabitants of the household influences the interactions with devices, meaning static load devices (such as electronics) can only be used when the inhabitants are at home and the timeshiftable devices (for example a washing machine) can only be turned on while the inhabitants are at home, but can continue operating while the inhabitants leave the house. The ALPG tool explicitly generates the available household flexibility offered by devices. It means that it uses classification of the household devices provided by (Flexiblepower Alliance Network (FAN), 2017) called Energy Flexibility Interface (EFI). It divides the appliances into four generic flexibility classes and focuses on the flexibility of a control action offered by the device rather than the technical capabilities of a device (G. Hoogsteen, 2017). The logic behind this division is presented on the Figure 16. 11 Figure 2 Classification of household devices adopted from (Flexiblepower Alliance Network (FAN), 2017) The researchers of University of Twente have specified the types of the devices in a more detailed way while maintaining the connection with the EFI equivalents in the following manner: • The equivalent class in EF-Pi of the Uncontrolled: o Uncontrollable devices are the devices that do not offer any energy flexibility. This means that they must execute their actions right after being triggered to start. In households, such devices can be computers, TV, “white goods”, stand-by usage and electronics, lighting, inductive devices and fridges. o Curtailable devices are characterized by a fixed consumption or production profile and the amount of power that can be curtailed. An example of such devices is PV. • The equivalent class in EF-Pi of the Timeshifter: o Timeshiftable are the devices that can only consume the electricity with a static consumption profile, this means that their “job” is not possible to modify, but only to shift in the time. The information about their job is specific for the device and additionally, it contains the information on the arrival time and deadline for the work to be done. This means that the device should be finished before the deadline specified and cannot be started before the arrival time of each job. The example of such devices are washing machines, dryers and dishwashers. • The equivalent class in EF-Pi of the Buffer: o Buffer-Timeshiftable are the devices for which the flexibility is specified by jobs with a start time, deadline (both given in seconds) and required energy demand in watthours. These devices have a fixed maximum power consumption in watts and buffer capacity in watt-hours. The example of such device is an electric vehicle with a battery. o Buffer is a type of the device that has a specified power consumption or production level in watts and capacity in watt-hours. Example of such devices can be home battery or hot water buffer (storage tank for hot water). For the purpose of this Master Thesis, the ALPG tool was adapted to needs of the case study and some modifications according to insights from Thermovault were introduced. The output data from ALPG tool was connected with the DEMkit tool developed by University of Twente. Simulation and demonstration platform - DEMKit Once the ALPG tool generated high quality “historical” data on the electricity demand in the households, its output was used in the simulation and demonstration platform, named DEMKit, which implements the components, performs the energy management in the neighbourhood and performs 12 control and finally provides a complete model of the smart grid. DEMKit implemented the components provided by ALPG tool, performed the energy management in the neighbourhood and provided a complete model of the smart grid. The energy management system was optimized according to requirements of the analysis. It simulated energy flows from, to and within neighbourhood. In one case the goal was to prevent the infrastructure problems by limiting the capacity on the connection point between the neighbourhood and the distribution grid. In the other case, it optimized energy consumption to minimize the costs of the electricity for the community. The tool was used to perform energy management on a simulated neighbourhood representing a Local Energy Community and verify technical possibility of implementing and executing strategies leading to lowering costs on the electricity provision as well as increasing the revenue from generation and sale of renewable electricity and balancing services. In all optimization cases, DEMkit follows the Triana approach. It starts with the prediction of the electricity demand. The prediction step is done on a household level for each of the relevant parameters, e.g. uncontrollable load, available flexibility, and generation from renewables. These parameters serve as input for the next step of the Triana approach - planning which is done on the neighbourhood level. In this step, the plan of the operation of the devices is done with respect to physical constraints (limitation of the cable capacity) as well as with consideration of the costs of electricity at any given moment. The scheduling problem is solved by iteratively. Given the input data such as the price electricity, the state of charge of the device, the historical data and the needed state of charge in the next time step, each devices schedules the use of their flexibility and communicates the scheduled profile to the household level. The scheduled profile of the devices are then aggregated and the household demand electricity profile is obtained. Next, the profiles that best fit the price signal are being selected and compiled in the neighbourhood profile. This is how the second step of Triana methodology is fulfilled. This approach has proven to be fairly accurate and efficient in performing the energy management between the simulated households and optimizing the usage of the distribution grid between the households in the way that it balances consumption of electricity with locally produces renewable energy from PV in the neighbourhood and satisfies network requirements and capacity constraints (G. Hoogsteen, 2017). However, it also has some disadvantages. The main one is that it assumes that the distribution grid present in the neighbourhood behaves like “copperplate”, which means that the electricity flow within this part of the grid (between the houses in the Community of Place) is not limited and the electricity can move freely between the houses. In case of this research, it means that the only limitation is the operational bounds of the transformer at the connection point between this neighbourhood and the rest of the grid. Therefore, the individual consumption patterns of the houses are not able to provoke problems elsewhere in the network (van der Klauw, 2017). However, this approach might turn problematic if the communities choose to optimize their energy use basing on dynamic wholesale electricity prices, for example the Communities of Interest who are not oriented on solving the infrastructure problems. In their case, the devices will be choosing between either consuming as much energy as possible at the moments of low price or will not be consuming any energy, once the price is too high. This means that the energy management system oriented on the cost minimization and steered only basing on price signals might not only keep the current infrastructure problems but even amplify them by creating new peaks in the electricity demand (van der Klauw, 2017). Price signals cause the devices to choose between either consuming as much energy as possible, if the price is low enough, or not consuming any energy, if the price is too high. As a consequence the devices never operate using a state that consumes a moderate amount of energy (e.g. an EV will never charge less than maximal power). While the grid constraints can be taken into account during the planning phase (Gerwin Hoogsteen, Molderink, Hurink, & Smit, 2014), the scheduled profiles still show significant fluctuations on a local level due to the price signals. Once the second step (planning) is accomplished, the system simulates the “real time” behaviour of the devices mimicking the real grid and performs the control in order to ensure proper functioning. 13 Data analysis: The output data was visualized with another software tool, Grafana 2 , that provides a convenient user interface to aggregate data from multiple time series, calculate mean values or display the profiles of demand for electricity and other commodities in time. The focus of the analysis was potential for the optimization of electricity exchange on the connection point between the neighbourhood (community) grid and the main grid. This value shows the electricity used by all houses in all analysed scenarios. This case study was interested in the amount of electricity exchanged in the direction from the houses and to the houses in each 15-minute interval during whole year. It was visualized as sum of smart meters of the households. Practically, this means that any electricity generated from the photovoltaic installation in the community was shared among the houses within the community and this electricity exchange was not visible at the connection point between the community grid and the grid of the DSO. Only in the moments when none of the houses used this electricity, it was exported out of the community. Therefore, aggregating the electricity consumption in each timeframe from all households resulted in the net power import/export by the community towards the external grid. 2.3.3 Case Study This subchapter describes the steps that were taken to calculate the economic value of the Local Energy Community understood as the Community of Place, in the urban environment. Case community The calculation of economic value was based on an example of Local Energy Community, resembling the local group of Coopérnico – community in Tavira, Portugal. The production of electricity is based on their installation in the city centre with installed power (kW peak) of 76.4 kW and annual production of 130 507 kWh (Coopérnico, 2019; Q Antum, 2019). The members of community are 50 households, as indicated in the description of the installation (Coopérnico, 2019). The households in case study are in close proximity and are under one connection transformer connecting them to the distribution grid. Flexible devices in the community In general, for provision of flexibility services, the devices are needed that can operate within the scale of minutes of hours (van der Klauw, 2017), meaning be able to store energy within days or between days. Such devices are stand-alone residential batteries, batteries in electric vehicles and heat buffers on residential scale. When it comes to electrical storage, batteries were expected to assist scheduling of renewable energy systems by storing the electricity, maintaining a fixed voltage during the electrical load supply, and distributing the stored power with high efficiency (Bagheri, Hamid, Pakzadmanesh, & Kennedy, 2019). Although, the capital cost of batteries has significantly dropped owing to progressive technological improvements (Bagheri et al., 2019), the high investment costs and risks, e.g., uncertainty about the lifetime of the system (Kalkbrenner, 2019) pose still barriers to the consumers. A solution to this problem can be community-owned storage system supporting the efficient use of communityowned photovoltaic system (Kalkbrenner, 2019). Additionally, an advantage of the community ownership is that the batteries can be located outside end-users' homes and therefore diminish safety concerns (Kalkbrenner, 2019). Another promise of the energy storage is the wide diffusion of the electric vehicles. Charging of electric vehicles directly from homeor community-owned photovoltaics is interesting solution to increase the self-consumption (Luthander, Lingfors, Munkhammar, & Widén, 2015). However, this potential is treated by scientists as limited, especially on a household scale, due to mismatch between solar irradiance and electric vehicle charging patterns (Luthander et al., 2015). Additionally, in most of the cases there is no bi-directional flow of electricity between the grid and the electric vehicle, meaning the vehicles can only be charged, i.e. they cannot be used to store electricity for later consumption in the household. The concept of electric vehicles cooperating on a big scale with the electrical grid (vehicle-togrid (V2G)) is not yet widespread. Additionally, scientists do not expect a rapid uptake of this practice because in V2G scenarios the battery lifetime is significantly reduced (Brennenstuhl, Pietruschka, Eicker, & Yadack, 2016). For this reason, the users are not expected to 2 Grafana Labs. Grafana - the open platform for analytics and monitoring. 14 agree to provide with their private electric vehicles the flexibility services and enhancing system efficiency unless there are heavily compensated by the grid operators (Ilieva & Rajasekharan, 2018). However, there are several pilots testing the economic viability of DSOs owned car sharing electric vehicles providing this service (Ilieva & Rajasekharan, 2018; innogy, 2019) which might mean that the communities will follow with community owned vehicles. Another type of devices having potential to play an important role in the flexible use of the electricity and optimal use of the smart grids are not only devices offering pure electricity storage such as household batteries or batteries in electric vehicles, but also heat storage buffers connected to devices transforming electricity into heat that it later on used by the residents. Heating with use of electricity and heat storage are especially convenient in providing flexibility of residential loads. In general, heat storage is less expensive and less influenced by ageing, as it is in case of batteries. Additionally, in the majority of member states of European Union, the biggest energy demand in residential sector is committed to keep the households within the comfortable temperatures and provide hot water that is expected by all end users to be available at any time. The additional buffer capacity can be provided by the thermal inertia of buildings. In this sense, the households can also be treated as heat storage that can be used in order to shift in time the use of electricity for heating (van der Klauw, 2017). The analysis done in the case study respected the need for not violating the comfort of the end-users while using the electricity. In this case, the potential for utilizing this self-generated electricity was calculated without the behavioural interventions motivating the end-users to change their customs and respond to the price or other signals from the electricity providers. Additionally, the case study assumed slow diffusion of the flexible devices. Among 50 simulated households, 5% of them possessed a battery. Additionally, 10% possessed an electric vehicle (EV) and 10% possessed plug-in hybrid electric vehicles (PHEVs). The vehicles have standard parameters of 4200 Wh battery capacity for EV and 12000 Wh battery capacity for PHEV. The remaining devices were typical whitegoods present in households. Definition of the economic value In the scientific literature, the overall economic benefits of community energy systems is proposed to be calculated as the interplay between increasing electricity tariffs and decreasing up-front investment costs of local energy systems (Koirala et al., 2016). However, for simplicity, this Master Thesis aimed to verify the economic value of the flexibility by focusing on the cost of the electricity provided to the households – the variable operational cost of the energy provision. The economic value in this case study was therefore understood as the difference in monetary value of the cost of electricity between the two scenarios of urban environment: Table 1 Visualization of the case comparison Case With optimization Without optimization Many separate houses Not considered Scenario: business as usual Electricity exchanged is sum of electricity demand of the houses and the electricity supply from the PV installations. Houses cooperating as Community of place Scenario: Community of place - one global optimum Electricity exchanged on the connection point is sum of electricity demand of the houses and the electricity supply from the PV installations with applying the optimization of the usage of the devices. • peak shaving + price optimization, (retail prices, wholesale prices) Not considered Houses cooperating as Community of interest Scenario: Community of interest – cost minimization Electricity exchanged on the virtual connection point is sum of electricity demand of the houses and the electricity supply from the PV installations with applying the optimization of the usage of the devices. • Only price optimization (wholesale prices) Not considered 15 Cost of electricity The cost of electricity in this case study was calculated twofold according to following assumptions: a. with consideration of the electricity prices in tariff for residential users from EDP Energias de Portugal, the biggest retailer in Portugal; providing electricity to the grid was: i. neither remunerated, nor charged for ii. remunerated at the rate of retail prices b. with the wholesale electricity prices for Portugal in the year 2018. This is a situation when communities can participate in wholesale market, currently blocked by DSOs in European Union; providing electricity to the grid was remunerated for wholesale prices. 2.4 Research Question 4: What suitable organizational models for the operation of the Local Energy Communities can maximize the satisfaction of the values and needs of Local Energy Communities? Data collection: The knowledge base was built with the use of scientific literature as well as non-academic sources. The keywords searched for during the research were: “organizational models”, “business models”. Additionally, the members of local energy community were asked for the input in semi-structured qualitative interviews and in the survey in order to: • pin-point the organizational and business model uncertainties and drivers in the local energy community • identify the major obstacles restricting the communities from working in the current energy system. The same interviews were used to as in the Research Question 2. In the second question of the survey the members of Coopérnico were asked about their vision on the operation of the energy community. They were asked to mark the answers on scale from “I strongly disagree”, “I disagree”, “I don’t have an opinion”, “I agree”, “I strongly agree” to the statements describing potential activities of the energy community. Data analysis: The literature review technique used in this part was a secondary data analysis as in the previous research question. The data obtained from scientific and grey literature was used to synthetize the existing knowledge on the organizational models of the local energy communities and the types of activities they perform. The input from literature review was complemented with the inputs from the interviews and surveys with the community’s members. The interviews and surveys were coded with the lenses derived from new business models (Jonker, 2012) with the program NVivo according to the coding procedure based on the work of Saldana (Saldana, 2009). Basing on the data obtained from the literature review, the interviews and the surveys, a set of suitable business and organisational models was proposed with use of the new business models canvas (Jonker, 2012). 2.5 Research quality In order to minimize the researcher’s bias, the thesis was a subject to the process of triangulation. The evaluation of the results and formulation of conclusion was supported by the academic supervisor from Eindhoven University of Technology and by the industrial supervisor from Thermovault. Moreover, interviews were double coded to avoid subjectivity and to enhance the reliability and validity of the research (Saldana, 2009). 16 3 Analytical framework The scientific literature doesn’t clarify what the Local Energy Communities are and what their role is in the transition of the energy system. There currently is no agreement on the exact definition of Local Energy Communities and the distinctive features differentiating them from other community energy projects. By offering alternatives to the current system organization Local Energy Communities can be seen as experiments in a broader energy transition which is about a shift from fossil fuels to renewable energy (R. de Waal & Stremke, 2014) and is foreseen to be based on a more distributed, serviceorientated and customer centric system (Delta Energy&Environment, 2017). Transition is thoroughly discussed in transition studies (Geels, 2002) as a transformative change (system innovation), drawing on a co-evolutionary perspective. It assumes that technology and society mutually shape each other, instead of one more or less determining the other (Kemp, 2010). Other scholars define transition as “a fundamental changes in functional systems of provision and consumption such as for example transportation, communication, housing and feeding” (Geels, 2002). It is specifically useful to analyse the transition in the system of energy provision using the Multi-Level Perspective, a perspective that in case of the energy system helps understanding the complex dynamics of sociotechnical change (Geels, 2002) that depends on the linkages between different social groups that reproduce and enact certain activities. These societal groups are the actors of the energy system. One of them, a novel type of actors emerging from niche projects, are the Local Energy Communities whose role in the transitioning energy system is still not clear. Generally, it is assumed that they are contributors to the change in the energy system, but there is no agreement to what extent and in which way they should be involved. To unpack this topic, the actors’ role analysis is particularly applicable. It divides the actors into categories of state (government), private sector (business), civil society actors and the intermediaries that are crucially important in multi-actor transition processes (Fischer & Newig, 2016). Thanks to this theory, the role of Local Energy Communities in the changing energy system can be better understood and the strategies helping them move from the pilot project to the broad system can be defined. The multi-level perspective offers a broad system perspective of the socio-technical context and comprises the landscape, regime and the niche; the energy demand flexibility analysis together with the economic analysis focus on the values, especially the economic value the Local Energy Communities might offer to their stakeholders and using it, exert pressure on the regime; lastly, the business model studies are focused on internal niche developments and the actors analysis on external niche dynamics. The theories in this Master Thesis are used to construct the conceptual analytical model. Here, the model connects the transition studies with actor analysis and business models studies helping to quantify the economic value of the Local Energy Communities and define their role in the new, decentralized energy system. Together, these research fields offer a comprehensive perspective to look at Local Energy Communities and their possible pathways to the regime. 3.1 Transition studies The transition studies are at the core of analysis of the transformation of socio-technical systems that occur due to the sustainability challenges such as climate change or the depletion of resources. Due to the fact that the transition of the systems is characterized by a great complexity of intertwining concepts, there exists a vast range of theoretical approaches aimed at understanding them. The most remarkable and well known basis for transition studies are evolutionary economic theories (Nelson & Winter, 1977), the social construction of technologies theory (Bijker, W. E., Hughes, T. P., & Pinch, 1987) , the role and variety of actors in managing sustainable innovations in society (Farla et al., 2012) as well as their activity in the protective spaces, niches that allow starting the process of the change (Kemp, Schot, & Hoogma, 2007). Among others, these approaches allowed for a systemic view on the transformation processes within the socio-technical systems. The concept socio-technical system highlights the fact that both the social and the technical phenomena are tightly interrelated and dependent on each other (Bijker, W. E., Hughes, T. P., & Pinch, 1987). For this reason, the scholars consider important the connections between the technical elements and the societal functions, the first being used to fulfil the latter. An example of such societal function can be 17 provision of energy. This concept is further used in the transition studies to define the transitions as “the radical change from one socio-technical system to another” (Hardy & Grintals, 2017)(Grin et al. 2010). This and further concepts related to transition studies will be further used as the foundation for this research. 3.2 Multi-Level Perspective The multi-level perspective is used as a framework that can describe the dynamics and structure of socio-technical systems. This framework allows wider system view on the analysed concept and helps conceptualizing the sectors of the socio-technical system, which is required to understand the transition that could take place towards a system of democratic and decentralized energy provision. The framework elaborated by Geels (Geels, 2002) combines important element of transition studies such as neo-institutional theories, structuration theories, science and technology studies as well as evolutionary economics. It divides the socio-technical systems into interconnected levels: the macrolevel called the landscape, the meso-level called the regime and the micro-level called the niche. The representation of them can be found in Figure 3. Due to the fact that all elements are connected with each other and interdependent, they are set in “nested hierarchy” (Geels, 2002). Figure 3 Multiple levels as a nested hierarchy (Geels, 2002) 3.2.1 Macro-level: the landscape Landscape refers to aspects of the widest exogenous environment and the material aspect of society. It is the widest element of the socio-technical system, influencing the dynamics of the lower levels: regime and the niche. It primarily comprises of the major aspects of the socio-technical systems: climate change, loss of biodiversity, resource depletion, macro-economic patterns, geopolitical pressures, shared societal values and beliefs, demographical trends and political ideologies (Geels, 2011). In case of this Master Thesis, the landscape represents the growing concern about the climate change resulting from use of fossil fuels for the energy provision as well as the criticism on the centralized energy system dominated by big energy companies slowing the energy transition. 3.2.2 Meso-level: the regime The socio-technical regime forms the ‘deep structure’ that accounts for the stability of an existing sociotechnical system (Geels, 2004). Regime comprises of set of rules, cognitive, normative, and regulative practices, that orient and coordinate the activities of the social groups that reproduce the various 24 way the transmission losses which occurs over long distances and making the system as a whole more efficient by optimising energy use to minimise the prosumer energy bill and optimises the energy sharing among prosumers by enabling an energy exchange zone at the community level. 2018 An SME or a not-for-profit organisation, the shareholders or members of which cooperate in the generation, distribution, storage or supply of energy at local level, including across borders, fulfilling at least four out of the following criteria: (a) shareholders or members are natural persons, local authorities, including municipalities, or SMEs; (b) at least 51% of the shareholders or members with voting rights of the entity are natural persons; (c) at least 51% of the shares or participation rights of the entity are owned by local members, i.e. representatives of local public and local private socio-economic interests or citizen having a direct interest in the community activity and its impacts; (d) at least 51% of the seats in the board of directors or managing bodies of the entity are reserved to local members, i.e. representatives of local public and local private socioeconomic interests or citizens having a direct interest in the community activity and its impacts; (e) the community has not installed more than 5 MW of capacity for electricity, heating and cooling and transport as a yearly average in the previous 5 year. (Eurelectric, 2018) 2019 Local Energy Communities (LECs) match locally the production and consumption of energy (onsite power) with several benefits, especially under the energy efficiency point of view. They share the property of energy plants and grids between all the inhabitants (jointly owned), with a cooperative governance business model (one man one vote). Local Energy Communities have a strong link with the territory and the local sociocultural context. In LEC the energy production and consumption become factors of social aggregation for local development, increasing the environment protection and valorisation as well as economic income, coming from the energy market. (De Pascali & Bagaini, 2018) 2019 A bottom-up movement which has highlighted the citizens’ intent to independently produce and purchase energy, ‘small unbundled utility model’ which is entitled to perform all activities of energy production and consumption. LECs generate renewable energy, provide energy efficiency services, are involved in electro mobility, and deal with storage and aggregation. LECs are mostly located in rural areas, where the density is relatively low and, as a result, the connection costs per person are the highest. They create legal entities that operate according to a set of ownership and governance principles that distinguish them from traditional for-profit actors in the market in order to provide community benefits for their members as well as local social (provision of services such as supply of local renewables at a fair price, addressing vulnerable consumers) and environmental (locating renewables generation close to consumption) benefits, and the opportunity to participate in the energy transition. https://www.pubaffai rsbruxelles.eu/eventhighlights-what-rolefor-local-energycommunities-in-theeu-energy-transition/ 2020 A legal entity (association, cooperative partnership, nonprofit organisation, etc.) controlled by local shareholders or members that is involved in distributed generation and in performing activities of a DSO, supplier or aggregator at local level, including across borders. (FLEXCoop et al., 2020) What is visible from this overview, the search results have shown various terms describing community energy projects, all of them having slightly different focus areas and putting emphasis on different core activities. The scientific sources and the grey literature do not provide a common definition of the Local Energy Communities. Additionally, all sources propose different roles for Local Energy Communities in the energy system and do not offer any agreement on the activities the Local Energy Communities can perform. To find exact similarities and differences between the proposed definitions of Local Energy Communities and identify the most important characteristics of community energy project, the analysis of all scientific texts chosen in the research was performed. The literature was analysed using the NVIVO software. To ensure proper categorization of the key words, the query was run in order to find exact matches of words occurring in the scientific texts that were later grouped together provided they were singular and plural form of the same word (e.g. community, communities) or they had a very similar meaning (e.g. sustainable, sustainability) and assigned a code in the text. The codes were ranked by occurrence in the literature and gathered in a table attached in APPENDIX: Nodes in the literature. With these codes it was possible to identify mostly occurring keywords and use them to create key 25 attributes of the Local Energy Communities. In order to find these attributes, first it was assumed that the Local Energy Communities although focusing on the renewable energy and sustainable use of electricity, should have a free choice in picking the appropriate way of satisfying their energy needs, therefore the definition should be technology-neutral (De Jager et al., 2008; Morris & Pehnt, 2016; Nolden, 2013). Therefore, all codes indicating specific technology (solar, biogas, wind) were not taken into consideration while choosing the attributes. Additionally, because the analysis took into consideration different forms of “energy community”, the keywords “community” or “communities” were not taken into account in creation of the attributes, because they described the subject of analysis. Other attributes were created by using the key words that were referenced in the literature the highest number of times or combining two or more frequent key words into longer phrases. The keywords were combined basing on the strength of linear association between them (with Pearson correlation coefficient over 0,5) and basing on probability with which one scientific paper contains both of the codes (Jaccard coefficient over 0,9). Both Figure 8 and Figure 9 show the connections between the key words found in the analysed literature. The dark blue lines in Figure 8 connect words between which the strength of linear association achieved Pearson correlation coefficient over 0,5, which means that in the literature they frequently occur next to each other. Figure 8 Items clustered by coding similarity with Pearson coefficient In the Figure 9 dark blue line connects the key words for which the probability with which one scientific paper contains both of them is expressed with Jaccard coefficient over 0,9. 26 Figure 9 Items clustered by coding similarity with Jaccard coefficient The final attributes are “legal entity”, “driven by different values apart from financial profit”, “engagement of people”, “citizens are actors”, “collective governance of actors”, “collective ownership of the organisation, initiatives”, “energy generation (production) ”, “energy distribution”, “energy storage”, “energy supply”, “community energy consumption (use) ”, “sustainability, use of renewable energy, environmental benefits”, “financial benefits”, “energy efficiency / rational use of energy”, “financial development”, “electrical system”, “heat, heating system”, “flexibility aggregation”, “location-based / local use”, “participation in the wholesale energy / flexibility market”. The results of the analysis of the exact definitions of the Local Energy Communities show the development of this term throughout the years. However, it is noticeable form Table 16 that the most occurring attributes of the Local Energy Communities both in the scientific as well as the grey literature indicate that they should be legal entities (75%) that are rather driven by different values apart from profit (88%). Their members, actors working on Local Energy Communities can be citizens (88%) are collectively governing (88%) the organisations and they are the collective owners (75%). They rather focus on electricity provision (100%) and rather not on the heat provision (0%). They act on the whole value chain of electricity, meaning the generation (100%), distribution (63%), storage (63%), supply (88%) and consumption (100%) optimized with the goal of assuring the high share of renewable energy usage contributing to the sustainable performance (63%), rational use of energy (50%) as well as 27 contributing to the reduction of costs spent on the energy (63%). The communities should rather achieve these by aggregating the flexibility (50%) from the local users, meaning that Local Energy Communities should be geographically bounded (88%). Mostly, the definitions were coherent in terms of the activities the Local Energy Communities should provide and the majority of the definitions indicated that these organisations should be formalised in some way, they cannot be just a loose cooperation of the members. The differences in the definitions were occurring in the attributes such as “energy efficiency / rational use of energy”, ”flexibility aggregation” and “active participation in the wholesale energy / flexibility market”. However, it is not clear if the authors of these definitions were not envisioning such possibility, or they purposely omitted these possibilities in the definitions to block the development of the Local Energy Communities or prevent them from performing potentially financially beneficial activities. 4.1.2 Defining Local Energy Community The definitions of Local Energy Communities analysed in Table 16 Occurrence of attributes of Local Energy Communities in the literature indicate that any energy community scheme must meet certain requirements in order to be given name of Local Energy Community. 4.1.2.1 Legal entity A Local Energy Community should be an association, a cooperative, a partnership, a non-profit organization or other legal entity. Any type of loose, non-formalized cooperation of the consumers and prosumers does not give them the mandate to be called a Local Energy Community. 4.1.2.2 Driven by different values apart from profit Almost all definitions focused on the fact that the Local Energy Communities are driven not only by the profit gain, but sometimes primarily by delivering a plethora of values to their members and shareholders. The mostly mentioned values, apart from the economic ones, were the social and environmental values, highlighting the fact that the energy community schemes were many times established with the goal of lowering the carbon footprint of the involved participants by increased renewable energy use and ensuring the energy supply to underprivileged or touched with energy poverty households. 4.1.2.3 Citizens are actors / members Local Energy Communities gather self-organised citizens. Although small businesses and local authorities are not excluded from participation, these initiatives aim to support models focusing on providing services to members or other community benefits, where the ownership and control is with citizens. 4.1.2.4 Collective governance of actors A very crucial aspect of such communities is to provide the members (prosumers and consumers) with individual incentives to reward their participation and ensure that they operate according to a set of internally agreed governance principles. 4.1.2.5 Collective ownership of the organisation, initiatives Due to the fact that the LECs are financed by the members and they are characterized by the community ownership, the financial benefit from their operations are returned to the members of local community via grants, services, reinvestments in collectively owned assets or returns on investment (Hicks & Ison, 2018). 4.1.2.6 All activities of energy value chain (energy generation (production), energy distribution, energy storage, energy supply, energy consumption (use), energy efficiency / rational use of energy) Local Energy Communities are able to effectively manage the assets they are responsible for, meaning various sources of local generation of heat and electricity, flexible demand as well as energy storage 28 with or without intervention of the technology (management system) supplier. Their members collectively own various energy generation assets serving their needs according to defined and community approved logic. They are involved in energy generation, distribution, supply and / or storage as well as activities leading to more efficient and cost-optimized energy use. 4.1.2.7 Financial benefits Aggregation of individual customers under one entity (organisation, cooperative, community) helps the members to achieve higher collective buying power. The consumers energy demand is satisfied with lower financial expenses (Colombo et al., 2014; Lynch et al., 2017; Vinyals, Velay, & Sisinni, 2018b) and prosumers are offered help in increasing their financial profits from selling their excess energy or engage in energy sharing practices (De Pascali & Bagaini, 2018; Vinyals et al., 2018b). 4.1.2.8 Sustainability, use of renewable energy, environmental benefits The activity of the LEC must lead to increased share of the renewable energy in the energy mix of the region. They might aim to be self-sufficient and carbon-neutral in energy provision like more than 500 initiatives aiming to establish energy neutral, zero-emission or low carbon communities (Van Der Schoor & Scholtens, 2015) or foster local renewable electricity generation and profit from selling it to the national grid (Oteman, Wiering, & Helderman, 2014). 4.1.2.9 Flexibility aggregation “Aggregation” means “a function taken by a natural or legal person combining multiple customer loads or generated electricity for sale, for purchase or auction in any electricity market” (Frieden, Tuerk, Roberts, D’Herbemont, & Gubina, 2019). Due its significant electricity consumption, the residential sector is strongly influencing the electrical system, especially the low voltage grid where it is directly attached. Additionally, the exact electricity consumption is difficult to forecast. The models are mostly based on the generic historical data, not accounting for the other important factors such as household size, net income or employment of end users (Hayn, Bertsch, & Fichtner, 2014). Due to the high share of electricity consumption and its hardly predictable load curve, the residential sector is one of the main causes of daily imbalances on the electrical grid, causing high cost for the whole society. On the other hand, the households in European Union increase their investments in the renewable energy generation equipment. However, due to the fact that not all electricity produced can be used at the same time, these newly added capacities lead to increases of more fluctuant power (like solar PV or wind farms) present in the system and the increased unpredictable power consumption linked to the growing share of new electrical appliances (such as heat pumps or electric vehicles). Projected increasing electricity demand in residential sector resulting from electrification of heat, cooling and electric vehicle adoption, without any interventions in internal electricity management will certainly lead to escalating congestion problems on local grids operated by the DSOs. Before, the implementation of Local Energy Communities, this problem was tackled by costly and path dependent grid reinforcement, with the end consumers bearing the costs of these interventions. On the other hand, studies have reported that residential demand flexibility could deliver high benefits to the electrical system and preventing the costly investments by exploiting technologies currently present on the market. Therefore, the need to find new sources of flexibility in the residential sector is increasing (Esterl et al., 2016; Stifter et al., 2016). Managing the generated electricity with the goal of maximizing the self-consumption and minimizing the costs passed on the end users stresses the importance of flexibility in the Local Energy Communities. 4.1.2.10 Location In the context of energy communities, scientific literature distinguishes mainly “communities of place” and “communities of interest”. The communities of interest are formed by networks and social relationships that can extend beyond specifically place-based networks, they can gather people assembled around a topic of common interest (Bauwens, 2019; Henri & Pudelko, 2003; Walker, 2011). In the context of energy community, community of interest would mean bottom-up movement of citizens that share similar values and concerns and come together to jointly produce and purchase energy. The members can aggregate into 29 the organization to jointly invest in the renewable energy production and treat the community as their retailer that virtually connects them and delivers the energy generated by their assets. The energy communities of interest are already quite widely spread in European Union and they connect people with a common interest (here: mostly, the production and consumption of renewable energy or reduction of the costs of electricity) but who are not local to each other, such as dispersed investors in a cooperative project (Walker, 2008). On the other hand, the members of community of place are embedded in a particular spatial context, for example a neighbourhood, a municipality, village, etc. Practically, they live in close or behind one connection point c Because of their proximity, they can balance demand and supply of electricity within their community which reduces the need for usage of the external grid and long distance electricity transmission (Mengelkamp, Johannes, & Weinhardt, 2017). Because of being closely connected, they might be more attracted to participation in the community because they can feel they have bigger impact on the local environmental and social benefits brought by the community projects (Bauwens, 2019). According to the analysis, Local Energy Communities are place-based, first of all serving the customers not only virtually but also physically connected in energy exchange. This attribute has been thoroughly discussed on the European level since the publication of the “Proposal for a Directive of The European Parliament and of The Council on common rules for the internal market in electricity” in 2017. According to the actors involved in the discussion, mainly the organization REScoop, the term “local” was problematic and was causing a lot of confusion among the legislators and involved stakeholders. They highlighted the fact that it was giving a more techno-centric connotation, suggesting rather a technological solution and was not highlighting the citizens’ ownership and control of the projects (REScoop.eu, 2019). To acknowledge the existence of citizen-led energy initiatives and support their development, the Commission proposed to replace “local energy community” with “citizen energy community” in the definition of that certain types of citizen-owned initiatives. This was meant to be a political sign sent to the large industrial players. Their intention was to show a clear sign that the incumbents would not obtain special privileges to set up micro-grids or control local energy management systems in order to avoid grid fees or sell new services. The legislators were concerned that the incumbent players would abuse the new law in order to draw the advantages for themselves and preventing the development of self-organized citizen initiatives. Thanks to this change, equal treatment of the energy communities led and controlled by the citizens is ensured and they are allowed participate across the market on a level playing field with other market actors (REScoop.eu, 2019). In case of the Citizen Energy Community “electricity sharing enables members or shareholders to be supplied with electricity from generating installations within the community without being in direct physical proximity to the generating installation and without being behind a single metering point” (Council of the European Union, 2019; European Parliament, 2019). Additionally, the advocates of term “citizen energy community” claimed that the former version would prevent the development of the energy communities whose operation is not limited to one geographical area, meaning communities of interest differing in their organization from the communities of place. After analysis of the literature, the research has reached a conclusion that the locality aspect of the Local Energy Communities is crucial and is an advantage over communities of interest, mainly because it gives communities of place capability to solve the technical problems in the energy system. Scientific literature agrees that both communities of place and communities of interest are set up to facilitate diffusion of clean energy solutions. However, the communities of place additionally can solve the infrastructure problems connected with increase of the renewable energy production on a large scale. Can help facilitate diffusion of clean energy solutions. They contribute to maintain grid stability, balance helps avoiding grid congestion (Lynch et al., 2016) and facilitate a local balance of demand and supply which reduces the need for long distance electricity transmission (Mengelkamp, Johannes, et al., 2017). This problem is not solved in case of communities of interest that, in order to achieve best economic results, can be optimized to lower the costs of energy provision. By can creating peaks of electricity imports to the end-users, they increase the need for costly grid reinforcement (Gerwin Hoogsteen et al., 2014). Communities of place allow local flexibility aggregation and locally deal with congestions and increase grid performances and reliability (Lynch et al., 2016) which makes them able to cooperate with the DSO to solve distribution grid problems and then aggregate the remaining 30 flexibility offers to TSO markets (with the assumption that distribution system operators are allowed to buy flexibility from distributed resources for grid operation purposes) (Olivella-Rosell et al., 2018). Additionally, they can expand their services to better satisfy all energy needs of the customers. Because of their geographical proximity, communities of place are able to not only provide their members with electricity, but also heat which is typically not transported over large distances (McKenna, 2018). However, by bringing so much value to the end-users and other actors in the energy system, they can be taken advantage of by incumbent energy providers which would use new opportunities to collaborate and develop new products and services (Lynch et al., 2016). On the other hand, communities of place bring benefits to the members strongly concerned about autonomy from the incumbent firms. Technically, community of place can manage the energy exchange in the local low-voltage grid to maintain electricity supply behind the meter (within one household) or behind one connection point during grid outage situations (Olivella-Rosell et al., 2018; USEF Foundation, 2015). This allows them to perform controlled islanding and be independent from the incumbents. However, to achieve the best performance, they preferably should involve all citizens living on a certain area, which is difficult to accomplish. Additionally, by being geographically bounded, communities of place primarily have to acquire the local customers before expanding beyond certain area which limits their customer base. When it comes to economic and social aspects, the communities of interest have slightly more advantages than the communities of place. The communities of place allow taking economic advantage of renewable generation owned by community members by facilitating a high rate of self-consumption by locally matching the production and consumption (Mengelkamp, Johannes, et al., 2017). In cooperation with local DSOs, decreased physical exchange of energy on the connection point of the neighbourhood grid and less frequent use of the infrastructure possessed by DSO gives a potential for lowering the costs (Okpako et al., 2017). Additionally, creates additional revenue stream coming from the fact that DSOs are able to buy flexibility from local aggregators to locally deal with congestions and benefit from increased grid performances and reliability (Lynch et al., 2016). In terms of selfsufficiency and autonomy from the incumbents, creates a possibility for situation in which local energy market is based on its own distribution grid and can influence the network charges or if tax advantages are introduced (Mengelkamp, Staudt, Johannes, & Weinhardt, 2017). Additionally, because of bigger proximity between the location of the project (for example renewable energy generation) and the location of the community members greater sense of ownership at the individual and community level is achieved (Peters, Fudge, High-pippert, Carragher, & Ho, 2018). On the other hand, communities of interest allow taking economic advantage of renewable generation owned by community members by virtually matching the energy production and use (virtual energy exchange) between the members (Brennenstuhl et al., 2016). Because of bigger scale of operation, helps achieving bigger negotiation power and receiving more advantageous electricity prices due to collectively participating in wholesale energy (Z. Ma, Billanes, & Jørgensen, 2017). Additionally, bigger scale leads to easier expansion of potential sites for installation of renewables and reach out to a bigger customer base beyond those proximate to specific communities or neighbourhoods (Peters et al., 2018). Additionally, they can take economic advantage from load balancing and participation in reserve and ancillary services markets by steering decentralized loads (Brennenstuhl et al., 2016). Finally, because of not limiting to certain geographical areas, they have possibility to operate on national and international scale and fulfil more the environmental rather than social motivations of the community by engaging individuals, organizations, businesses and local governments in collaboration in shared investment in the clean technologies and contributing to the large-scale energy transition (Hicks & Ison, 2018). The choice of form of the community will affect the way it impacts the external environment and interacts with existing actors of the energy system. On the way from the experiments in the niches to the regime, the energy communities will have to adopt certain strategies. According to transition studies the process in which innovation becomes mature system gets embeded to the new system, is called empowerment. There are two main strategies niches can adapt to grant their place in the new regime. One of them is “fit and conform” in which niche it becomes competitive practice in unchanged selection environment. The other strategy, called “stretch and transform”, assumes that the niche changes the old regime and leads to transformation of the selection environment. 31 Without doubts, the incumbent will not stop blocking the development of the energy communities unless it benefits them and satisfies (at least partially) their needs. Already in the process of the negotiation of the “Clean Energy Package for all Europeans”, they were advocating for introduction of obligations for energy communities to obey “the same ‘free market’ rules” (REScoop.eu, 2019) as larger energy companies. That opposition towards the new initiatives and lack of willingness to change the incumbent system will probably continue unless the energy communities propose an attractive cooperation for the established energy companies. The significant asymmetry of power in the energy system for the advantage of the large incumbent companies indicates that different actors in energy system will refrain from adopting the change, will be sabotaging the niche development of energy communities and surely will be hesitant to switch from their profit-making routines to the social innovations. For this reason, the energy communities do not have the power to radically change the organization the energy system. On the other hand, in the long-term they might strongly contribute to shaping of the roles in the future energy system, by doing this in cooperation with current actors. Therefore, I believe that the strategy of “fit and conform” gives the new idea of energy communities higher chances of adoption to the society. The “fit and conform” strategy can be realized when the energy communities will not only be able to internally bring value to their members and representatives of the society who already believe in them, but when they also benefit the external actors and contribute to solving already existing problems that are painful not only for the citizens, but also to the incumbents. 4.1.3 How does Local Energy Community differ from other Community Energy schemes? Apart from Local Energy Communities, the body of scientific knowledge distinguishes many more definitions of the energy cooperation among and within communities. They are referred in the literature as Community renewable energy, Community energy projects, Sustainable energy communities (SECs), Clean energy communities (CECs), Integrated Community Energy Systems (ICES), Community-scale energy projects, Community Microgrids, Community-based Virtual Power Plant, Renewable Energy Community (REC), Citizen Energy Community (CEC). These different energy schemes vary significantly, but they have several attributes in common. First of all, they aim to contribute to accelerated diffusion of the renewable energy sources, lower the carbon emissions and engage consumers to participate in the systemic changes taking place in the energy system enabling the decentralization of power generation and therefore the power shift from the incumbent players to many distributed emerging initiatives (Boait et al., 2019). Additionally, Van Summeren et al. stress the importance of “community logic” behind these initiatives which can be observed in Community energy projects, Clean energy communities (CECs), Community-based Virtual Power Plant, Renewable Energy Community (REC), Citizen Energy Community (CEC). The elements of “community logic” are fair distribution of outcomes, community ownership, collective decision making, community engagement, open membership, and a scale of energy generation and other related technology in line with community (energy) needs and values (Van Summeren et al., 2019). Having the community focus, these schemes contribute to societal cohesion through shared goals and a fair and transparent allocation of financial costs and returns (Boait et al., 2019). By placing the ownership and the responsibility for the renewable generation assets, such as wind mills or solar panels, on the community members they have additionally contributed to mitigation of the non-favourable attitude of the local populations towards certain technologies, in literature described as “not in my backyard” attitude (Bauwens et al., 2018). According to Gui & MacGill, the term ‘energy communities’ emerged as a related concept which specifically defines the relationship of communities with their intended energy management (Gui & MacGill, 2018). Depending on the primary goal as well as the motivations of the founders, they can have various schemes with different organizational forms. This results in choice of activities and services being provided by them as well as different business models found across all projects. One of the important distinctions impacting the business model of the community energy projects is the 32 differentiation between communities of locality or of interest (Boait et al., 2019). The latter are described as to integrated community energy systems (ICESs), a comprehensive and integrated approach for local energy systems where communities can take complete control of their energy system and capture all the benefits of different integration options (Koirala et al., 2016). Additionally, the ICES aim not only at the self-provision for the local communities, but also provide system services to neighbouring systems such as balancing and ancillary services or help minimizing congestion in the low voltage grids, which is contrasting to main goals of the communities of locality, prioritizing the benefits of sustainable energy generation, maximization of self-consumption and ensuring secure energy supply to their local users (Gui & MacGill, 2018). Community energy projects may have different types of members. According to study of Gui & MacGill, Clean Energy Communities (CECs) can be organized by members within the community, or external actors outside the community, for example technology companies, utilities, governments, or NGOs. On the other hand, in Germany it is common for such projects to be initiated, led and owned by local government (Agentur für Erneuerbare Energien, 2013). Contrasting, in the UK and Australia, the involvement of local government was less significant, leaving the space for the individuals, community groups and small business in a defined local area to act as the ‘community’ actors (Hicks & Ison, 2018). The members in CECs may take a variety of different roles, showing more or less active involvement and their engagement can range from being informed to active participation (Van Summeren et al., 2019). They can act as producers, consumers, or prosumers, investors, asset owners, or a combination of these. They can contribute to the CECs in the form of financial investments, electricity supply, demand reduction, physical equipment such as generation equipment and battery storage, or simply to consume electricity. There are known examples from both rural and urban areas hosting CECs. In the rural area community energy involves mainly private individuals and farmers investing in and operating low carbon technologies, such as micro-CHP and heat pumps, PV, batteries and insulation measures (McKenna, 2018). Other projects connect investors in wind farms, and solar farms that may be coowned and operated by third-party companies, as well as their local distribution networks (Gui & MacGill, 2018). In more limited, urban environment, residents and businesses in a community can have their own PV arrays, co-generation plants, battery storage, demand management facilities supporting more sustainable and efficient energy use in their facilities (Gui & MacGill, 2018). Energy communities that promote local sustainable energy production, can form new connections and new type of energy providers, interacting with local, regional, and national networks, to provide social innovations in a decentralized energy system by becoming involved in the management, distribution and trading of self-generated energy (Van Der Schoor & Scholtens, 2015; Van Summeren et al., 2019). All above described constructs are important elements of Renewable Energy Systems (RES) being defined as a socio-technical system, i.e. a network of actors, rules and material artifacts, that influences the speed and direction of technological change toward the specific use of renewable energy sources to produce electricity, heat/cooling and transportation (Frank, Gerstlberger, Paslauski, Lerman, & Ayala, 2018). Therefore, as elements of RES, they contribute to the technological innovation system of a country, region and/or municipality (Frank et al., 2018). The energy community schemes may take various forms. In order to map the similarities and the differences between them, they were gathered in the Table 17 and compared against the same key attributes of energy communities as the Local Energy Communities. Finally, to verify whether there are differences between Local Energy Communities and if, what they are, the occurrences of the attributes of Local Energy Communities were compared against the occurrences of the attributes in other energy community initiatives. Thanks to this, it was possible to identify the similarities and differentiating factors of the Local Energy Communities among other community energy initiatives. The results of the analysis showing the similarities (marked with “YES”) and differences (marked with “-“) between Local Energy Communities and other schemes are gathered in Table 3. The colours red and green show the presence of given attribute in the definition of analysed energy community scheme. 33 Table 3 Comparison of attributes of Local Energy Communities and other energy community initiatives Local Energy Community (LEC) Citizen Energy Community (CEC) Community energy projects Clean energy communities (CECs) Renewable Energy Community (REC) Communitybased Virtual Power Plant Sustainable energy communities (SECs) Community renewable energy Integrated Community Energy Systems (ICES) Communityscale energy projects Community Microgrids community energy consumption (use) 100% YES YES YES YES YES YES - YES YES YES energy generation (production) 100% YES YES YES YES YES YES YES YES YES - electrical system 100% YES YES YES YES YES YES YES YES YES YES driven by different values apart from financial profit 88% YES YES YES YES YES - YES - - - citizens are actors / members 88% YES YES YES YES YES YES YES - YES - collective governance of actors 88% YES YES YES YES YES YES YES - YES - energy supply 88% YES YES YES - YES YES - YES - YES location-based / local use 88% - YES YES YES - - YES YES - YES legal entity 75% YES - - YES - YES - - - - collective ownership of the organization, initiatives 75% YES YES YES YES YES YES YES - YES - energy distribution 63% YES YES YES - YES - - YES - YES energy storage 63% YES - - YES YES - - - - - sustainability / renewable energy 63% YES YES YES YES - YES YES YES YES YES financial benefits 63% - YES - - - - YES - - - energy efficiency / rational use of energy 50% YES YES - - - YES - YES YES - flexibility aggregation 50% YES YES - YES YES - - - - YES engagement of people 38% - - YES - - - YES YES - YES participation in the wholesale energy / flexibility market 13% - YES YES - - YES YES YES YES YES heat, heating system 0% YES - - - YES YES YES - YES YES financial development 0% YES YES YES YES YES YES YES YES YES YES Similarity to Local Energy Community (LEC) 80% 80% 70% 65% 65% 65% 65% 55% 55% 55% The analysis of definitions was based on equal treatment of all of the identified attributes. This approach was chosen to ensure transparent and non-biased comparison of the definitions. In the majority of aspects the definitions are quite similar. Almost all of them assume that described scheme is focused on delivering to the community members and use renewable energy. In nine out of eleven schemes the definitions stress the fact that they support citizen participation in the schemes and they are collectively governed and owned by these actors. All of the schemes focus on electricity, but only some of them mention the possibility to engage in activities connected with provision of heat. In more than 50% of them it was explicitly mentioned that they are mainly driven by different values apart from financial profit, but some definitions also focus on obtaining financial benefits for the community members or their closest environment. The legal status of the scheme is the most differentiating element. Many of the definitions mention only to “social and organizational structures”, “community initiated and invested energy projects” or refer to technical aspects of the schemes such as a “portfolio of communityowned distributed energy resources” or “self-contained and self-sufficient local electricity supply system”. Only the “Renewable Energy Community (REC)”, “Citizen Energy Community (CEC)” and “Sustainable energy communities (SECs)” are described as legal entities or organizations. Pure comparison of the definitions, based on the listed attributes gathered in Table 3 shows that the most similar form of the organization are the Community energy projects and Citizen Energy Communities, having 80% similarities. The second place take the Clean energy communities, having 70% similarities to the Local Energy Communities. However, a deeper analysis of the literature suggests that the most crucial aspects differentiating the energy communities are their legal status, presence of geographic limitation of their activity (here: location-based / local use), type of members ( here: citizens are actors / members which corresponds to natural persons, but also small enterprises, 40 Table 7 Survey results: social values Category Sub-category Item Average Standard deviation Average score of category Standard deviation within category SOCIAL Energy security Independence from big energy suppliers. 3,95 0,575 3,43 0,4062 Provision and use of locally generated energy. 4,10 0,540 Being self-sufficient in the energy use. 3,95 0,775 Renewable energy education & training Educating about renewable energy, spreading training or knowledge about renewable energy production. 3,65 0,660 Increasing awareness about local energy initiatives. 3,75 0,825 Creating opportunities to engage in volunteering activities. 3,20 1,000 Increasing the environmental values in my community and help my friends behave in more environmentally friendly way. 3,85 0,810 Local accountability & democratic decisionmaking To increase participation in daily life of my community. 3,15 0,765 To empower my community when it comes to decision on energy use. 3,65 0,590 To increase sense of ownership of the local grid and locally generated energy. 3,10 0,830 To improve the feeling or atmosphere within my home. 3,75 0,725 To show my environmental commitment to others. 2,70 1,230 Local job creation & skills development Supporting social cohesion. 3,30 0,940 Cooperating with my neighbours and maintaining good relations in the neighbourhood. Getting involved in building strong community with my neighbours. 3,10 1,000 Cooperating with local companies, supporting local job creation, local suppliers and contracts. Creating local jobs and developing skills in local community. 3,00 0,800 Supporting economic development in my region. 3,15 0,765 Reducing fuel poverty. 3,75 0,600 Addressing poverty and social equity problems in my community. 3,35 0,820 Working and benefitting from eco-tourism developing in the area. 2,80 1,060 Additionally, a strong preference of the financial values over social values is visible in comparison of two very similar expressions referring to putting an end to energy poverty. One of them “Tackling fuel poverty.” was grouped under the financial values and the other one “Reducing fuel poverty.” was kept in the social values. Although the expressions mean practically the same, the scores given to them were slightly different. The item in the financial category scored on average 4,00 and the item in social category 3,75, both with standard deviation of 0,60. Table 8 Survey results: Fuel poverty in financial and social category Category Item Average Standard deviation Financial Tackling fuel poverty. 4,00 0,600 Social Reducing fuel poverty. 3,75 0,600 The technological values did not score high in the survey and are not very appealing to the respondents. The whole category obtained the average score of 2,88 and the items were among the lowest scoring ones in the whole questionnaire. “Use of innovative (high-tech) system to obtain the electricity and heating in the building.” was ranked on average 3,20; “Use of high level inter-communicated smart 41 technologies for automated control of home appliances and devices.” – 3,00 and “Be among the first to participate in a new technologically advanced initiative and give feedback to improve it.” obtained the lowest score in the whole survey – 2,45. However, it is worth noticing that all of them had quite high standard deviations 0,80; 0,90 and 0,94 respectively. The difference of the answers among the respondents can be observed in Figure 10. It can be seen that although the majority of the respondents gave to each of these items score 2 and 3, there were some outliers. 10% of respondents gave “Use of high level inter-communicated smart technologies for automated control of home appliances and devices.” a score of 5 and another 10% gave the score of 1. When it comes to “Be among the first to participate in a new technologically advanced initiative and give feedback to improve it.”, it got 10% of score 0 and the same time 5% of scores 5. There is one interesting aspect about this question. In the first set of the questions 60% of the participants valued as 2 or less the possibility “Be among the first to participate in a new technologically advanced initiative and give feedback to improve it.” while in another question in the same survey 70% of them answered either “I agree” or “I strongly agree” with only 5% indicating that they “strongly disagree” on a very similar question “I would like to be among the first participants in a new technologically advanced initiative and give feedback to improve it.”. The results can be seen on Figure 11. This confusion might indicate that the respondents did not fully understand the question. Another explanation can be that although being among the first to participate in a new technologically advanced initiative and give feedback to improve it is not important to their satisfaction from participation in the energy community, the majority of them do not mind if they happened to participate in such pilot project. Table 9 Survey results: technological values Category Item Average Standard deviation Average score of category Standard deviation within category TECHNOLOGICAL Use of innovative (high-tech) system to obtain the electricity and heating in the building. 3,20 0,800 2,88 0,3171 Use of high level inter-communicated smart technologies for automated control of home appliances and devices. 3,00 0,900 Be among the first to participate in a new technologically advanced initiative and give feedback to improve it. 2,45 0,940 The sensitivity to the financial matters was also reflected in question about the operation of the energy community, with results visualized in Figure 11. The statements “The savings achieved by the energy project should be spent on the initiatives benefitting the whole community (e.g. creation of the bicycle lanes, building a playground for the children).”, “If the monthly savings are not significant (e.g. less than 100 EUR/year), I would prefer to keep this money in the collective budget of the community in order to use it later for a bigger investment.”, “The energy community should manage the savings achieved by the project.” and “The energy community should keep a part (e.g. 10 EUR/month) of my savings in order to be able to reinvest in the new renewable energy generation equipment (e.g. solar panels, wind mills).” were the ones with the least amount of people answering “I agree” or “I strongly agree”. Additionally, they were 4 out of 5 questions that got the answers “I disagree” or “I strongly disagree”. 42 Figure 11 Survey results: Opinions on the operation of the energy community In the last question of the survey, the participants were asked to indicate what would discourage them from participation in the energy community. This multiple choice questions was not aiming at choosing the most discouraging barrier, rather than finding out which ones from these possibilities would be the ones least desired and indicated by the most participants of the survey. The barrier chosen most of the times and being a clear outlier was “Lack of transparency on contract or financial remuneration.” (14 mentions) which is strongly connected with loss of trust of the engaged participants and the need of transparency in the financial aspect of the energy community. This barrier was followed by other financial aspects of the energy community - similarly scoring “Initial investment on equipment.” (6 mentions) and “Possible occasional economic penalties.” (6 mentions). Other barriers, connected with technology use and adoption by the users, were “Possible occasional comfort variations” and “Lack of previous user experience.”. Only 4 participants answered that they would be discouraged by lower remuneration for participation. Additionally, only 3 participants indicated that disclosure of private information and failure of technology would discourage them from participating in energy community services. 0% 25% 50% 75% 100% The savings achieved by the energy project should be spent on the initiatives benefitting the whole community (e.g. creation of the bicycle lanes, building a playground for the children). If the monthly savings are not significant (e.g. less than 100 EUR/year), I would prefer to keep this money in the collective budget of the community in order to use it later for a bigger investment. I would like to be among the first participants in a new technologically advanced initiative and give feedback to improve it. The energy community should manage the savings achieved by the project. The energy community should take decisions on (re)investment in the communities’ grid and renewable power generation equipment (windmills, solar panels, grid infrastructure). The energy community should manage the communities’ energy project. The energy community should support the electrification of transport in my region. The energy community should advise me and support in decision making about improvement of the equipment I use (for example: advisory on which heat pump or which air conditioning equipment to choose.) The energy community should keep a part (e.g. 10 EUR/month) of my savings in order to be able to reinvest in the new renewable energy generation equipment (e.g. solar panels, wind mills). Strongly disagree Disagree I don’t have an opinion Agree Strongly agree 43 Figure 12 Survey results: Factors discouraging to participate in the energy community Apart from the survey, two interviews were conducted with members of Coopérnico. This interview research aimed to contribute to an understanding of the values and needs of local energy community members and to verify the prioritization of the values present in given community. For the interview, two members of Coopérnico were selected. The first person was Simon Pannett, local non-formal leader and the representative of one of the locations united under Coopérnico - Tavira. The second person was Ana Rita Nazário Marouço who works as a project developer in the national office of the Coopérnico in Lisbon overlooking and cooperating with all locations. The analysis of the interviews done in program NVIVO is attached in APPENDIX: Codes in the interviews, Simon is mainly motivated by environmental, social and financial values. He a strong advocate of the sustainability, shares the concerns for the climate change and wants to support the clean energy transition by decreasing the demand of the fossil fuels and their use in the energy generation. In his opinion, Portugal does not take advantage of the abundant solar energy and the potential to assure the energy provision with means of renewable energy. Additionally, he strongly criticizes the fact that the critical infrastructure, such as the national grid, is in hands of foreign investors and the profit taking companies. In his opinion, this closes the possibility for the citizens to enjoy lower electricity bills due to the fact that the monopolistic companies impose high connection charges and payments for the usage of the gird. For this reason, he strongly supports all schemes allowing local communities have control over their locality, especially with satisfy their energy needs with the renewables, which can be sourced locally rather central power stations and having the control over their assets. He wants his Local Energy Community achieve energy self-sufficiency and energy security by becoming independent from monopolistic incumbent firms. Additionally, he likes the community ownership setups and supports the development of social network for the launches of the energy communities. He thinks that, in order to build resilience in the region, the energy communities might go beyond only renewable energy provision and management. By the cooperation with local contractors and local population, he hopes for the energy community schemes to facilitate local job creation and discourage the migration of young generation to big cities in the search for employment. He suggests that Local Energy Communities should adopt a holistic approach contributing to the diffusion of certain new technologies, such as expansion of use of the electric vehicles contributing to the local environmental and health benefits. In his opinion, this will result in the growing attractivity of the region, strengthening the economic base and allowing further revenue streams, such as benefitting from eco-tourism. According to the second interviewee, Ana Rita Nazário Marouço, the members of Coopérnico and she personally are strongly motivated by the environmental values. Rita said that the biggest motivator of the members is to be able to produce their own electricity which is the renewable electricity. They jointly invest in the production of the renewable electricity and closely control the realization of the yearly plan in order to make sure that they consume the same of less electricity than is produced from their renewable energy facilities. Additionally, some members are motivated by the financial values 0246810 12 14 16 Possible new technology failure. Private information disclosure. Lower remuneration than expected. Lack of previous user experience. Possible occasional comfort variation. Initial investment on equipment. Possible occasional economic penalties. Lack of transparency on contract or financial remuneration. 44 and join in order to achieve financial profits realized by having lower tariffs on the electricity consumed and to take advantage from the lower costs of the electricity consumed from the photovoltaic installations owned by the cooperative. Additionally, they seek fulfilment of the institutional and technological values by asking for assistance in establishing business models supporting them in consuming locally produced electricity and maximizing the collective self-consumption. To this moment, this is however not allowed in Portugal. At the moment of the interview, the law does not support the schemes allowing for energy exchange between neighbours, therefore the accounting of energy produced and consumed is done virtually. Once the law changes, the members expect the cooperative to help them do business models around PV on the rooftop to, first of all, consume locally by using a technologically advanced self-consumption system and a management system, and then profiting from sale of the electricity. 4.2.3 Prioritization of values among members of Coopérnico The Coopérnico being a cooperative of renewable energies with a social focus that operates to support projects promoting solidarity, education or environmental protection. They are mainly motivated by contributing to a social and environmental values within the energy transition to more sustainable. Additionally, they involve citizens and companies in the creation of renewable and decentralized energy system that brings their members social, environmental and financial benefit. They share concerns for climate change, want to contribute to global environmental protection and believe that the community energy system should primarily address the environmental problems such as limiting the use of fossil fuels in energy production, decrease emissions of carbon dioxide and other pollutants. By their operation they want to contribute to increase of renewable energy production. This must happen with delivering the financial values to their members. First of all, the members of Coopérnico want the new energy provision scheme to be financially viable and based on clear, transparent and consumerprotecting regulations that ensures customer rights and market rules. Additionally, they are motivated by possibility of saving money spent now on electricity by jointly using the electricity coming from renewable assets owned by the cooperative. Additionally, they expect to draw financial profits from the investments in shared community assets from the sale of the produced electricity. They want the economic benefits to be fairly remunerated based on transparent, clearly communicated methodologies. Provision and use of locally generated energy is not only a tool for gaining financial profits, but also obtaining social benefits for the whole community. Members of Coopérnico expect that the collective cooperation will help them creating opportunities for community participation in determining the nature of energy system. Additionally, they want to achieve empowerment of small domestic consumers in electricity markets and balancing markets and become independent from big energy suppliers. The results of the survey clearly prioritise the category of the environmental values. However, it was clear that the results vary additionally within category. A good example is very differing prioritization of social values where the subcategory of “Energy security” was higher valued than “Local job creation & skills development”. Therefore, it is important to list the most significant values motivating the participation of members of Coopérnico as separate aspects. The aspects that ranked on average above 4,0 and were chosen as rating 4 – very important or 5 – my top priority by 70% to 95% of the respondents are: “Contribution to increase of renewable energy production and energy transition.”, “Contribution to decrease of fossil-fuels consumptions.”, “Contribution to global environmental protection & concerns for climate change.”, ”Contribution to reducing the electricity system gas emissions (for example carbon dioxide emissions). ”, ”Clear, transparent and consumer-protecting regulations that ensures customer rights and market rules. ”, ”Clear and transparent contract with the service provider company that ensuring customer confidence and conflict resolution mechanisms. ”, ”Creating opportunities for community participation in determining the nature of energy system. ”, ”Provision and use of locally generated energy. ”, ”Fair remuneration based on transparent, clearly communicated methodologies. ”, ”Tackling fuel poverty. ” and ”Empowerment of small domestic consumers in electricity markets and balancing markets.”. The exact results of the survey with the average score of each item are displayed in Figure 13. 45 Figure 13 Prioritization of values 46 Having analysed the data form members of Coopérnico, it can be concluded that they are primarily driven by environmental values followed by financial motivations and social values, with special focus on energy autonomy. These inputs were used in the following parts of the research to choose the proper strategies of maximizing the economic value of the Local Energy Community described in subchapter 4.3.1 and to define proper business and organizational models for Local Energy Communities in subchapter 4.4. 4.3 Research Question 3: What economic value can Local Energy Community create to its members and other actors in residential sector? Being a very recent phenomenon, the Local Energy Communities are a subject to strong pressures from the established regime. In order to succeed, they not only must deliver satisfaction of the social and environmental values, but also prove their financial viability. For this reason, the economic value brought by the community energy provision and use requires a special attention. This chapter verified the financial gains coming from the difference of energy costs between the current setup and the community setup. In the current setup the households do not cooperate in terms of energy production and use and purchase electricity from retailers. In the community setup households engage in collective use of renewable energy, energy sharing and optimize their impact on the external grid. This comparison allowed to calculate the economic value of Local Energy Communities to verify the bankability of such projects. The study case was based on a community of place in Portugal. For simplicity of considerations, it was assumed that all members of community of place are connected within one lowvoltage grid. In one case, the community of place is connected to the low-voltage grid and can therefore be considered a low-voltage end user of significant size. In the other case, community has one connection with the medium voltage grid and can therefore be considered a medium-voltage end user. The visualisation of the assumption is represented on Figure 14. Figure 14 Electricity distribution system, adopted from (ERSE, 2018a) 47 4.3.1 Strategies to maximize economic value of Local Energy Community and their practical implementation This chapter took into consideration the outcomes of the social study and used them as inputs to define strategies offering Local Energy Communities possibility to maximise their economic feasibility. These strategies evolved around various methods of either decreasing the costs of electricity, increasing revenues from sale of electricity generated by Local Energy Community and flexibility obtained from optimisation of use of devices in households or a mix of both. The following subchapters describe the strategies to maximise the economic value and their practical implementations. 4.3.2 Decrease the costs Generally in the European Union, and in Portugal, the residential consumers purchase electricity from suppliers competing in a free, unbundled energy market (THOMSON REUTERS, 2019), because they do not have significant size to participate in the power market, as this is done at the wholesale level (Okpako et al., 2016). The cost of electricity purchased by the individual households therefore depends on the choice of the retailer who provides the service of selling the electricity. However, a part of the electricity price is the passing on of regulated tariffs (THOMSON REUTERS, 2019) published, in case of Portugal, every year by Entidade Reguladora dos Serviços Energéticos (Portuguese Regulatory Entity for Energy Services). The tariffs include the costs of economic general interest, such as costs of subsidized renewable energy generation, costs associated with use and maintenance of grid infrastructure and taxes (THOMSON REUTERS, 2019). The network charges are connected with use of the electrical infrastructure such as transmission system possessed and operated by TSOs and distribution system possessed and operated by DSOs. In Portugal, network access tariffs are charged to all electricity consumers for the use of the infrastructure. These tariffs are typically paid by retailers on behalf of their customers and incorporated in the final energy bill (Smart Energy Demand Coalition, 2017). Generally, in Portugal the electricity price paid by the final consumer can be grouped in three clusters: payment for use of networks (distribution and transmission), payment for purchased energy and taxes (ERSE, 2018a). Figure 15 Structure of the price of electricity supply in Portugal, adopted from (ERSE, 2018a) The components having the biggest influence on the final electricity bill of the residential consumers are the costs of purchased energy and the network use costs (the transmission costs and the distribution costs). The costs of energy depend on the amount of energy bought from the market (measured in kWh) and the rate offered by specific retailer (measured in EUR/kWh). Transmission costs are associated with use of high voltage electricity transmission infrastructure serving the whole country, while the distribution costs are associated with use of medium voltage and low voltage electricity grid, extending from the transmission grid. Both, the national transmission system operator (TSO) of Portugal - Rede Eléctrica Nacional SA (REN) and the distribution system operator (DSO) - EDP Distribuição SA, are 48 remunerated through regulated tariffs (network use tariff and tariff of global use of the system), which are set annually by the regulator, Regulatory Entity for Energy Services (ERSE). The way the tariffs are constructed ensures the economic and financial balance of the transmission and distribution activities, and effective system management activities (ERSE, 2018a; THOMSON REUTERS, 2019). The payments for transmission and distribution grid use come respectively to TSO and DSO from generators of the electricity and the suppliers who pass the costs on the final electricity consumers, who pay them in addition to the price of electricity in the final electricity bill. The tariff system is universal to all clients in continental Portugal and it relates the amount of fee paid with amount of electricity purchased, measured in kWh (ERSE, 2018a, 2018b) as well as with the peak capacity requested by the user measured in kW and sometimes represented in equivalent form of kVA (ERSE, 2018a, 2018b). In line with the regulation of ERSE for the year 2018, the electricity price components of focus in this Master Thesis are built up in the way represented in the Figure 16. Figure 16 Cost components of final price of electricity, adopted from (ERSE, 2018a) The price can be calculated, following the equations (1),(2) and (3). (1) 𝐹𝑖𝑛𝑎𝑙 𝑝𝑟𝑖𝑐𝑒 𝑜𝑓 𝑒𝑙𝑒𝑐𝑡𝑟𝑖𝑐𝑖𝑡𝑦 (𝐸𝑈𝑅)=𝑛𝑒𝑡𝑤𝑜𝑟𝑘 𝑓𝑒𝑒𝑠 (𝐸𝑈𝑅)+ 𝑒𝑛𝑒𝑟𝑔𝑦 𝑐𝑜𝑠𝑡𝑠 (𝐸𝑈𝑅) (2) 𝑛𝑒𝑡𝑤𝑜𝑟𝑘 𝑓𝑒𝑒𝑠 (𝐸𝑈𝑅) =𝑐𝑎𝑝𝑎𝑐𝑖𝑡𝑦 𝑐𝑜𝑛𝑡𝑟𝑎𝑐𝑡𝑒𝑑 (𝑘𝑉𝐴)∗ 𝑝𝑟𝑖𝑐𝑒 𝑑𝑒𝑝𝑒𝑛𝑑𝑒𝑛𝑡 𝑜𝑛 𝑐𝑎𝑝𝑎𝑐𝑖𝑡𝑦 𝑙𝑒𝑣𝑒𝑙 (𝐸𝑈𝑅 𝑘𝑉𝐴) + 𝑒𝑛𝑒𝑟𝑔𝑦 𝑖𝑚𝑝𝑜𝑟𝑡𝑒𝑑 (𝑘𝑊ℎ)∗ 𝑑𝑦𝑛𝑎𝑚𝑖𝑐 𝑝𝑟𝑖𝑐𝑒 𝑝𝑒𝑟 𝑒𝑛𝑒𝑟𝑔𝑦 𝑢𝑛𝑖𝑡 (𝐸𝑈𝑅 𝑘𝑊) (3) 𝑒𝑛𝑒𝑟𝑔𝑦 𝑐𝑜𝑠𝑡𝑠 (𝐸𝑈𝑅) =𝑒𝑛𝑒𝑟𝑔𝑦 𝑖𝑚𝑝𝑜𝑟𝑡𝑒𝑑 (𝑘𝑊ℎ)∗ 𝑑𝑦𝑛𝑎𝑚𝑖𝑐 𝑝𝑟𝑖𝑐𝑒 𝑝𝑒𝑟 𝑒𝑛𝑒𝑟𝑔𝑦 𝑢𝑛𝑖𝑡 (𝐸𝑈𝑅 𝑘𝑊) Taking into account the cost components of the final electricity bill, this Master Thesis focuses on strategies lowering the amount of imported energy to the local grid of the Local Energy Community, lowering the peak capacity on the substation connecting the grid of Local Energy Community with the rest of the grid of DSO, using the differences in the prices within the day by taking advantage of timeof-use tariffs or a combination of all of them. 4.3.2.1 Decrease contracted peak capacity (kW) Lowering the cost of capacity payment per user can be achieved by aggregating individuals under Local Energy Community based in a shared apartment building or on a neighbourhood. This can happen when the households aggregate under one body, for example a local community representing them to the market, and the use of electricity within the community is optimised in the way that ensures that not all devices operate simultaneously, meaning the loads do not operate at their nominal power all the time (van der Klauw, 2017). In such situation, the peak demand for electricity of a group of households is not arithmetical sum of the loads of the devices in these households. This means that the peak demand for electricity of residential consumers can be reduced through changing the coincidence of loads (Zhang, Ochoa, & Kirschen, 2011). The resulting realistic power demand is obtained by multiplying the nominal power by a simultaneity factor which differs depending on type of the end-user (housing, Final price of electricity (EUR) Network fees Capacity contracted (kW or kVA) Energy imported (kWh) Energy Energy imported (kWh) 49 hospitals, schools, supermarkets, office buildings). In the residential sector, the value of the coefficient differs between 0,117 (for 50 households) and 1,0 (for 1 households) and it is inversely proportional to the number of the households in neighbourhood or apartments in the apartment building (Stowarzyszenie Elektryków Polskich & BEZEL, 2018). It has been proved by (Zhang et al., 2011) that the Demand Side Management in residential sector is effective in reducing the simultaneity factor and therefore the coincident peak load in residential low voltage feeders. This means that Local Energy Community using optimization of the energy use within the households of the members would be able to have lower connection capacity and therefore be a subject to lower connection costs. On the other hand, this measure is not applicable within a Local Energy Community oriented only for cost minimization of the used electricity and without respecting the physical grid constraints. This is because some demand side management applications may increase simultaneity of loads up to 1.0 (Vill, Rosin, & Lehtla, 2016). Such situation can occur in Local Energy Community having a dynamic electricity tariff reflecting the wholesale electricity prices. In this case the signal of very low price of electricity might cause all flexible loads to switch on at the same time (Gwisdorf, Stepanescu, & Rehtanz, 2010). For this reason, Local Energy Communities that decide to manage their energy use in the way it takes advantage form dynamic wholesale prices, will not be able to decrease the component of gird charges in their electricity bill. 4.3.2.2 Decrease amount of imported energy, maximise self-sufficiency A method to decrease the amount of electricity imported from the grid is to either lower the electricity demand for the whole community or generate required electricity (at least a significant part of it) on site and assure maximal use of it. First, the potential for lowering the electricity demand in households will be discussed. According to Eurostat, among the countries of European Union, the biggest share of final energy consumption in the residential sector was represented by space heating (64.1%), while space cooling accounted only for 0,3%. The second biggest end use was also connected with provision of heat – water heating taking up 14,8% of the final energy consumption. The two uses related with provision of heat took over 75% of the energy used by the residential sector. Electricity used for lighting and most electrical appliances represented 14,4%. The remaining 5,6% of the final energy consumption was spent on the cooking needs (Eurostat, 2018a). Figure 17 Final Energy Consumption in households per use (Eurostat., 2018) This division indicates a big potential in space and water heating for decreasing the amount of energy used or applying energy efficiency measures. It is noticeable that Portugal has one of the lowest proportions of energy used for space heating - 21.1 %, however this is coupled with notorious violations of thermal comfort of end-users especially in winter time (Hutchinson, Wilkinson, Hong, & Oreszczyn, 2006; Magalhães & Leal, 2014). This condition, called “fuel poverty” is a result of lack of economic conditions from the households to purchase energy (Magalhães & Leal, 2014). On the other hand, taking into consideration that in Portugal 72.2% of the energy providing space heating comes from renewable sources, it is expected that decreasing prices of renewable energy and increased affordability of heat pumps coupled with innovating schemes to finance the investments (such as Local Energy Communities or Citizen Energy Communities) will lead to increased electrification of heat provision (Carvalho, Space heating; 64,1 % Space cooling; 0,3 % Water heating; 14,8 % Cooking; 5,6 % Lighting and appliances; 14,4 % Other end uses; 0,9 % 56 Because of proper optimization constraints in the community of place, all peaks were successfully lowered for almost all days of the year. The peak capacity of community of place rarely surpassed 50 kW which is a significant decrease compared to the non-optimised case with average peak capacity in all days of the year around 74 kW, reaching even over 100 kW in January and December. The electricity consumption in community of interest exercising price arbitrage was also characterized by higher peaks. On average, the maximal peaks were 12% higher than in the community of place. However, in extreme cases they reached over 100 kW. The peak shaving effect is particularly visible on the houses with electric vehicles, which electricity consumption was optimised to prevent multiple vehicles from charging at the same time. The visualisation is presented on Figure 20. For bigger precision of the observation, the figure focuses on three weeks in March. Figure 20 Comparison of electricity consumption of electric vehicles In the winter months, like January, the power curve was smoothened mostly by optimized operation of the heating systems, characterized by Buffer-Timeshiftable energy consumption. Therefore, in cold months, when the heating is required to maintain the thermal comfort in the household, they can provide sufficient flexibility to increase the self-sufficiency and lower the required capacity connection. The simulated electricity consumption in January is presented on Figure 21. Figure 21 Comparison of electricity consumption, January 57 Once the temperature rises, the heating needs decrease. In this situation, the electricity generated by the community is not fully used to satisfy the needs of the residents and needs to be exported during the day. The spikes of electricity export are similar for all cases (non-optimised, community of place, community of interest), reaching up to 37 kW in the non-optimized case and up to 30 kW in case of community of place and community of interest. The comparison is visible on Figure 22. Figure 22 Comparison of electricity consumption, March In the sunniest months, both individually operating houses as well as the communities of place and interest were not able to consume all electricity generated by the photovoltaic installation. Significant exports of produced electricity are observed in Figure 23 representing electricity consumption in June. Figure 23 Comparison of electricity consumption, June 58 Although, the exports of electricity were lowered due to optimized electricity consumption, the produced electricity from photovoltaics was not fully used during the day. There are several reason for such behaviour of community. First of all, in summer time the heating demand is very low due to the fact that the air temperatures even surpass the desired temperatures of the households. Secondly, the houses were not equipped in air cooling systems that are not very widely adopted in Portuguese households. Thirdly, the batteries existing in the community did not provide enough storage capacity to compensate for the whole production of electricity from photovoltaics on site. Therefore, the unused electricity had to be exported from the community. Despite these big export of electricity in summer months, the self-consumption of electricity was significantly higher in the case of community of place and community of interest than in the nonoptimised case. By the end of the year, the non-cooperating houses were able to consume only 14 MWh of electricity produced by themselves. On the other hand, the community of place was able to collectively self-consume 27 MWh of the electricity produced on site. The community oriented on the price arbitrage achieved a similar result of 23 MWh. These differences are visualised on Figure 24. Figure 24 Comparison of electricity self-consumption, whole year Summing up, the simulation results show that the analysed community of place can successfully optimize their electricity consumption, even though the penetration of storage devices was not high. Additionally, community of place achieved significant decrease in peaks of power consumption. The price arbitrage in the community of interest provoked high spikes in the electricity consumption at times of very low wholesale electricity price. These spikes were comparable or sometimes higher than in the non-optimised case. 4.3.6 Case study results The economic value in this case study was understood as the difference in monetary value of the cost of electricity between the two scenarios of electricity consumption in urban environment: 59 Table 11 Visualization of the case comparison Case With optimization Without optimization Many separate houses Not considered Scenario: business as usual Electricity exchanged is sum of electricity demand of the houses and the electricity supply from the PV installations. Houses cooperating as Community of place Scenario: Community of place - one global optimum Electricity exchanged on the connection point is sum of electricity demand of the houses and the electricity supply from the PV installations with applying the optimization of the usage of the devices. • peak shaving + price optimization, (retail prices, wholesale prices) Not considered Houses cooperating as Community of interest Scenario: Community of interest – cost minimization Electricity exchanged on the virtual connection point is sum of electricity demand of the houses and the electricity supply from the PV installations with applying the optimization of the usage of the devices. • Only price optimization (wholesale prices) Not considered The costs of electricity were calculated, basing on the national tariffs published by Regulatory Entity for Energy Services (ERSE, 2018a) that are gathered in the APPENDIX: Tariffs. The costs of electricity in “Business as Usual Scenario” case were calculated for each house separately according to tariffs applicable to end users at the low-voltage grid gathered in Table 23. On the other hand, the costs of the community, depending on the case, were calculated with tariffs for low-voltage users with peak capacity over 20,7 kVA, gathered in Table 24 or with tariffs for medium-voltage users requiring higher capacities that is gathered in Table 25. The first scenario assumes the no modification of the tariffs for the residential users and considers a situation in which the households within the community do not change the electricity retailer. The separate houses (Business as Usual), the houses in the community and the community understood as one big user are subject to the tariffs currently applicable in Portugal. Additionally, the first scenario assumes a penalty for injecting the electricity from prosumers, meaning this electricity is not remunerated. The results are gathered in Table 12. Table 12 Comparison of costs (Case1: No payment for PV, retail prices for separate houses and community) Tariff Price component Unit Business as Usual: Individual houses, no community Houses in community of place, invoiced separately by the retailer Community of place, bigger low-voltage user Community of place, medium-voltage user Average costs per house Average costs per house Savings Average costs per house Savings Average costs per house Savings Simple tariff Capacity payment EUR 118,44 101,96 14% 13,82 88% 46,27 61% Energy payment EUR 585,69 586,57 0% 556,20 5% 371,65 37% Yearly sum EUR 704,13 688,54 2% 570,01 19% 417,92 41% Dual zone tariff Capacity payment EUR 118,44 101,96 14% 13,82 88% 46,27 61% Energy payment EUR 478,17 446,67 7% 556,20 -16% 371,65 22% Yearly sum EUR 596,60 548,63 8% 570,01 4% 417,92 30% Three-zone tariff Capacity payment EUR 118,44 101,96 14% 13,82 88% 46,27 61% Energy payment EUR 622,97 563,44 10% 556,20 11% 371,65 40% Yearly sum EUR 741,41 665,40 10% 570,01 23% 417,92 44% The second calculation was performed in the similar manner as the first one. However, in this case the electricity supply form the prosumers was remunerated at the same level as the electricity consumption. The comparison is presented in Table 13. . 60 Table 13 Comparison of costs (Case 2: Retail payment for PV, retail prices for separate houses and community) Tariff Price component Unit Business as Usual: Individual houses, no community Houses in community of place, invoiced separately by the retailer Community of place, bigger low-voltage user Community of place, medium-voltage user Average costs per house Average costs per house Savings Average costs per house Savings Average costs per house Savings Simple tariff Capacity payment EUR 118,44 101,96 14% 13,82 88% 46,22 61% Energy payment EUR 431,29 507,37 -18% 473,20 -10% 256,39 41% Yearly sum EUR 549,73 609,34 -11% 487,01 11% 302,61 45% Dual zone tariff Capacity payment EUR 118,44 101,96 14% 13,82 88% 46,22 61% Energy payment EUR 368,35 390,06 -6% 473,20 -28% 256,39 30% Yearly sum EUR 486,78 492,02 -1% 487,01 0% 302,61 38% Three-zone tariff Capacity payment EUR 118,44 101,96 14% 13,82 88% 46,22 61% Energy payment EUR 450,12 475,93 -6% 473,20 -5% 256,39 43% Yearly sum EUR 568,55 577,89 -2% 487,01 14% 302,61 47% The third and fourth calculation compared the cost savings for community of interest and the community of place. This case assumed that opening the electricity market to the Citizen Energy Communities will enable them to purchase and sell the electricity at the wholesale prices. Both, the community of interest and the community of place take advantage of changing wholesale electricity prices. On the other hand, the community of place puts a limit on the electricity imports and exports to find the optimum balance between the price arbitrage and the peak shaving. In this situation, the energy price component is calculated with use of the wholesale prices and the capacity price component is calculated as in the case 1 and 2. In the third case the costs are compared to the scenario in which the electricity from prosumers is not remunerated. The results of the economic calculation of this case are gathered in Table 14. Table 14 Comparison of costs (Case 3: No payment for PV for separate houses, wholesale prices for community) Tariff Price component Unit Business as Usual: Individual houses, no community Community of interest Community of place, bigger low-voltage user Community of place, medium voltage user Average costs per house Average costs per house Savings Average costs per house Savings Average costs per house Savings Simple tariff Capacity payment EUR 118,44 125,66 -6% 13,82 88% 44,62 62% Energy payment EUR 585,69 157,83 73% 157,83 73% 157,83 73% Yearly sum EUR 704,13 283,49 60% 171,64 76% 202,45 71% Dual zone tariff Capacity payment EUR 118,44 125,66 -6% 13,82 88% 44,62 62% Energy payment EUR 478,17 157,83 67% 157,83 67% 157,83 67% Yearly sum EUR 596,60 283,49 52% 171,64 71% 202,45 66% Three-zone tariff Capacity payment EUR 118,44 125,66 -6% 13,82 88% 44,62 62% Energy payment EUR 622,97 157,83 75% 157,83 75% 157,83 75% Yearly sum EUR 741,41 283,49 62% 171,64 77% 202,45 73% The fourth case, similarly as the third one, assumed that community purchase and sell the electricity at the wholesale prices. The costs are compared to the scenario in which the electricity from prosumers is remunerated at retail prices. The results of the economic calculation of this case are in Table 15. Table 15 Comparison of costs (Case 4: Retail payment for PV for separate houses, wholesale prices for community) Tariff Price component Unit Business as Usual: Individual houses, no community Community of interest Community of place, bigger low-voltage user Community of place, medium-voltage user Average costs per house Average costs per house Savings Average costs per house Savings Average costs per house Savings Simple tariff Capacity payment EUR 118,44 125,66 -6% 13,82 88% 44,62 62% Energy payment EUR 431,29 157,83 63% 157,83 63% 157,83 63% Yearly sum EUR 549,73 283,49 48% 171,64 69% 202,45 63% Dual zone tariff Capacity payment EUR 118,44 125,66 -6% 13,82 88% 44,62 62% Energy payment EUR 368,35 157,83 57% 157,83 57% 157,83 57% Yearly sum EUR 486,78 283,49 42% 171,64 65% 202,45 58% Three-zone tariff Capacity payment EUR 118,44 125,66 -6% 13,82 88% 44,62 62% Energy payment EUR 450,12 157,83 65% 157,83 65% 157,83 65% Yearly sum EUR 568,55 283,49 50% 171,64 70% 202,45 64% 61 The resulting sums show that the energy use optimisation performed by community yields substantial savings on electricity bill in case the electricity production is remunerated at the level of retail prices. This savings are achieved in 50% of the cases when the houses were treated as separate entities by the retailer and were a subject to the same tariffs as in Business as Usual Scenario. Once the electricity produced from residential end users is not remunerated, the costs of the energy component rise due to the fact that big part of production is exported outside of community and needs to be bought back form the market. On the other hand, in the case when houses are represented by one entity, Local Energy Community and considered by the DSO and TSO as one bigger end user at the low-voltage level, savings up to 23% are achieved. Lower costs were mainly observed especially in the capacity component of the end bill. They were achieved because of lowering the peaks in electricity imports to the area of the community grid. Additionally, maximising-self consumption of produced electricity by allowing energy sharing within the community contributed to up to 11% of savings in the energy price component. Although in the first two cases, the energy price component was higher for the community than the separate houses, the savings from the capacity component balanced this grow in all of the scenarios. The savings significantly increased for communities of place that can be treated at one medium-voltage user. In this situation, due to successful energy management and peak shaving, the community can save between 30 and 47% on costs of electricity. The price arbitrage and purchasing the electricity at wholesale prices yielded the savings on energy price component between 57 and 75% both for communities of interest and the communities of place. However, the overall costs of the electricity bill were more lowered for the communities of place. The communities of place in low-voltage grid saved up to 77% of the final costs while the communities in medium-voltage could save up to 73% pf the final bill. On the other hand, the price arbitrage in communities of interest provoked high spikes in electricity consumption as certain moments, increasing the capacity price component by 6%. Therefore, the savings were only achieved in the energy price component. This was possible because the electricity consumption in the community of interested was strongly correlated with volatile wholesale prices. The results of the analysis show that Local Energy Communities (communities of place) not purely optimising the patterns of energy consumption to take advantage of hourly price variations, but primarily focusing on limiting their impact on the electrical grid, can achieve significant cost savings on the electrical bills of their members. These savings are increased if Local Energy Community represents the households of their members as one entity and serves as the electricity retailer to the members. Higher economic value is achieved because Local Energy Community, by limiting its impact on the electrical grid, solves infrastructural problems endangering the operation of the grid possessed by DSOs and TSOs and is a subject to different tariffs, applicable for energy users of significant size. 4.4 Research Question 4: What suitable organizational models for the operation of the Local Energy Communities can maximize the satisfaction of the values and needs of Local Energy Communities? The results of Research Question 3: What economic value can Local Energy Community create to its members and other actors in residential sector? clearly indicate that the Local Energy Communities are able to maximize their economic value from lowering the peak capacity for imports of electricity and from maximising the self-consumption within their local grid. These economic advantages can only be met in the communities of place, not only gathering the members in close geographic proximity, but ideally additionally operating and owning the local low-voltage grid connecting the households of their members, connecting the apartments in a multi-apartment building or connecting multi-apartment buildings in a block. These communities would connect the users with energy generation facilities and / or shared energy storage. This crucial aspect must therefore be included in the business models for Local Energy Communities, which were designed in this research question. 62 4.4.1 Role of the Local Energy Communities in the changing energy market The specific role that would allow Local Energy Communities maximisation of their needs, while delivering economic value to other actors of the energy system was identified with USEF framework. This document has the ambition to serve as an integral market design for the trading of flexible energy use (USEF Foundation, 2015). It contains description of roles and responsibilities of actors in the flexibility markets that can be used to define several business models. The framework relates to current organisation of the energy system and leaves the interactions between market roles unchanged. This enables understandable standardization of the flexibility market while still providing sufficient room to adapt it to local differences in market regulations. USEF Framework (van der Veen, van der Laan, de Heer, Klaassen, & van den Reek, 2018) and corresponding whitepaper focus on flexibility within Citizen Energy Communities (Klaassen & Van Der Laan, 2019) and provide descriptions of possible roles they can adopt, such as Facilitator, Supplier, Energy Service Company, Aggregator or DSO. The illustration of energy and flexibility services that can be offered to the Prosumers within a Citizen Energy Community are presented on Figure 25. Figure 25 Illustration of all energy and flexibility services that can be offered to the Prosumers within a Citizen Energy Community (Klaassen & Van Der Laan, 2019) Although Citizen Energy Communities are not identical to Local Energy Communities, some of these roles can be adopted by Local Energy Communities. As Facilitators, they would encourage collective participation of the members and coordinate activities contributing to development, implementation and/or expansion of their activity. As Suppliers they can participate in energy trading, become the retailer of the electricity to their members as well as be responsible for sale of energy on the wholesale energy market. To further strengthen their market position and offer wider variety of services, the community can take the role of Energy Service Company (ESCo) to more efficiently valorise implicit demand-side flexibility. In this way, they might yield additional benefits to the community members, they might optimize the energy consumption in the community according to availability of locally generated energy or renewable energy as well as to the dynamic prices offered to them either by their retailer or access by the participation in the wholesale market. Additionally, they can engage in not only optimization, explicit demand-side flexibility, but also sale of the aggregated flexibility to interested parties such as the DSO, TSO or Balance Responsible Parties. In this way they become an Aggregator. Finally, in the communities of place, the community can take ownership and responsibility of 63 maintaining the local grid and take the role of DSO. In this way, they would be based on (almost) selfcontained and self-sufficient local electricity supply system and achieve big rate of autonomy and independence from other actors in the energy system. 4.4.2 Specific aspects of Local Energy Communities in urban environment Until now, most of such energy communities were operating in the rural areas. One of the explanations for this difference in popularity of rural and urban energy community is a different context in which people interact. The urban communities are characterized by less strong ties between the citizens and tend to be less collectively organized and cohesive than rural ones (Walker, 2008). For this reason, the potential participants of the community are less incentivized to care about the common goods and mostly have less sense of ownership of the projects serving particular areas of the city. Additionally, the renewable energy technologies are not equally viable in the urban context as in the rural one. Some of the renewable energy technologies, such as wind, biomass and hydro are not applicable to the urban environment and therefore these methods of renewable energy production was not used to this date on a big scale in the cities. On the other hand, there is a big potential for building-mounted solar, combined heat and power (CHP) and district heating networks in the dense urban environment (Walker, 2008). All of this, influences the choices the potentially established Local Energy Communities in the cities would take and has an impact on their business models and the internal organization of the members and stakeholders. 4.4.3 Expectations of Coopérnico towards their Local Energy Communities To compare the inputs from scientific literature knowledge with the opinions of real members of energy community, the social study collected the expectations towards their Local Energy Communities in form of a survey. The participants were asked about their vision on the operation of the energy community, answering the questions on scale from “I strongly disagree”, “I disagree”, “I don’t have an opinion”, “I agree”, “I strongly agree” to the statements describing potential activities of the energy community. The results of this part of the study are presented on Figure 11 Survey results: Opinions on the operation of the energy community, analysed in terms of values of the community in Chapter 4.2.2. However, it also brings insights on the expectations of the Energy Communities, as Coopérnico, that can be relevant for proposal of Business Models for Local Energy Communities. The distribution of answers from the participants show that they are very sensitive to the financial aspects of the operation of energy community. The question “If the monthly savings are not significant (e.g. less than 100 EUR/year), I would prefer to keep this money in the collective budget of the community in order to use it later for a bigger investment.” Achieved less than 50% of approval among the surveyed participants, which is the lowest score among all of the questions. Additionally, 5% of the respondents strongly disagreed and following 10% disagreed to the statement “The savings achieved by the energy project should be spent on the initiatives benefitting the whole community (e.g. creation of the bicycle lanes, building a playground for the children).” Possibility of giving the control over managing the savings achieved by the project by energy community was met with strong opposition of 5% of the respondents, which were the same people who opposed to possibility for energy community to keep a part (e.g. 10 EUR/month) of the savings in order to be able to reinvest in the new renewable energy generation equipment (e.g. solar panels, wind mills). On the other hand, 85% of the respondents was convinced to leave the energy community the control and allow the body to take decisions on (re)investment in the communities’ grid and renewable power generation equipment (windmills, solar panels, grid infrastructure). Apart from managing the communities’ energy project, community energy is expected by 90% of the respondents to advise the members and support them in decision making about improvement of the equipment used (for example: advisory on which heat pump or which air conditioning equipment to choose). Slightly less, 85% of them, additionally, think that energy community should support the electrification of transport in the region. 64 To improve the understanding of logic behind the operation of Coopérnico, the results of the survey were completed with the semi-structured interviews. The representatives, Rita and Simon were asked to describe how they see an active role for the people living around to participate in the energy trading system, how they envision the decision-making processes and the role of members in Local Energy Communities. Both Rita and Simon suggested the cooperative model as the way to design the operation of the Local Energy Communities to maximize the satisfaction of members’ values and needs. Rita was in favour of the cooperative model, because she believed that energy communities should be based on democratic principles. On the other hand, Simon stressed the importance of transparency in the operation of community-based energy schemes. Both claimed that the cooperative model allows a very high degree of transparency due to the fact that it imposes the obligation on all members to participate in the decision making process. Additionally, Rita was convinced that good operation of the Local Energy Communities can be ensured when the members can democratically control and govern the organisation. She gave the example of execution of collective decision making in Coopérnico where all members get to vote on the activity plans during the General Assemblies, that later on are executed by the management board who are the people chosen by the members of the community to make the decisions on the day to day basis. Simon, being very pragmatic, claimed that it is not possible to constantly satisfy everyone involved in the project. Therefore, at least democratic decision making process ensures that the activities of the community are decided based on the decisions of the majority of members, which means that the democratic model are is the most appropriate one to satisfy the biggest share of stakeholders. According to Rita and Simon, a big advantage of the cooperative model is the fact that the members have the possibility to closely observe the managing team and they are able to constantly verify their performance. When it comes to business activities of the energy community, the interviewees suggested slightly different business focus. In Rita’s opinion, Coopérnico and similar organisations gathering Local Energy Communities should engage in facilitating collective investment in renewable generation, act as an electricity retailer for the members and enable collective self-consumption of renewable electricity. She thinks that by acting as one big entity towards the electricity market, Local Energy Communities can have a better bargaining power when it comes to the negotiations of electricity provision tariffs, which would ensure low costs for the electricity for their members. To manage this activity, Local Energy Communities needs to have the tools to virtually account for the electricity produced and consumed by all people gathered under the community. She does not mention any additional possibilities for revenue streams, such as trading the energy flexibility of the end consumers with the market, mostly because she claims that the state of the technology in the apartments of the current members of Coopérnico does not allow for the activities considered as demand side management. However, she does not exclude this possibility in the future. The other interviewee, Simon, presented a broader vision for business model of energy community. He suggests that Local Energy Communities should adopt a holistic approach contributing to the energy transition as well as contributing to the local environmental and health benefits. The energy communities should be oriented towards increasing the share of renewables in the electricity mix of the country or region, diffusion of certain new technologies, supporting for example the electrification of transport and refurbishment of the built environment to increase efficiency of energy use as well as tackle energy poverty. In his opinion, these activities should engage local suppliers and discourage young talent from emigration to other cities or countries. According to Simon, this would result in the growing attractivity of the region, strengthening the economic base and allowing further revenue streams, such as benefitting from eco-tourism. 4.4.4 New Business Models Business Models visualize the principles of operation of companies and justify their existence. They are a tool helpful to manifest how certain organizations plan to create, deliver and capture value (Osterwalder & Pigneur, 2010). The literature in organization studies defines business model as a synthetic representation identifying and combining the main dimensions that characterize an organization, which are mission and objectives; strategy; organizational structure and governance; activities, understood as goods and services; financing mix; partnerships (REScoop.eu, 2018). 65 Traditionally, the most popular business model canvas, created by Alexander Osterwalder (Osterwalder & Pigneur, 2010) and widely used nowadays, focuses on the value proposition offered uniquely towards the customers of the company, the profits gained from the operation as well as the resources involved directly in the creation and delivery of the value. However, in the world increasingly attentive to the sustainability issues, the traditional approach of focusing purely on monetary value creation is considered by many scholars and decision makers to have an apocalyptic effect on the planet (United Nations, 2011, 2018). The major problems of the classical business models come from the fact that they were invented in the linear way, meaning they treat the resources used in the production as unlimited and they allow for production of waste. This is connected with not accounting for negative externalities, such as environmental damage, exploitation of the workers or pollution. Additionally, because they are aimed at constantly growing the monetary gains for the business owners and their customers, they do not suit well in the time of financial, energy and climate crisis (Jonker, 2012). Therefore, the societies advocate for change of the perception of the value creation. They suggest that it should no longer be focused only on monetary, measurable benefit obtained by the organization and their customers, but also social and ecological values shared with the outer world. In order to address these problems and draw the attention of the businesses to their impacts on broader society, Jan Jonker proposed a New Business Model (Jonker, 2012). This model offers a fresh look on how companies should build rationale about their activity in the new regimes addresses the problem of sustainability. The principles of business are multiple, shared, collective and are manifested by multifaceted (monetary, social, environmental) value creation that address the needs of variety of stakeholders in the community structure around the business. Additionally, special attention is dedicated to environmental costs arising from the firm’s activities and critical assessment of availability of the resources needed for the activity. This New Business Model approach is not just sustainable because of the earning or transaction model, but also have an innovative value proposition (Jonker, 2012), combining social, environmental and economical values. This approach reflects the broad variety of needs and values present in the energy communities and specifically Local Energy Communities, described in chapter 4.2. For this reason, the canvas presented on Figure 26 was chosen to draw the business model proposition in this Master Thesis. Figure 26 Clover leaf New Business Model by Jan Jonker (Jonker, 2012) 72 community participation in determining the nature of energy system by empowering small domestic consumers, tackle fuel poverty and build strong economic base within their region. 5.2 Discussion and outlook The answer to first research question was based on literature on very novel, not specifically defined topic that was, in the time of the research, under influence of political discussion. At the beginning of the research, the Local Energy Communities were most commonly described as the new bottom-up, citizen movement generally value rather than profit-driven, involved in distributed generation and in performing activities of a distribution system operator, supplier or aggregator at local level, including across borders. Additionally, they were characterised by aiming to provide environmental, economic or social community benefits for its members or the local areas where it operates rather than financial profits. However, this definition was shaped by political discussion between the proponents of the energy communities, opposing incumbents, lobbyists and decision makers influencing the legislation of European Union. The discussion was revolving around the locality aspect of the Local Energy Communities. It was unclear whether it should mean the geographical proximity or the broader social definition of locality, e.g. of interest. Finally, it was concluded that Local Energy Communities do not perfectly describe the European-wide movement of citizens engaged in electricity generation, distribution and supply, consumption, aggregation, storage or energy efficiency services, generation of renewable electricity, charging services for electric vehicles or providing other energy services to its shareholders or members. Instead, the definition of Citizens Energy Community was proposed to ensure that the incumbents do not take advantage of acknowledgement of the Local Energy Communities in “Clean Energy Package for all Europeans”. Despite the understandable change of the naming of these citizen led projects, this Master Thesis, still holds that the Local Energy Communities are a crucial element to help Citizen Energy Communities break from the niches. Although, they are seen as mainly technical solutions, they bring a significant economic advantage to the energy community schemes. The results of the third research question supports the claim that thanks to clustering the members into Local Energy Communities, the Citizen Energy Communities contribute to solving urgent technical problems and are able to maximise their economic value that can be used in the expansion to the regime of the energy system. The social study was based mostly on survey among only 21 members of energy cooperative already active in Portugal which might suggest that the outcomes of the study do not reflect the opinions of broader society. Even though the questions were designed in a non-directing way, the results surely cannot be replicated to all communities in Portugal or European Union, because the local preferences were clearly visible in outcomes of the study. The respondents highly prioritised the environmental values delivered by the participation in the energy community. On the other hand, there are known cases of energy communities that base their rationale on financial motives and attract the members mainly because of offering more attractive tariffs of electricity use, preferential conditions for investing in specific energy generation equipment or subsidies for renovations aiming at energy efficiency. The results of the third research question have proven that the intermittent and decentralized renewable generation provided by increasing numbers of citizens, Local Energy Communities and increased electrification of the residential sector is source of the stresses on the low-voltage distribution grids. The old infrastructure, not well equipped to handle bi-directional and prone to peaks electricity flows requires costly infrastructure investments each year (ERSE, 2018a). The funds needed for these investments and the associated operation and maintenance costs are currently charged by the DSOs who, because of their physical characteristics, are natural monopolies. For this reason, the Local Energy Communities aggregating the residential consumers are likely to bear the costs associated with their impact on the local grid. Currently, scientific literature suggests that practically grid investments can be deferred if peaks in import and export of electricity to the local grid of the community are reduced. This method is called peak-shaving (Koller, Borsche, Ulbig, & Andersson, 2013; Poullikkas, Papadouris, Kourtis, & Hadjipaschalis, 2013) and is connected with price components calculated in relation to the requested capacity of connection measured in kW (ERSE, 2018a). 73 The results of the case study are in line with the scientific literature and indicate the validity of developing demand response at community scale rather than focusing on individual customers. This claim is supported by research of (Boait et al., 2019) and industry practitioners (Delta Energy&Environment, 2019). In line with the literature review and the case study in this Master Thesis, they stress that only a few domestic devices can be used and steered in the demand side response programs, especially not the ones which might potentially violate comfort of the end users or lead to disclosure of their private information. According to the literature, the key asset types providing biggest potential for residential demand response are devices providing space and water heating, space cooling, electric vehicles and residential batteries (Ali, Safdarian, & Lehtonen, 2014; Delta Energy&Environment, 2019; FLEXCoop et al., 2020; Leeuwen, 2017; Ruelens et al., 2014; van der Klauw, 2017), mainly because thermal masses of buildings act as a storage buffer thanks to the slow thermal dynamics (Ali et al., 2014). Coupling this property with increased electrification of space and water heating (direct electric, storage heaters, heat pumps, direct electric central heating, immersion heater, a heating element in a hot water tank) as well as space cooling (room air conditioners or whole house air conditioning), is forecasted to play a major role in flexibility offering of the residential sector (Delta Energy&Environment, 2019). Indeed, these devices offered the biggest flexibility and peak shaving potential in the case study on the energy community of 50 houses. On the other hand, in many European Countries the heating needs are rarely satisfied with the electrical devices. Certainly, there is a big potential to electrify heat provision which attracts the attention of the utilities that are looking for technologies allowing them to take advantage of increased customer engagement in the energy provision and use. However, the speed of diffusion of this technology, highly impacting the flexibility potential in the Local Energy Communities, is questionable. The second group of devices offering big potential for energy use optimisation within the community were electric and hybrid vehicles. In some forecasts, electric vehicles of the future will most likely be charged at home with a dedicated EV charger enabling the households and communities to participate in the demand response. This assumption was used in this Master Thesis. The optimisation of energy use performed in the third research question proved that smartly charging electric and hybrid vehicles contribute to smoothening of the curve of the power consumption in the low-voltage grids. However, the methods of either controlling the rate of charging of the vehicle or by using vehicle to grid (Accenture, 2017; Brennenstuhl et al., 2016; Eid, Codani, Chen, Perez, & Hakvoort, 2015) approach in which power flows from the car to the house or the electrical grid, is only at the development stage. There are big expectations towards these approaches, essentially transforming the car into a residentialscale energy storage, however they are not widely used nowadays. Another type of devices used in the optimisation for increasing self-consumption were stationary batteries, mainly expected to store energy from household photovoltaics, but also to be used for interface with the wider electricity system and with time-of-use tariff. The Master Thesis adopted a conservative approach towards this technology and assumed very low penetration of household or community scale batteries. In recent 5 years, decreasing battery costs have attracted residential users to investments. On the other hand, there is still a lot of uncertainty in predictions of the adoption rate of these devices at residential scale, mainly because they require use of scarce minerals that can become a subject to price speculations. The method of maximizing economic value of local energy communities might enable the citizens to financially benefit from growing demand response market and use the revenues to maximise their diverse values. However, the business case of Local Energy Communities will strongly depend on the network charges paid to the network operators for connecting to and using the grid (EURELECTRIC, 2016). Additionally, the practical implementation might pose some risks to mostly non-professional and bottom-up initiatives as the energy communities. This is because the success of offering balancing services relies heavily on the reliability of the service provider and their ability to perform computational heavy prediction and planning of the electricity use by the devices with use of professional and complicated software. In the case of energy communities offering flexibility from residential loads this would imply very accurate predictions of the electricity demand as input for planning the operation of the devices as well as strict control (Hajighasemi, Hurink, & Smit, 2017; van der Klauw, 2017). However, the technology is still not mature enough, which in many cases might lead 74 to imperfect predictions. Resulting wrong declaration of flexibility offered and failure to deliver the promised service, might be connected with a penalty payment severely impacting communities (Esterl et al., 2016; van der Klauw, 2017). On top, even the new market design does not guarantee financial feasibility of provision of balancing services by the communities. It is expected that the profitability will depend on the perception of the Energy Communities by DSOs, valuation of their services and appropriate transposition of the directives to the legislation of the member states (REScoop.eu, 2019). If Energy Communities, through their activities, manage to defer the infrastructure investments and save money of DSOs, this value should be reflected in the charges they pay to use the network. In this case, the communities of place have a higher negotiation power that communities of interest due to the fact that they might be own and operate local power networks, or ‘community networks’ and limit the energy flows between their network and the network of the DSOs (REScoop.eu, 2019). In this way, the impact of their balancing activities is reflected in optimal use of the external grid and might be treated as added value. On the other hand, community of interest, even if offering balancing services, might be penalized by the DSOs through additional fees for intensified use of the grid. These additional costs might break the business case for communities of interest to offer balancing services (REScoop.eu, 2019). Concluding, the possibility for participation in energy market by energy communities is guaranteed by the “Clean Energy Package for all Europeans”. However, the business profitability will depend on ‘who’ will pay for maintaining networks. This answer will play a significant role in determining how well DSOs and governments will get along with renewables self-consumers, energy communities and other emerging market actors (REScoop.eu, 2019). Lastly, the DSO and ESCo role was identified as the role allowing Local Energy Communities maximizing their values. Recently adopted “Clean Energy Package for all Europeans” opens the possibility for communities to perform these roles and enables Citizens Energy Communities and Local Energy Communities to assume DSO activities. However, the suggested role of the community in the energy system is not yet possible in most of the member states of European Union. Currently, the regulation requires Prosumers to be connected to a grid that is operated by the designated DSO (or TSO). Additionally, strong pressure from the incumbents blocks opening these possibilities to the communities. Therefore, it might be concluded that even if the legislation changes, the economic barriers for performing DSO roles would still prevent communities from choosing it. Additionally, in the fourth research question, all surveyed participants of social study considered cooperative as the suitable organizational models for Local Energy Communities. The reason for it might be the fact that Coopérnico is a cooperative and its members highly value the democratic setup. However, a system in which all members have equal rights and voting power might not be desired in other energy communities. In fact, energy communities documented in various reports and scientific literature adopt less democratic organisation models like SMEs or non-profit organisations steered by limited number of stakeholders to restrict the decision power to investors or members with expert knowledge only. 5.3 Limitations of the study Despite the efforts to strengthen the research quality of this study several limitations of this study can be identified, which are mainly due to the explorative nature of this research. There were several obstacles impacting the development of this study. First and foremost, available knowledge base and political discussion around the implementation of the “Clean Energy Package for all Europeans”. The discussion on the definition of Local Energy Communities and their role in the changing energy system, despite quite narrow and specific in terms of research, turned into a vast, interdisciplinary discussion between stakeholder motivated by contradictory agendas. Therefore, the definition of Local Energy Communities and the research on appropriate roles they should take in the energy system was not only the subject of scientific considerations, but mainly the outcome of political pressures influenced by different stakeholders with different agendas. In order to avoid continuous adjustments of the thesis to accommodate emerging topics and keep course on the constrained selection of researched themes, the result of the work does not represent the full picture of different Citizen 75 Energy Community schemes and various business models they can adopt, but focuses mainly on the Local Energy Communities as a way to put Citizen Energy Communities into practice. Additionally, the initial social study was supposed to be set among participants of project developing Local Energy Communities in Belgium. However, the researcher encountered several barriers in reaching out to the participants of the project. First of all, the access to the participants in Leuven was limited because of a delay in the creation of their community project. Furthermore, the participating people were not consciously involved in the process of setting up the community, but they were encouraged to participate in exchange for smart home devices. For this reason, the social study needed to be conducted on different research group and it focused on members of Citizen Energy Community, Coopérnico that gathers Local Energy Communities in major cities in Portugal. Additionally, the social study on values of people depended on the personal bias of the 21 research participants of this study. Although different interpretations of the prioritization of the values of these group of people are unlikely, surely a research using the same survey and interview questions, but conducted on a different group of people would generate different results. Taking this into account, it can be concluded that different energy communities are motivated by a plethora of values and the exact prioritization of them can only be defined case by case. As far as realisation of the interview is concerned, the researcher experienced difficulty while attempting to design the interview questions that would be non-directional and not imposing their opinion, but still quite specific and to the point. However, the interview questions were quite specific, providing the structure and focusing on the core question. Unfortunately, the recording is not ideal and some parts of the conversation are missing of badly recorded with no possibility to decode the words spoken. However, in the researcher’s opinion the interviewees’ statements were quite confident and clear. Additionally, because they were clarified by the researcher, they do not leave room for multiple interpretations. The change of the research group to people with different awareness of energy communities and different expectations towards the cooperation implied that the context of the research does not allow anymore for analysis of bankability of Local Energy Communities in Belgium, which implied that the technical and economic tool for quantification of flexibility available in the residential sector as well as its economic value must have been modified. This was a difficult challenge given that the initial tool was prepared by a group of researchers refining the algorithms for several years already, whereas the author of this Master Thesis, at the beginning of the process had only basic programming skills. Therefore, the answer to the analysis of third research question must have been supported by researchers from University of Twente who agreed to disclose their optimisation algorithms, and Thermovault, who supported with technical expertise. Additionally, the research done in third research question was based on multiple assumptions. Firstly, it was assumed that the problem of fuel poverty would be solved completely with the implementation of Local Energy Communities. This means that the thermal comfort of the end users was improved compared to the current state. Additionally, it assumed rapid electrification of heat provision in households which is still not the main source in Portugal. It was assumed that Local Energy Communities will pursue the realization of their environmental, financial and social values, meaning they will not be willing to use fossil fuels, such as gas, to provide heat to their houses. Secondly, they will maximize self-consumption form possessed photovoltaic installation by using a big share of the electricity generated to power heat pumps, in this way minimizing the amount of electricity bought from the market to achieve financial savings and to be independent from the energy companies. The economic value of Local Energy Communities was calculated, taking account the costs of electricity prices calculated at the connection point between the community grid and the grid of the DSO, which implies that the community engages in distributing renewable energy to the customers and owns the part of the grid between the members. However, owning part of the grid is not common among European energy community initiatives, especially in centralized energy system (REScoop.eu, 2018). The fourth research question was answered basing mainly on the USEF Framework, the framework for valuation of flexibility in the energy system, and the social study. Although USEF Framework provided a solid basis for the argumentation of the possible role of the Local Energy Communities in the transforming energy system, using a limited literature basis might influence the final outcome of the study. The results analysed with use of a novel approach to define business and organisational model for the energy communities which is radically different from the most popular business model canvas, 76 created by Alexander Osterwalder and widely used nowadays. The basis for answering this research question was a New Business Model proposed by Jan Jonker which offers a fresh look on how companies and organisations can build rationale about their activity to address the problem of sustainability, but is not widely used in the industry. Therefore, despite it might be suitable to visualize not only financial, but multifaceted benefits from participation in the energy community and it is able to better equipped to value “the commons” and showcase environmental costs arising from the organisations’ activities, using only this model to gain investors or prove the bankability of the Local Energy Communities might not be the right choice. Additionally, to keep the survey as short as possible, the part investigating the preferences of the members of Coopérnico towards operation principles were limited. Instead, the research question was answered with inputs form two representatives of the organisation, strongly involved in its operation. For this reason, the outcomes of the research question might be biased, reflecting personal opinion of these representatives and not objective evaluation of all possible options. 5.4 Further research This thesis shows that industry and technology trends are not constraining the development of Local Energy Communities as elements of Citizen Energy Communities. Industry and technology trends have been discussed as two separate matters, while the combination and alignment of industry and technology trends is essential. First, the analysis of scientific and grey literature, especially the political discussion around the Local Energy Communities in the European Union, illustrated that current electricity regime is influenced by pressures from wider landscape factors and the collection of social movements gathered around the development of alternative technologies and institutional setups of energy provision, such as community energy projects. However, the power of incumbent energy firms is and is expected to remain strong. Therefore, the energy system is expected to change in a moderately dynamic way, using all possible tools and solutions to keep the stability within the current electricity regime by enacting and reproducing the old activities. Additionally, the research was executed during the time of wide political discussion on acknowledgement of Local Energy Communities. Taking into consideration that the regime of energy provision is strongly influenced by the incumbents, it is expected that any political changes allowing Local Energy Communities to access the energy system on a “level playing field” will not be rapidly implemented in the member states of European Union. Therefore, it was impossible to specifically define what roles Local Energy Communities are going to play in all countries of European Union in the upcoming years. Secondly, this research does not aim to forecast the future, but investigates potential for development of Local Energy Communities based on the assumption that fast rate of adoption technology allowing for energy management in the energy communities will be coupled with propitious institutional changes encouraging citizen involvement. It is certain that economic value will play a big role in diffusion of Local Energy Communities in the society. Therefore, it is essential to investigate it separately in the context of each country, climate and technology used in the households. The financial result is directly tied to the electricity tariffs offered to the residential users and the Local Energy Communities representing them. It is possible that applicable tariffs will be changed in the near future to the advantage of the incumbents, especially DSOs rising fees for maintenance of the grid. Therefore, further research should involve practical approach towards researched economic value of flexibility in the residential sector in different countries of European Union. Following this, the technological and economical efficiencies would need to be tested in the real-life scenarios in Portugal. Each barrier could be potentially re-evaluated as a separate research problem, providing more in-detail results. This Master Thesis attempted to draw a set of possible strategies for Local Energy Communities that can be adopted by them in current energy system. It was done basing on the current state of knowledge on the energy community projects and possible business models suitable for them. However, the institutional context in which energy communities operate and the ways of value creation is rapidly changing. The organizational models of Local Energy Communities will be therefore shaped by the external pressures from other market actors. These pressures will determine whether the communities 77 will only manage community owned renewable generation assets which do little more than exploit feedin-tariffs or some other subsidy regime; attempt to align the generation to the needs of the local community or optimize the balance between local supply and demand; operate completely independently of the grid; or advance to deliver energy-related services to the grid when required. Therefore, the organizational models need to be constantly evaluated to make sure they serve the needs of the community members, but also deliver real value to the participants of the energy system. 78 6 List of figures Figure 1 A visualization presenting the research design overview. ........................................................ 6 Figure 2 Classification of household devices adopted from (Flexiblepower Alliance Network (FAN), 2017) ..................................................................................................................................................... 11 Figure 3 Multiple levels as a nested hierarchy (Geels, 2002) ............................................................... 17 Figure 4 A dynamic multi-level perspective (Geels, 2002) .................................................................. 19 Figure 5 Differences between values of incumbents and energy communities .................................... 20 Figure 6 Clover leaf New Business Model by Jan Jonker (Jonker, 2012) ............................................ 21 Figure 7 Analytical perspective of the study ........................................................................................ 22 Figure 8 Items clustered by coding similarity with Pearson coefficient ............................................... 25 Figure 9 Items clustered by coding similarity with Jaccard coefficient ................................................ 26 Figure 10 Community values FIETS representation ............................................................................. 35 Figure 11 Survey results: Opinions on the operation of the energy community ................................... 42 Figure 12 Survey results: Factors discouraging to participate in the energy community ..................... 43 Figure 13 Prioritization of values.......................................................................................................... 45 Figure 14 Electricity distribution system, adopted from (ERSE, 2018a).............................................. 46 Figure 15 Structure of the price of electricity supply in Portugal, adopted from (ERSE, 2018a) ........ 47 Figure 16 Cost components of final price of electricity, adopted from (ERSE, 2018a) ....................... 48 Figure 17 Final Energy Consumption in households per use (Eurostat., 2018).................................... 49 Figure 18 Part of the main energy products in the final energy consumption in the residential sector for each type of end-use, EU-28 (Eurostat., 2018) ............................................................................... 50 Figure 19 Comparison of electricity consumption, whole year ............................................................ 55 Figure 20 Comparison of electricity consumption of electric vehicles ................................................. 56 Figure 21 Comparison of electricity consumption, January ................................................................. 56 Figure 22 Comparison of electricity consumption, March ................................................................... 57 Figure 23 Comparison of electricity consumption, June ...................................................................... 57 Figure 24 Comparison of electricity self-consumption, whole year ..................................................... 58 Figure 25 Illustration of all energy and flexibility services that can be offered to the Prosumers within a Citizen Energy Community (Klaassen & Van Der Laan, 2019) ........................................................ 62 Figure 26 Clover leaf New Business Model by Jan Jonker (Jonker, 2012) .......................................... 65 Figure 27 Visualization of New Business Model of Local Energy Community .................................. 67 Figure 28 Opinions on the operation of the energy community ......................................................... 140 Figure 29 Factors discouraging to participate in the energy community ............................................ 140 79 7 List of tables Table 1 Visualization of the case comparison....................................................................................... 14 Table 2 Summary of definitions of "Local Energy Communities" ....................................................... 23 Table 3 Comparison of attributes of Local Energy Communities and other energy community initiatives ............................................................................................................................................... 33 Table 4 Survey results: environmental values ...................................................................................... 38 Table 5 Survey results: financial values ............................................................................................... 38 Table 6 Survey results: institutional values .......................................................................................... 39 Table 7 Survey results: social values .................................................................................................... 40 Table 8 Survey results: Fuel poverty in financial and social category.................................................. 40 Table 9 Survey results: technological values ........................................................................................ 41 Table 10 Cost components for energy provision in energy communities ............................................. 53 Table 11 Visualization of the case comparison .................................................................................... 59 Table 12 Comparison of costs (Case1: No payment for PV for separate houses and community, retail prices for separate houses and community) .......................................................................................... 59 Table 13 Comparison of costs (Case 2: Retail payment for PV for separate houses and community, retail prices for separate houses and community) ................................................................................. 60 Table 14 Comparison of costs (Case 3: No payment for PV for separate houses, wholesale prices for community) ........................................................................................................................................... 60 Table 15 Comparison of costs (Case 4: Retail payment for PV for separate houses, wholesale prices for community) ..................................................................................................................................... 60 Table 16 Occurrence of attributes of Local Energy Communities in the literature .............................. 94 Table 17 Comparison of different energy community initiatives ......................................................... 96 Table 18 Codes of 1000 most common words in literature on energy communities ............................ 98 Table 19 The correlation of all nodes with highest Pearson correlation coefficient ........................... 100 Table 20 The correlation of parent nodes with highest Pearson correlation coefficient ..................... 101 Table 21 The correlation of parent nodes with highest Jaccard's coefficient...................................... 101 Table 22 Table with leads ................................................................................................................... 113 Table 23 Rates Low Voltage Normal up to 20.7kVA ......................................................................... 143 Table 24 Low Voltage Normal Rates above 20.7kVA ....................................................................... 143 Table 25 Medium voltage rates 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New York: The Free Press. 94 9 APPENDIX: Local Energy Communities in literature Table 16 Occurrence of attributes of Local Energy Communities in the literature Definition legal entity driven by different values apart from financial profit engagement of people citizens are actors / members collective governance of actors collective ownership of the organization, initiatives energy generation (production) energy distribution energy storage energy supply community energy consumption (use) sustainability, use of renewable energy, environmental benefits financial benefits energy efficiency / rational use of energy financial development electrical system heat, heating system flexibility aggregation location-based / local use participation in the wholesale energy / flexibility market A set of users that share renewable sources and storage resources to satisfy energy demand while minimising carbon emissions and operating costs. (Colombo et al., 2014) X X X X X X X Consumers and Prosumers that join together under a LEC to act in a coordinated way with respect to consumption, generation and storage. Financial and non financial benefits are possible. Potential to be a cooperative entity. Role in Classical Energy Market: Aggregate the buying power of individual customers for energy savings. Focus on the integration of renewables. Objectives: Save money and lower their electricity bills leveraging a community approach. Respect of comfort preferences and desired electricity use. Access to the Flexibility Market. Be part of an eco-friendly community (Lynch et al., 2017) X X X X X X X X X X X X X X X X X An association, a cooperative, a partnership, a nonprofit organisation or other legal entity which is effectively controlled by local shareholders or members, generally value rather than profit-driven, involved in distributed generation and in performing activities of a distribution system operator, supplier or aggregator at local level, including across borders. (European Commission, 2017) X X X X X X X X X X X X X Integration of distributed generation whereas maintaining energy security and keeping costs down for consumers and provide prosumers with individual incentives to reward their participation. Prosumers can locally trade their excess of energy, reducing in this way the transmission losses which occurs over long distances and making the system as a whole more efficient by optimising energy use to minimise the prosumer energy bill and optimises the energy sharing among prosumers by enabling an energy exchange zone at the community level. (Vinyals et al., 2018b) X X X X X X X X X X X X Local Energy Communities (LECs) match locally the production and consumption of energy (onsite power) with several benefits, especially under the energy efficiency point of view. They share the property of energy plants and grids between all the inhabitants (jointly owned), with a cooperative governance business model (one man one vote). Local Energy Communities have a strong link with the territory and the local socio-cultural context. In LEC the energy production and consumption become factors of social aggregation for local development, increasing the environment protection and valorisation as well as economic income, coming from the energy market. (De Pascali & Bagaini, 2018) X X X X X X X X X X X X X An SME or a not-for-profit organisation, the shareholders or members of which cooperate in the generation, distribution, storage or supply of energy at local level, including across borders, fulfilling at least four out of the following criteria: (a) shareholders or members are natural persons, local authorities, including municipalities, or SMEs; (b) at least 51% of the shareholders or members with voting rights of the entity are natural persons; (c) at least 51% of the shares or participation rights of the entity are owned by local members, i.e. representatives of local public and local private socio-economic interests or citizen having a direct interest in the community activity and its impacts; (d) at least 51% of the seats in the board of directors or managing bodies of the entity are reserved to local members, i.e. representatives of local public and local private socioeconomic X X X X X X X X X X X X 95 interests or citizens having a direct interest in the community activity and its impacts; (e) the community has not installed more than 5 MW of capacity for electricity, heating and cooling and transport as a yearly average in the previous 5 year (Eurelectric, 2018) A bottom-up movement which has highlighted the citizens’ intent to independently produce and purchase energy, ‘small unbundled utility model’ which is entitled to perform all activities of energy production and consumption. LECs generate renewable energy, provide energy efficiency services, are involved in electro mobility, and deal with storage and aggregation. LECs are mostly located in rural areas, where the density is relatively low and, as a result, the connection costs per person are the highest. They create legal entities that operate according to a set of ownership and governance principles that distinguish them from traditional for-profit actors in the market in order to provide community benefits for their members as well as local social (provision of services such as supply of local renewables at a fair price, addressing vulnerable consumers) and environmental (locating renewables generation close to consumption) benefits, and the opportunity to participate in the energy transition. (Barrera-Hernández, Barton, Godden, Lucas, & Rønne, 2016) X X X X X X X X X X X X X X X X X A legal entity (association, cooperative partnership, nonprofit organisation, etc.) controlled by local shareholders or members that is involved in distributed generation and in performing activities of a DSO, supplier or aggregator at local level, including across borders. (FLEXCoop et al., 2020) X X X X X X X X X X X X legal entity driven by different values apart from financial profit engagement of people citizens are actors / members collective governance of actors collective ownership of the organization, initiatives energy generation (production) energy distribution energy storage energy supply community energy consumption (use) sustainability, use of renewable energy, environmental benefits financial benefits energy efficiency / rational use of energy financial development electrical system heat, heating system flexibility aggregation location-based / local use participation in the wholesale energy / flexibility market 6 7 3 7 7 6 8 5 5 7 8 5 5 4 0 8 0 4 7 1 75 % 88 % 38 % 88 % 88 % 75 % 100 % 63 % 63 % 88 % 100 % 63 % 63 % 50 % 0% 100 % 0% 50 % 88 % 13 % 96 10 APPENDIX: Energy communities in the literature Table 17 Comparison of different energy community initiatives Definition legal entity driven by different values apart from financial profit engagement of people citizens are actors / members collective governance of actors collective ownership of the organization, initiatives energy generation (production) energy distribution energy storage energy supply community energy consumption (use) sustainability, use of renewable energy, environmental benefits financial benefits energy efficiency / rational use of energy financial development electrical system heat, heating system flexibility aggregation location-based / local use participation in the wholesale energy / flexibility market Community renewable energy Grassroots innovation concept for enabling sustainable energy generation realized by renewable-energy-generating social groups that possess high degrees of project ownership and yield collective benefits from it on a local level. (Walker & Devine-Wright, 2008), (Seyfang, Hielscher, Hargreaves, Martiskainen, & Smith, 2014). X X X X X X X X X Community energy projects Community energy covers aspects of collective action to reduce, purchase, manage and generate energy. Community energy projects have an emphasis on local engagement, local leadership and control and the local community benefiting collectively from the outcomes. Community-led action can often tackle challenging issues around energy, with community groups well placed to understand their local areas and to bring people together with common purpose. Examples of work: Community-owned renewable electricity installations such as solar photovoltaic (PV) panels, wind turbines or hydroelectric generation. Members of the community jointly switching to a renewable heat source such as a heat pump or biomass boiler. A community group supporting energy saving measures such as the installation of cavity wall or solid wall insulation, which can be funded wholly or partly by the Green Deal. Working in partnership with the local Distribution Network Operator (DNO) to pilot smart technologies. Collective purchasing of heating oil for off gasgrid communities Collective switching of electricity or gas suppliers. https://www.gov.uk/guidance/communityenergy#what-is-community-energy X X X X X X X X X X X X X X X X Sustainable energy communitie s (SECs) Organizations whose members are strongly involved in the planning and implementation of measures aimed at the rational use of energy and introduction of renewable energy sources (RES) in the production, consumption, and/or supply of electricity, that have contributed to the development of renewable energy infrastructure (Romero-Rubio & de Andrés Díaz, 2015). C. Romero-Rubio, J.R. de Andrés Díaz, Sustainable energy communities: a study contrasting Spain and Germany, Energy Policy 85 (2015) 397–409. X X X X X X X X X X X Clean energy communitie s (CECs) Social and organizational structures formed to achieve specific goals of its members primarily in the cleaner energy production, consumption, supply, and distribution, although this may also extend to water, waste, transportation, and other local resources. A CEC may consist of a small number of households in close proximity, yet may also comprise up to hundreds of thousands of households and businesses, covering a wide geographic area. Individual members in this structure may be loosely or strongly related to each other, and may come from a wide range of socioeconomic groups (Gui & MacGill, 2018). (Gui & MacGill, 2018) X X X X X X X X X X X X Integrated Community Energy Systems (ICES) An integrated urban resource management system, not only provide energy supply, but may also involve energy efficient buildings, combined heat and power, water and sanitation, transportation and waste to increase energy efficiency, and reduce greenhouse gas emissions at the local level. (Gui & MacGill, 2018) (Gui & MacGill, 2018) X X X X X X X X X Communityscale energy projects Community initiated and invested energy projects, that may involve renewable energies, energy X X X X X X X X X 97 efficiency and conservations, community energy services etc. (Gui & MacGill, 2018) (Gui & MacGill, 2018) Community Microgrids A self-contained and self-sufficient local electricity supply system, either standalone or connected to a centralized grid of regional or national scale, comprising residential and other electric loads, and can be supported by high penetrations of local distributed renewables, other distributed energy, and demand-side resources. (Gui & MacGill, 2018) X X X X X X X Communitybased Virtual Power Plant A portfolio of community-owned distributed energy resources (DER) aggregated and coordinated by an ICT-based control system, adopted by a (place-based, interestbased, virtual or sectoral) network of people (and organisations), who collectively perform a certain role in the energy system. What makes it community-based is not only the involvement of a community, but also the community-logic under which it operates. (Van Summeren et al., 2019) X X X X X X X X X X X X X Renewable Energy Community (REC) ‘renewable energy community’ means a legal entity: (a) which, in accordance with the applicable national law, is based on open and voluntary participation, is autonomous, and is effectively controlled by shareholders or members that are located in the proximity of the renewable energy projects that are owned and developed by that legal entity; (b) the shareholders or members of which are natural persons, SMEs or local authorities, including municipalities; (c) the primary purpose of which is to provide environmental, economic or social community benefits for its shareholders or members or for the local areas where it operates, rather than financial profits; Activity and rights description in the source. Directive (EU) 2018/2001 of the European Parliament and of the Council of 11 December 2018 on the promotion of the use of energy from renewable sources X X X X X X X X X X X X X X X Citizen Energy Community (CEC) a legal entity which is based on voluntary and open participation, effectively controlled by shareholders or members who are natural persons, local authorities, including municipalities, or small enterprises and microenterprises. The primary purpose of a citizens energy community is to provide environmental, economic or social community benefits for its members or the local areas where it operates rather than financial profits. A citizens energy community can be engaged in electricity generation, distribution and supply, consumption, aggregation, storage or energy efficiency services, generation of renewable electricity, charging services for electric vehicles or provide other energy services to its shareholders or members; Activity and rights description in the source. DIRECTIVE OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL on common rules for the internal market for electricity X X X X X X X X X X X X X X X X legal entity driven by different values apart from financial profit engagement of people citizens are actors / members collective governance of actors collective ownership of the organization, initiatives energy generation (production) energy distribution energy storage energy supply community energy consumption (use) sustainability, use of renewable energy, environmental benefits financial benefits energy efficiency / rational use of energy financial development electrical system heat, heating system flexibility aggregation location-based / local use participation in the wholesale energy / flexibility market 3 6 6 8 8 8 9 6 3 7 9 9 2 5 0 10 4 5 6 3 30 % 60 % 60 % 80 % 80 % 80 % 90 % 60 % 30 % 70 % 90 % 90 % 20 % 50 % 0% 100 % 40 % 50 % 60 % 30 % 104 12 APPENDIX: Interview protocol – Simon Pannett The value in Local Energy Communities - new actors in the energy transition Date: 23.03.2019 Researcher: Aleksandra Radwanska (1375822) [email protected] In this interview research, we aim to contribute to an understanding of the values and needs of local energy community members and to verify the prioritization of the values present in given community. 1. What values, and specifically what economic value can Local Energy Community create to its members and other actors in residential sector? 2. What suitable organizational models for the operation of the Local Energy Communities can maximize the satisfaction of the values and needs of Local Energy Communities? Theory and justification The world is increasingly concerned about global challenges resulting from the use of the fossil fuels and the increasing degradation of the natural environment. In order to decrease the output of polluting substances, among others carbon dioxide, a radical change in the energy generation sector is needed, coupled with improvements in renewable energy technologies as well as societal changes. Adding to this, the current energy system is mainly represented by big energy companies providing electricity through a centralized energy system. Throughout the generations of operation in a centralized, fossil fuels based way, the energy system has led to the degradation of the environment and the climate change due to growing emissions of greenhouse gases and contaminating pollutants. However, a number of broad changes such as development of renewable energy sources, research on clean fuel alternatives, smart grids and ICT-based infrastructure put pressure on the incumbents and advocate for an alternative way of organizing the systems, by e.g. decentralization, and democratization of the energy production (Burke & Stephens, 2017, 2018), coupled with more wide-spread use of renewable energy generation technologies and phasing-out of the use of fossil fuels. There is also a growing number of and a widespread support to the Distributed Energy Resources (DERs). Many new technologies, many initiatives, they set up basic infrastructure but they do not create sufficient critical mass to motivate a larger change. Real impact could be made when multiple devices are linked together to form a sustainable decentralized network, also called Virtual Power Plant (VPP). The supporters of VPP systems have successfully exerted pressure on the politicians of the European Commission and the conditions of their existence are currently negotiated in the legislation of European Union as Local energy communities (European Commission, 2017). They are considered an efficient way of managing energy at community level by consuming the electricity they generate either directly for power or for (district) heating and cooling, with or without a connection to distribution systems. However, currently they are either blocked (EDSO, 2017) or taken advantage from by the incumbents to solve the problems of the energy system. Additionally, the LECs lack critical mass and need assistance in building the network to successfully aggregate and be able to exert bigger pressures on the existing socio-technical system. Additionally, they require support in facilitating a constructive 105 interplay between relevant stakeholders, especially the providers of technology able to satisfy their needs. The LECs want to operate on different values than current regime, therefore a lot of attention is needed in order to help them setup and develop in an appropriate way without the need to make any trade-offs between bankability and pursuing the radical change in energy provision. In order to avoid the scenario of becoming the new sustainified incumbents, they should refrain from sacrificing their values to become financially sustainable and bankable. Furthermore, the existing literature operates on the abstract level of the concept of LECs. There is a need for quantification of the economic values provided by the flexibility offered by the LECs in order to prove they can be financially viable to survive in the harsh institutional environment that does not support them. Finally, more attention needs to be paid to the actors helping in the establishment and development of the communities, the ESCOs or any other third-party facilitators as well as the proper organizational and business models of the LECs, taking into account not only how to sustainify the current business models of the regime actors, but primarily how to establish radically different logic of the value creation (Jonker, 2012). Method Since the topic of interest, the community based Virtual Power Plants and local energy communities, is a relatively new research topic, there are still a lot of unknown factors to be considered. There are various attempts to establish local energy communities, but no coherent and replicable organizational model has been designed yet. Therefore, there’s a large amount of information yet to be uncovered. Considering the novelty of this specific application of a VPP and the limited available literature on the topic, this research uses a bottom-up inductive approach. The research is moreover interested in the benefits and downsides for the involved stakeholders, most specifically the community members. It is therefore important to consider the meaning of the involved stakeholders assign to the issue. A method that allows for the discovering of meaning and is an inductive bottom-up approach is the qualitative interview (Weiss, 1994; Cresswell, 2009). For this purpose, a single, face-to-face, semi-structured interview is conducted in order for indicative themes to emerge. These themes can then be used to conduct more in-depth follow-up research, including more interviews. The interview was partially structured, though the researchers were ready to adapt the questions to the direction of the conversation. Additionally, due to the fact that one of the interviewers knows the interviewee, the conversational tone was chosen in order to create more natural environment. Interviewee selection and justification Simon Pannett is the local non-formal leader of the Coopérnico, a cooperative of renewable energies with a social focus that operates to support projects promoting solidarity, education or environmental protection. It was founded by 16 citizens coming from diverse background and professional experiences but sharing a common concern for sustainable development. Their vision is to foster a fair and responsible energy model based on renewables, contributing to a social, environmental and energy sustainable future. They aim to involve citizens and companies in the creation of a new energy paradigm - renewable and decentralized - for the benefit of society and the environment (Coopernico, 2019). Specifically, they aim to conduct projects to generate economic benefits, from the sale of the produced electricity, as well as environmental benefits with the production of clean electricity (without emissions of carbon dioxide and other pollutants). The electricity produced is integrated into the electricity grid and serves to supply families and businesses. To support their local community, the foundation of the operation is to distribute the benefits generated by society, investors and the environment. Interview protocol This protocol is based on a template provided by Stanford University (National Center for Postsecondary Improvement, 2003). The interview questions are divided into 5 categories which are each aimed at gathering different data relating to the research question: 2. What values, and specifically what economic value can Local Energy Community create to its members and other actors in residential sector? 106 3. What suitable organizational models for the operation of the Local Energy Communities can maximize the satisfaction of the values and needs of Local Energy Communities? The goal of the categories are as follows: A. Gathering information about the interviewee’s role, B. Gathering information about the current state of the community he’s involved in, C. Exploring the values that are important to the community members and prioritize them, D. Understanding possible effects of application of different services to the community, E. Exploring the potential organizational models for the particular community. For every question, possible probe questions are included which can be used in case the interviewee’s answer does not entirely match the intended goal of the question. In case there’s time left after discussing each of the prepared questions, there’s room for final remarks by the interviewee, as well as possible emerging questions by the interviewers. These additional topics can be listed in section F. Any possible leads (people, documents, etc.) provided by the interviewee can be listed under section G. Introductory protocol To facilitate the processing of the information gathered during the interview, today’s interview is recorded. The interviewee, Simon Pannett, is asked the sign the consent form, in order to meet our human subject requirements. This document states that: • participation is entirely voluntarily and the interviewee may choose to stop the interview at any time, • the information discussed during the interview is considered confidential and will only be shared among the interviewers, Aleksandra Radwanska and the assignment’s supervisor, Anna Wieczorek and Eryk Masiak, and anonymously published in the Master Thesis • we do not intend to inflict any harm. The interview is intended to last approximately 45 minutes. Due to the limited time and the number of questions that we would like to complete, interruption in order to push ahead may be necessary. Thank you for understanding and thank you for participating in the research. Introduction You have been selected as an interviewee in our research due your function in the Tavira community. For that purpose the following research question was formulated: What values, and specifically what economic value can Local Energy Community create to its members and other actors in residential sector? What suitable organizational models for the operation of the Local Energy Communities can maximize the satisfaction of the values and needs of Local Energy Communities? Interview section • Gathering information about the interviewee’s role - Interviewee’s background o Could you please start by saying a bit about yourself? Briefly describe your role at the community in Tavira. Probe: Why did you decide to start the project? • Gathering information about the current state of the community he’s involved in. • What is the state of the Local Energy Community now in Tavira? • Do you think this Local Energy Community project is beneficial for Tavira? Why/ why not? 107 • Exploring the values that are important to the community members. o Who could potentially be affected by a Local Energy Community? o What do you personally find the most attractive / interesting about the Local Energy Community? o What do you expect to personally gain from participating in the Local Energy Community? • Prioritization of the values. o What do you find is the most important / relevant aspect of the Local Energy Community? Probe: Can you prioritize it? • Identifying the possible products and services offered to the community. o What do you think the Local Energy Community should provide to you? Probe: What do you aim to obtain from the community? What do you expect the community to do for you? o What are you as a leader planning to offer to the Local Energy Community members? o What do you think the members of Local Energy Community would appreciate the most? Probe: Why do you came to this conclusion? • Understanding possible effects of application of different services to the community. o What are potential benefits and downsides for the people in the community? Probe: Do you expect an effect on costs of living? • Exploring the potential organizational models for the particular community. o If you created the energy community, do you possibly see an active role for the people living around to participate in the energy trading system? o Who do you think should be decisive on the finances of the Local Energy Community? o What is in your opinion the role of the members in the Local Energy Community? Probe: How do you envision the decision-making processes in the Local Energy Community? F. Room for final remarks and additional questions - G. Leads (people or documents) • Ana Rita Nazário Marouço Transcript What follows is the verbatim transcript of the interview conducted on the 23.03.2019, between interviewer Aleksandra Radwanska, and interviewee Simon Pannett. Aleksandra: It's working. I live in Eindhoven. Yes. I do my Master's thesis in the department of innovation Sciences from and it's about bringing like discovering the values and especially the economic values in the local energy communities or this new setup of provision of energy via some community activities. And for the economic. I do my model, my quite heavily data based model, but there are also other values that I want to 108 discover and I wanted to see what people really who established the communities what they really think and what is truly important for them. So yes, I asked also Kacper and he mentioned about your project. So we decided that you would be a great person to, aaaahm, to be the interviewee for my research because of your involvement and what you do in the Tavira community and yeah as I will tell you exactly what the questions are so that the questions that I'm trying to answer are: what values and specifically what economic value can local energy Community create to its members and two other actors in the residential sector and what suitable organizational model for the operation of local communities can maximize the satisfaction of the values and the needs of the local community energy communities. So this is how it works. And yeah, I would like to now, I introduced myself. I would like to know more about you. What is your involvement in the Tavira community something about yourself? How did you find yourself there? That would be very good. Simon: Yes. Well, we had a connection with Portugal, in the 1980’s we had farm? in the different areas in Portugal, in the Al…., bringing up two children there, very much trying to find a different way of living that was not compromised with the areas that we didn’t find comfortable in the UK. But in the end, children grow up, and we ended up going back to the UK, and I worked, I trained as an accountant. I was a business director for a couple of companies but when we retired in 2009, we came back to Portugal but we came back to Tavira, to the Algarve because we felt culturally in the <…> it was a little bit isolated. We can have some people around that we could communicate very easily too. So Tavira it became a very nice position for us to come to. Since coming to Tavira, we’ve met a lot of nice people here and I was very prominent in 2017, I think. COP 23 I think it was, climate march. And I think we had a big procession, big demonstration in Tavira, lots of speakers, music, positions, coinciding also with the anti-oil at that time the Portuguese government wanted to suddenly let oil companies take… try to find some oil well off the coast and it was a very bad agreement, they would have to pay nothing to state anyway. It would be disastrous to the tourism industry, which is number one industry. Plus the environment… That was also a big fights going on. That's still going on. I think we've been successful in the Algarve. The west coast is still looking to draw some oil there, so… So far, it was okay here. In Coopernico, I became involved quite early on, having realized that they were trying to do something different from the energy market, to revise a different model, social model if you like, a non-profit model and based on and 100% renewables. Yhym, <what?> is very much a monopoly in the energy market, it’s monopoly in the transfer of energy, on the network. It’s called <NAME> here. It is now owned by a Chinese company with < NAME > here and then beyond that network, the local grid, have now the EDF, sorry the EDP here in Portugal which is again owned by Chinese investors after it was privatized. I haven't got anything against the Chinese but it's a question of whether such facility, such an opportunity should be owned by a profit taking company without competition or whether there should be another better model thing for us that really helps communities have some control over their locality, especially with the renewables that are available today, which can be sourced locally rather Central Power stations. So that's what still interests me and yeah big frustrating because the law here which is geared to the monopoly people makes it very difficult to establish these communities, but we're starting to see something I think I'm Lisbon - a community there who are trying to get through the barriers to provide a social network for their launches. So that's where I am at the moment. Aleksandra: And where is the community in Tavira? Simon: Tavira community? I mean, yes, Tavira community is a very strong community, very sophisticated in terms of as a multi facet of different nationalities, lots of not Europeans, lots of Portuguese, of course, and it is the very multi-facetted community and one that is very much aware of the environment. We have three bio farms here, we have transition movements, which is very strong for her for a while and we're yeah, we're looking to see how to make each day better here by <…> like this. Aleksandra: Okay. Who do you think is successful <…> the community and <…> operational state? Who do you think would be the biggest beneficiary of the project? How… How do you think it will benefit the people? What's your aim? What's… What's your vision? Simon: The mission is probably 100% renewables, first of all. And we’re living in a very strong area for solar power here, because we have 300 days of year in sunshine. So this is a perfect position for solar energy, but north of the country is better for hydro and for wind. But for us here, to say it is that, no more. Again, the old structure of the electricity supply was built many, many years ago relying on our Central Power Station, large power stations, supplying various parts of the country through long transmission lines. First of all, one thing we can do is to do a wave along transmission lines really, because lately here we could have, we produce enough energy for Tavira, in the area around with solar power and we back up with obviously batteries and also a link to the group should we have excess or should we require more from the grid that we can’t produce. Aleksandra: Mmm Yeah. Simon: I really just to have a greater control, a greater transparency to people who use electricity as to what the technology is there, what costs are and what the supply can be? Historically, the electrical companies also charge a large amount of their standing charged for networks. These networks were established years ago, they should have paid for themselves years ago and yet because there are monopoly company they're still charge everybody quite large amounts of money just to be connected to them. For doing nothing. That's another advantage. I think locally, you know, depending on the negotiation of taking over the local network, that’s something again, the local people should benefit from - not having to pay such high standing charges for the electricity. Secondly, of course, if it's produced locally, it's much more stable. It's not due to somebody in the Middle East extracting oil or all the dangers you've got of not having something about your own control. Thirdly, to be a hundred percent or as close as we can get to from the renewables, so we're not destroying our environment anymore. And fourthly, we would like to get people involved in the local community of electricity, power supply – it is one area along with local food, local resources, local businesses to support a far greater awareness of local enterprise with the money produced locally, stays locally and in case we still need to buy from outside of our community, but we do a lot better than what we're doing right now. Aleksandra: So in your opinion who would be potentially the most affected by the fact that there is a community providing the energy to the local people? Simon: Well, first of all, I’ll see, person providers would be very affected by that. So they will be quite handy that …?<…> Secondly, getting people to actually actively join into these things is quite difficult. They just think it's too much trouble. They look at electricity, they look at bills, they look at problems. They think you can't do as well as a regional company. So there's a there's a a… an image issue as it were with the local people to get… to gain their trust. Actually we could Supply just as well if not better than what people have now. And for better prices. And prices… Yeah, people do like to have <…> Again, I think would be a good step forward. And people look around. They can see the solar panels around them. They can see where the electricity comes from. That should help them also to feel more comfortable in their lives and security. 109 Aleksandra: Do you see some potential influences on the local people once the provision of energy is done by yeah.. by the system there? Simon: <…> We can encourage people there to have electric transportation system. Again that would be using local energy, again reducing pollution, improving Health Quality among the local people. And organizing our lives in a better way than this thing left to corporations which just want to make profit from peoples lives. So I think this is ideal usage. As long as they… Whatever the system we use, whether this is cooperative or municipal system, it should be transparent, it should be again there to gain the trust of the people and remember that they're working for the people and be responsive to people. Because nobody knows in the future what other Technologies we can use for producing renewable energy. We only have at the moment, two very important ones which is wind power and solar, along with hydro. And these are technologies and we're working… Yeah, people are clever and they will find other things in the future for sure which….So is engagement. It's really engagement and empowering of local communities. Aleksandra: And what do you personally find most attractive or interesting in the community for yourself? Simon: Yeah, I mean for me is… I like the idea of people taking back control of their lives from corporations and from really a mental state of helplessness, they can’t just think about their lives. If you can show people actually, you know, what you can do you can control things and don't need have these corporations to tell you all the time there’s no alternatives… That I find very empowering - to see people suddenly wake up and say “Actually, we can take control of our lives and we do have a say in this world.” These are my main motivators. Aleksandra: So, in this sense: What do you expect to gain from the for participation or from maybe more leading position in the in the community? Simon: First of all, once again engagement by the <….>. You can’t actually have the business if the community is not engaged. That's most important, to first of all, is to actually engage and to be able to trust, to say: “Yes. It is an alternative. You can actually have a community around…” As, I mean, in Germany they have where they didn't go down the corporate line. We have Islands from Madeira and Azores where people can come together and do that as well. So there's no reason at all why we shouldn’t be able to do that. In fact, after the revolution in Portugal in 1974, country really relies on thousands of cooperatives cross-country to keep country go. So the cooperative model in Portugal is very well known and very well trusted. And it’s really there whenever it’s needed. So people really know that it can work. Aleksandra: But then I understand that for example, you want to…. Like, you have this Vision that since you start the, let's say, the coordinated movement in the community on the topic on the provision of energy, you want to translate it to also to other sectors, right? Simon: Yes, certainly. We have the municipal supply for our water and waste here, which is not very transparent. It’s majority owned by the council so it is under municipal control. So that’s another area where I see they haven’t really engaged the local community in what they do because they're not very transparent about what they do. And they don't seem to feel it's necessary to engage Community in that. So they are… That engagement is an important part. Whether it is cooperative, or it’s municipal. They need to engage them in what they do and show them that you know that it's potentially a much better way forward and to be transparent to other communities around or other technologies that can benefit processes we're looking at. Aleksandra: And in your opinion if people are more engaged, what would be the first impact like…. Or why in the first moment do you think they should be engaged and they shouldn't be having the same attitude towards for example provision of energy or to taking away their waste as it is right now? Why do you think engagement is such a big key? Because you repeated these words many times. Simon: Because unless people are engaged into it, then then they really not looking at the processes that are being provided for them. And I think it's very important that people are engaged in the process is very important. They're engaged locally politically as well as the resources of this area… Probably not as well represented because central government in Portugal is in Lisbon and very much the Algarve's is an afterthought for many of them. So it's it is an engagement on all levels… On physical, practical, community and political levels. And that's important. I think there’s the idea that there are experts somewhere who is going to help out and you solve it all for you - I'm afraid this is not going to happen. You realize we need to talk to each other and we need to look at getting directly involved to make things happen. Then they are supposed to inform. Aleksandra: Okay. Yeah, it makes a perfect sense to me. Also. If you you mentioned a couple of values that are important to you in the community. So that was transparency. That was a fair pricing system and there was this engagement of the people… Being more environmental friendly or more sustainable, to resign from fossil fuels… If you could tell me from these aspects, what is the most important thing for you? If you could if you could say that… “That's the aspect I'm never going resigned from.” - which one would it be? It can be also a detail. It doesn't have to be that: “Okay, I'm resigning from being environmentally friendly.” It can be a detail some really tiny thing that is the most important for you or two to three things as well. It's good. Simon: Certainly, climate and engagement is actually necessary. This is just one facette. Because climate is about how we operate today on every level. On what we consume, what we get rid of, what we use and what we waste. So it’s one facette that is to me the most important area of getting sustainability and yeah… Actually, the environment, as clean as humans can be. Actually, I say that if people would be continuously involved in these processes, you would still have dedicated, people trained, personnel to run that. But those people would be running them in a transparent way, so the community can understand what they were doing and how they were doing it and give them some feedback on that. We need to we need to engage people to change habits, change ideas across all the spectrum of how they have a deal with their lives and environment… And with each other. Because so much of what we do the moment is based on competition here, and we'll need to change that to cooperation and to have some comfort and some trust in people around us. And that's another very important part of that process. 110 Aleksandra: Yeah, thank you. So if you could say if you can envision the working… the working days of the community already and it's in full potential, it’s operational. What are the services? What are the products that you envision to obtain from the community energy as organization or as functional entity? Simon: Okay. Well, first of all, we have electricity supply under our own control. So we can then decide how much we want to supply whether it's just for us or whether we want to export it to other areas, other regions. We can also look at now encouraging the other uses of electricity, like in the transport sector, to produce a vehicle… Yeah to have transportation not relying on fossil fuels and maybe even an engineering center which will convert old vehicles to new electric vehicles because if we wait for just all the new vehicles to become electric, we are still going to be the same position in 20 years. So we do need to deal with all the old vehicles out there. We don’t need sports cars, we don’t need fast cars. We just needs things that work. And it's already been proven in the UK. You can reproduce… You take a fossil fuel engine vehicle, put in an electric vehicle and take out a fuel tank and put in fuel cells. You can do that. Okay. It's not going to be the top. These are all things that people are sold in terms of cars transportation, but it'll be efficient and they will work, which means they work with pollution we have. And people again… <…> role <…> having electricity and that there are our own garages who can actually sustains these vehicles to a lot longer life. You’re not gonna need to produce vehicles, you know, you just need to repair them. Which again might be a lot positive for the local economy. Aleksandra: So you mentioned, of course, energy or electricity provision… Just to be sure, in Tavira, what’s the bigger problem heat or cold in the winter? Simon: It’s funny because most of the housing here is built for the summer, so has barely installation. So actually for the winter if they're not very good and you need some sort of heating. Not a lot, but need some. So that would be quite positive. I think for the people here that you don't have it traditionally. They just wrap themselves in blankets or have a fire to have nice warm houses and electric blankets. There's no reason why they should not have a comfortable winter. Okay, yeah. For the summer. We're lucky in a way that we are close to the sea. So we have some breeze here. It's not such a problem as inland in Portugal where they have much problems with the heat and need much more air conditioning. Yeah, air conditioning if it's if we have to have it… Fine, it should be there. But again, I think part of the engagement of the locality would be to build houses which are far better insulated, both for hot and cold, so that we don't really need to actually artificially heat or chill areas. Our houses will do that for us. That's another…. that's another topic and another engagement. Aleksandra: So do you think there is something else you would aim to obtain from the community or what do you want to do other people that you have talked with mention the most frequent… most frequently? Simon: I’d like to touch on tourism here. Yeah, we are a big tourist town. And yeah, this is a chance for Tavira to actually to their to show yourself different from all the other tourist offerings. To offer tourists zero-carbon experience. I think that would be very important for industry here. As well as sustain the wonderful wildlife nature that we have around us here. So that's another big plus. What other people have got… Everybody's got their own ideas and everything. So yeah, other people… I think we would have to talk to them about it as a group. I think many people would agree with a lot of word I am saying, my sentiments but they may see different ways of doing that. I don't think…. That's what you get when you enter a group. You have to listen to people and to try and find a way for that everybody agrees. So, you know, I have my own ideas. But when you enter a group you have to make sure that the group has its own ideas and goes forward with them. Aleksandra: So to summarize, to make sure I understood: For you the most important thing is to… the safe or…. Not safe. The transparent and sustainable energy provision, supporting maybe some retrofit activities of the houses and turning the transportation into some transportation that is not a fossil fuel-based. Okay. That's your priorities. Great. I am happy that I understand it. And do you did you think about…. We were mentioning the benefits but it doesn't… it doesn't hurt to repeat what are the benefits in your opinion. And now we also like to focus on, maybe, the downsides for the people in the community. Did you, in the talks and the discussions before, did you pinpoint some pins, some downsides of this new system for the community? Simon: I think the downsides, one of the down sides is <…> Before, was, yeah, the image, and getting through to the people and saying it’s possible. I think a lot of people resigned from the fact that big corporations “must know better” and “why are you getting involved in it while they have bigger allies, basically”. So for me, the biggest downside would be that. I would see a gradual rollout of the facilities, so that we can prove and we can gain trust from the community, so we would probably start with a small area of the community, at the substation level and take on the substation supply and you would actually have your own solar supply with that. But you could <…> excess or deficit with the substation to prove that…. To prove it's possible, to prove this beneficial and to prove that is not that common cases with the technologies that people have incentives. So that would be important to start with a big pilot project we could actually all learn from and we will find areas are which we may not thought about which might be a problem. That would be the initial starting point. Yes, we have a large fishing fleets and boating here. We have a new solar boat factory which are making solar powered boats for the tourist sector and for the fishing movements, etc. Again, there's a retrofit required on the diesel boats that we've got here which again…. If we have a technology if we can encourage the local engineering expertise to try to transfer electro motored vehicles form fossil power powered motors, it would benefit them, the local community enormously. And again it brings things more back into our power, to our feeling that people are in control of their lives. Aleksandra: Just to understand the local context… Because usually what I noticed there is some resistance from the people, from potential communities when it comes to land usage. So maybe in Germany that was happening when there were farmers. They were not really keen on establishing the solar panels under pieces of land. Or there are some resistance towards wind mills. Did you see anything like this among people in Tavira? Some resistance to the technology or some fears towards the new setup of energy provision? Simon: Not really. Mainly, because we haven't really dived a very large wave here. We've had solar water heating each year. It's mainly true for new buildings to setup water heating in Portugal. And people are very aware of solar heating. They're not afraid of the sun… of using the sun at all. As for farmers, there’s a better a way than putting a solar array on ground level. Doesn't have to be that. We could actually suspend solar panels above the ground level on high tensile cables. And people will then actually have the shade underneath to grow more crops because in the summer here it's just too hot. So that could be another new technology here, another view on renewable energy products which they can't do which would be even more beneficial to use. We do have a lot of plastic greenhouses now supplying most of Europe with red very fruits just because they grow quicker down there in the south. Like everywhere else, that's taking off very, very quickly. I would like to see a much more local sustainable food production using these technologies, using experience we've got. We can provide shade with solar panels, so we get power and we can improve our agriculture as well. So, we need to be able to, I think, experiment with things and then to roll out what works and to 111 learn what doesn't. As for the people I think I think generally the people here certainly are not anti the new technologies. They might be not aware of it. Again, this is educational issue. If you had a pilot project operated locally, people can then become aware, become engaged, they can see it, touch it, feel it and say that actually that's something we want here. It’s not something to be afraid of. So I can't see that that is going to be a big issue but it just needs that transparency engagement. Aleksandra: And what would you say is the average… Or how would you describe the wealth in the community because… Because maybe costs can be also influencing the decision of the people. Would you say that people who would participate are people living in this region are more price sensitive or they are rather wealthy or how is it? Simon: Yeah. We have a mixture here. I think the local population here… We have a history of bad jobs and bad pay for Portuguese. Full stop. And. They have a rural system here so that people know how they <…> People get rich by going to the cities working at European projects for other companies. We have some wealthy people who have come to living in Portugal mainly from outside Portugal, from northern Europe: France, the UK, Scandinavia. They are very engaged and they are very actively supportive of new technologies because they can see that they don't want to destroy the beauty that they have around, that they have here. And they are actually involved. For the local people, yes, price sensitivity is very important because their disposable income is quite small. So in winter they put their jackets on and they put blankets on so that they can turn down the electricity because it costs money. So I think there's a benefit there to provide much better conditions so that without costing them so much. That's important that we do that here. As well as local housing, social housing which again since 2010, no movement has been made on that so there's no more provision for social housing. People are finding it quite hard to find affordable accommodation here, in Tavira area. There is a lot to do. So again this is an important part of the whole picture. Aleksandra: And if you were to create a community any different vision system, do you see the possibility to actively engage these people to participate in the community in any way or what would be the areas that you see the biggest potential for their full engagement? Simon: Yes, certainly, I mean pilot projects as I said to you would be very important. To have something running on a small scale. People could actually come and see how, bring schools and visits. We have a local science institute here, a public science institute that you can get involved. We would encourage many, many people to actually just come and visit come about and see what we’re doing. And get their feedback and yeah, find out more about what issues they may have with that. I can't see that there could be any negative issues. Once people do see it and see it working, they want more of it themselves. Yeah. Especially if it still saves them money. Aleksandra: So financials are very important as I see. Simon: I mean it’s difficult to sell something that's gonna cost. That's true. There's a real reason for the technology today, especially depending on how much we would have to pay for the local grid connections. That was a big plus. That's a big unknown. The actual technology for producing and storing and using electricity - we know that we can do that at a very good level, much cheaper than what they would have to pay to the national company at the moment. Aleksandra: In the scenario, that the costs are not really significantly sinking, because maybe for example of a really high need of using the batteries or any other types of storage that are too costly. What would you say would be convincing part for the people to join the community anyway? If they don't really see a big very big impact on their wallet? Maybe they even have to pay just a bit more. What would you say that what would convince them in your opinion to join the new system of energy provision anyway? Simon: Yeah, that is quite an interesting one because if you look at the cost per kilowatt hour that solar power can generate now, we're around about 5 cents a kilowatt hour. Now people are billed and they pay the normal tariffs around about 16 cents a kilowatt hour. And they have even VAT on top of 23%. So that takes the cost to actually 20 cents a kilowatt hour. And that's very expensive. It's one of the highest cost in Europe. We know that the cost of five cents is straight from the solar panel. So we know when the sun is producing we can actually save a lot of money. Battery power – Yes, it is more expensive. That's the question of whether you add more panels and then your connected to a grid, you can export your excess during the day and you import when you don’t have enough. That could be the first stage process before putting batteries. Battery technology. We've already seen reductions in prices for 200 - 300 percent in the last five years. There's no reason why that technology will not continue to fall in price. And there may be a timing issue to how and when that is to be used as a backup source for your local produced energy. I think, if it was price neutral at the moment, you could say what is the technology you would get cheaper rather than a resource, natural resources which is going to get more expensive. So you're investing in the future. You're investing in a clean technology which is not going to destroy your local environment. You're investing in local technology which provide jobs, education, spin offs… All the local community at the moment, have to look to… to go to big cities to get jobs because locally we're not really producing that enterprise and that technology locally. I think all of those areas hopefully would be a good enough argument for people to switch over. Aleksandra: To continue living in Tavira? Simon: Yeah. Maybe if this the situation to pay the same price for example. Aleksandra: And when it comes to this finance management, wealth management in the community, how do you envision this? Who should be decisive? And what is your opinion on how should it look like once it’s operational? Simon: You mean wealth management of the communities or of the electricity <…>. 112 Aleksandra: Mostly question was of the wealth management in the community that comes from the benefit of maybe lower costs from energy provision or obtaining the energy. But maybe you have some other vision so I don’t want to impose my way of thinking on you. Simon: From the actual electricity, yes, we can certainly offer cheaper rates than what they are paying at the moment and everybody would be happy with that. I would like to see, as I told you earlier, different possibilities for engagement of groups of local engineers for conversion of engines into electricity engines. For a lot of people that can be involved in a…. Sort of thinking schools and solar panels here… get rid of <…> For engagement of other areas of benefits that would come from the electricity that funds that… I think that there will always be an option for people to give to other communities, some in the third world to help them with their grids and with their energy. The people that are short of infrastructure. I think this could be a donation system that allows you to put some of your savings into other projects in areas where people are really having a problem just to stay alive. And to give them the conditions that we enjoy in our countries. But that would be voluntarily. I would think there would be a big voluntary part of the local community again to involve people who have excess <…> to invest in ocal projects because we need finance to get these projects up and running, set up local engineering stations, to set up local businesses which would benefit from our green credentials in Tavira. And a little bit like the cooperative we do in Coopernico. We have members who invest in solar panel production. They get a 3 percent return at the moment. It's a 12 year investment and at the moment every project that comes up is sold out within about 10 15 minutes so there's definitely an energy hunger there to get involved in actually financing this transition. Which again, the central banks in the normal financial situations are really getting involved to be honest. Once again that would be a different engagement in the community on the financial level of building these business models. Aleksandra: And how do you envision the decision making process or decision… The ability to take decisions for the new system among the community members or the new system? Who do you think should be in charge? How many people? What kind of way of the decisions? Didn't you think about that? Simon: Yes. I think the every little area, every little mini grids should have a say in how that mini gird works. Some mini grids may want to export their energy and not have batteries. Some mini grids may want batteries and save their energy. Those local decisions should be based on the mini grid. Now technically, there's going to be two - three people in those mini grids organizing and managing that grid and maintaining it. Those would be appointed. We have a cooperative at the moment. We have a board of people who run the cooperative. Every member has every year at least a say how they are running it and who these people are, whether they are doing a good job or not. That's important part of this engagement transparency. So yes that would be a level of engagement. I would say there's no reason why every mini grid, depending on how it's organized, should not have any engagement. Set different priorities <…> so it would be much more democratic than trying to fit one solution to everybody. <…> Aleksandra: And for example you were mentioning also that you would like to see the support in refurbishment or the retrofit of some systems that you have right now, the transition of transportation or for example some support for the farmers to obtain an energy to increase their crops in a sustainable way. Do you think that this should be the community, the energy community doing this activities or the energy community should be as a service provider to other parties. Or do you see the involvement in these activities? Simon: Yeah, I mean the energy community I think we have to actually have a structure for each process. So energy would be one structure, but people could see the structures and see what works with energy. I think you would need another structure for agriculture and you would need again another pilot projects to show people there is a different way for what they're doing at the moment. And then how that's taken on board - it could be a mixture of that people say I got it this way, it works and this works, or we can actually keep coming together, say “Okey, let’s do it as a group”. Let’s buy some land as a group, have some managers managing the production. But we will have a say in it like a cooperative. So there are different ways of organizing. The important thing is that this is a big improvement to what we're doing at the moment, that offers a better future for the young people who are growing up in it than it’s offered at the moment as well. Aleksandra: Oh thank you very much for all of this. My… let's say my prepared questions have finished but maybe you have some final comments or additional questions to me or some remarks…. Something that you still would like to mention. Simon: No, I mean… I think one of the issues for everybody in every country is trying to take that first step, trying to get it these pilot projects of the ground, trying to prove themselves that there is other possibilities than the monopolistic companies for profit which organize resources at the moment. That is a huge first step. I think once you've got the first step, you know, people will see it and it will kick in snowballs very, very quickly. And it will be taken by the people. Because we learn from each other. That's what humans do. They see something good and they want to do it too. That can happen very quickly but we just need those initial steps, those initial projects and support it by as many people as possible. Aleksandra: And hope that my research will…. <…> what the cooperatives or communities should be doing or how to do it in the way that is actually profitable and bringing big values to the people around. So, yes, if I am…. Once I have the conclusions then I’ll also drop some comments to you if you don’t mind. Simon: I might have thought of…. I mean there's a lot of programs, there are a lot of the small island programs and they try to have a natural small grids which is at the moment running on diesel generators and those are very keen to move on to solar power. They are very natural pilot projects to actually give the alternative and to see it. So this is already happening. And they're happening in Portugal in Madeira in the Azores. So. I think that that is important to spread the news of those and the success of those as well. And then there's no reason why everybody on the mainland shouldn't have their own grids. I mean people trying to understand how the electricity gets to the house. Generally comes from bigger sources into smaller sources and then is provided a certain voltage rate locally. I mean. It's not rocket science. You don’t need to actually be hooked up to a large power stations. You can provide your own energy. Aleksandra: Mm hmm. Yeah. Thank you once again for your time and for the…. Yeah, for the needs and all the insights that you told me. I also found out something interesting for myself something completely new that I didn't think about before like this retrofit activities, for example, or support in transition from fossil fuel based technologies to other technologies for the existing equipment that's already there. So I will stop recording now because this is encapsulated already. 113 Leads After the interview, it was arranged that the interviewee would send an email concerning the leads that had been picked up during the interview as well as additional leads. The leads concern specific people or documents which are useful for further research. These leads are presented in Table 1. The people listed in this table are considered to be potentially interesting for further research and interviewing. This table show the leads that were provided by the interviewee during the interview. The table shows the name of the lead (person or document), its function and the context in which the lead was mentioned. Table 22 Table with leads Lead Function Context in interview Ana Rita Nazário Marouço Project Developer Employee of Coopérnico, expert on energy communities Analysis and reflection The research question of the interview was as follows: What values, and specifically what economic value can Local Energy Community create to its members and other actors in residential sector? What suitable organizational models for the operation of the Local Energy Communities can maximize the satisfaction of the values and needs of Local Energy Communities? The Coopérnico is a platform gathering the Local Energy Communities in many cities in Portugal, Simon, the interviewee is the representative of one of the locations united under Coopérnico – Tavira. He is mainly motivated by environmental, social and financial values. He a strong advocate of the sustainability, shares the concerns for the climate change and wants to support the clean energy transition by decreasing the demand of the fossil fuels and their use in the energy generation. In his opinion, Portugal does not take advantage of the abundant solar energy and the potential to assure the energy provision with means of renewable energy. Additionally, he strongly criticizes the fact that the critical infrastructure, such as the national grid, is in hands of foreign investors and the profit taking companies. In his opinion, this closes the possibility for the citizens to enjoy lower electricity bills due to the fact that the monopolistic companies impose high connection charges and payments for the usage of the gird. For this reason, he strongly supports all schemes allowing local communities have control over their locality, especially with satisfy their energy needs with the renewables, which can be sourced locally rather Central Power stations and having the control over their assets. He wants his Local Energy Community achieve energy self-sufficiency and energy security by becoming independent from monopolistic incumbent firms. Additionally, he likes the community ownership setups and supports the development of social network for the launches of the energy communities. He thinks that, in order to build resilience in the region, the energy communities might go beyond only renewable energy provision and management. By the cooperation with local contractors and local population, he hopes for the energy community schemes to facilitate local job creation and discourage the migration of young generation to big cities in the search for employment. He suggests that Local Energy Communities should adopt a holistic approach contributing to the diffusion of certain new technologies, such as expansion of use of the electric vehicles contributing to the local environmental and health benefits. In his opinion, this will result in the growing attractivity of the region, strengthening the economic base and allowing further revenue streams, such as benefitting from eco-tourism. When it comes to the proper organizational models of the Local Energy Communities, Simon suggests the cooperative model. He stresses the importance of transparency in the operation of community-based energy schemes and in his opinion, the cooperative model allows a very high degree of transparency due to the fact that it imposes the obligation on all members to participate in the decision making process. Additionally, in the cooperative model, the members have the possibility to closely observe the managing team and they are able to constantly verify their performance. Simon, thinks practically 120 Aleksandra: Uhym, okay. Rita: So we need to be that figure that independent electricity supplier to establish the business models that will allow our members wither to locally self-consume or to virtually self-consume. Aleksandra: So I imagine that you also develop some benefits in your mind. And what do you think will be the biggest benefits for the community if they have this projects in their house or in their location? Rita: Obviously, to consume the local energy that is renewable energy. That is always. The big picture for Coopérnico is to produce ore renewable energy so that ore renewable energy can enter the electricity grid or is consumed in a bigger way than fossil fuel energy. And also the creation of these communities can educate the population about energy efficiency. We think that in Portugal there is a lot illiteracy when it comes to electricity market. So the people here don’t know how the market operates, how the electricity… Well, they know it is produced, but how it reaches their house usually it’s topic that they don’t know about it. So when we create this energy community, the citizen energy communities, we want to promote more education in that field and if people are better aware of how they can be smart consumer of electricity, then they usually are efficient in their consumption and it’s better for all of us. Aleksandra: Yhym and do … Rita: <disruption> Aleksandra: Oh sorry. Do you have anyone in mind, let's say, apart from only the end consumers who could potentially be affected by this project so for, local energy communities? Rita: Right now we are just thinking about the our members and their small communities, but it if we can create successfully one or two energy communities that can lead by example here in Portugal, because there are none, then it will be a positive example for all of us citizens in Portugal to create their own communities. So Coopérnico will grow in terms also of members but it would be… What we want to impact is the Portuguese population to see that it is possible to create these type of communities and then they bring benefits not only for them as citizens but for the population as a whole and for to environmental, obviously. Aleksandra: So, you like you think you are mostly focusing on the consumers in the residential sector …<disruption>… companies or some additional services right. Rita: Yes mostly because our members are mostly citizens from residential homes. Yes that's where we are focusing our efforts. It doesn't mean that the end in the clean energy package the definition allows for small service companies or enterprises to enter those citizens energy communities so it doesn't mean that let's say it's apartment building that have bakery owner or this shop or post office in the same apartment building. That doesn't mean we should exclude them. Those small services could also benefit a lot from the energy community. And if you think in terms of selling the energy or consuming the locally the energy that is being produced those services probably need more energy throughout today than the residential owns. So that would be a good thing to look at as well. Aleksandra: Ok. And personally for you what is the most attractive or interesting aspect about the local energy community? Rita: Well I joined Coopérnico and my masters is also in energy so I believe that renewable energies and they can meet local energy communities are really the future. So to be able to help achieve that transformation in Portugal is very satisfying for me. Aleksandra: Mm hmm. So this is something that you expect to gain personally from the project, right? Rita: Yes, I think personally and professionally it complements itself beautifully because I joined the section because I did thought and I do think it is the future. So to have the possibility to be a part of that transformation. Yes it's also very rewarding personally for me not only professionally but also personally. Yes. Aleksandra: Mm hmm. And in cooperation with other people, with other members of Coopérnico what would you identify as the most important or the relevant aspects of the Community… Energy Community. What do the people say what to what comes to your mind first as the most important or relevant thing for them? Rita: It's to be able to produce their own electricity. 121 Aleksandra: okay. So… Rita: So they are really our members are very, let’s say, environmentally concerned. So they do support and believe that renewable energy is the future. They want to embrace and they would like very much to produce and consume the energy. They also think it's a good business models. They have seen cases from other business models that occur not only in Europe but let's say the Brooklyn microgrid case. So our members would like for… eee… for that to be possible here in Portugal. And the regulation unfortunately still doesn't allow it. But that's what we at Coopérnico also trying to do is to do. To change the regulation to allow local collective self-consumption. Aleksandra: Also, you mentioned before that it's very important for the people to be sustainable and good for the environment. What about if the costs are really too high? Are they still holding on to this idea or are the costs….? Rita: We have both cases in Coopérnico. We have members who join only for the financial profits. But, then we do have members that joined because they believe in the cause. But since PV has dropped… The cost of PV as really drastically been getting been low every year, so they are the ones who are asking for our help to be able to help them build these energy communities. So in terms of their department building I was using as an example. But is that the case we are trying to set up here in Portugal. That community in that apartment building before any of them joined Coopérnico, for themselves they bought LEDs, for all the lightings in the building so then they have a more smart consumption and a lower consumption of electricity. So that came from themselves and afterwards they see the model for the LEDs work well and then they installed PV for the common areas of the building. All by themselves, without Coopérnico interfered. And then they wanted to… to have more PV installed so they could do consume in their own houses and sell to their neighbours, for instance. A business model of some type like that. And they… they saw they couldn't do it for themselves so they were the ones asking us for help to help them establish their… their local community and to explain to them why all the regulation still doesn't allow us in Portugal which are working very hard to try to change that. So when you think about these communities in Portugal with… You think mostly about PV and the cost of PV has dropped every year for the last two or three, four years, five years. So it's not so costly anymore. And people really want to embrace renewable energy so there investing in renewable energy. And to be more sustainable. Aleksandra: Mm hmm. And was there reaching out for your help of Coopérnico or in the cooperation - what are the activities that they wish to obtain? What are the services that they wish to obtain? And what exactly are they mostly asking for? For what kind of help? Rita: I think they need our help. Not only on the technological side that they need… like… the technical tools, they need the management system and I think <disruption>… It is only the technical side. So they have meters at their homes. I don't know if all of them are smart meters but they're not. But smart meters are only being installed right now in Portugal by the grid operator. Not only that, also like about 30 percent of homes nowadays have them, but it's still a process ongoing. So probably we need to do certain metering to help them to install that business model and to…. So they don't know how to do business models around PV even if self-consumption was possible in Portugal and they could install more PV on the rooftop to consume locally, I do think they would need help establish the business model around that collective self-consumption system and a management system as well. Aleksandra: And if you were to become a member of Coopérnico not only… Let's say the like also for example being in the location, living in the location that can cooperate with other people, what would you personally see us as the service done for the members? What would you like to obtain from such cooperatives, from such initiatives? Rita: Well, mostly what I'm saying is that if I was in that community what I wanted Coopérnico to do is what they can do and ask us to do is to do we get to that management figure that can manage their collective self-consumption system that they want to install in the community and to do that part of the service. But other members of ours that aren't included in the communities like an apartment building, they would like for Coopérnico to have like a virtual collective self-consumption business models as well. Apart from the production projects where they are involved. Aleksandra: Ok so this is something you think they would appreciate most: to be the manager, to be the one taking the responsibility of governing the system and to provide that technical and the business economic help for making the production or the operation mostly cost effective, right? Rita: Yes. Aleksandra: OK. And do you see any possible downside is that downsides for the people in the community for any possible disadvantages of such projects? Rita: Well, I don't know it can be called a disadvantage. One of the concerns here in Coopérnico is to establish the fairest of the business models there and that's something that we have been discussing with them because you can imagine that in an 122 apartment building some of the tenants might be there the whole time. Some of them might not be there at all and only arrived at night to their home. So we've established a fair business models where all of their concerns are… are provided for or looked out for. That's one of the things that concerns us the most. And the…. And they might see to it as a disadvantage as the classic system that is implemented now where you only pay the electricity that you are consuming. Also, there are lots of discussion going on with the grid operator. Because the charges of the grid are paid in your electricity bill by the final consumer, the residential final consumer by they. So they are consuming locally and not using the grid, the general grid, so, there should be other tariffs implemented for that.. that cause as well. So the grid tariffs might be disadvantage if they will not change until such a system is improved. Aleksandra: And how do you think this might affect the people like… Can you… Can you elaborate on this? Rita: Some of them might not want to join the collective self-consumption and prefer the traditional system. So all these disadvantages for the members is a disadvantage for us, because we are the ones maintaining and operating the whole system. And it is tricky for us. Let’s say, we have 80 apartments in buildings and 20 of them doesn’t want the system. That will imply more money invested in the system itself to separate these 20 from the other 80. So that the energy can only effect those. So that will imply a more costly system. Aleksandra: But you'd say that in this situation you'd like to do the double cabling? Like for example to take the cabling from the PV system directly to the apartments and separated from the cabling provided by the DSO? Or… Am I understanding it wrong? Rita: It’s one of the things that we’re still studying here in Coopérnico. Or how to do it to be more fair to the citizen. Because if you leave the system as it is now, when the system is producing, the electricity will go to the person that is consuming at that time. But imagine that none of them are there at the time. What will we do with the electricity that is being produced? Because system with batteries is even more costly. So that would be a barrier for the investment. For the lucrative, et’s say, of the system.. Aleksandra: I understand. Okay. Do you see any other potential downsides or any negative aspects that you already may be addressed in your project? Rita: I think it's more a risk for the Coopérnico, and they position on the market during the operation of the project. But I think there’s no risk to that person to the payments itself. Because they do not want to control the system. Imagine that's a local community that does that for themselves. That then it would be a risk for themselves. And if you are making the system and everyone says: “Yeah, we'll go for it for that system”. And then at the end: “Eeee, no, I want to go back to the traditional one.” So we have invested a lot of money and you are not obtaining enough return for meet if no one is… or most of them are not too involved in that system. So it is important to have the strong community that can can… can vouch for the use of such a system for the time period established. Independently, if it is governance by cooperative or other type of government system. Aleksandra: And then how do you stimulate the active participation of people and to… And to maybe draw some loyalty from them so that they… they are more active and are more committed to…? Rita: We organize workshops with those communities want to be local, collective self-consumption energy communities, we will… We have envisioned a set of workshops to establish with them to make them understand what the system can and cannot do or what they will gain from being in such a system. Both the economic and environmental benefits that such a system can provide and to share with them energy efficiency tips and try to engage them to be an active community as a smart costumer. Aleksandra: Does active community and smart consumer also means participating directly in energy trading system or somehow deciding on the times when my… let's say, consciously decide on the usage of the devices or how do you define it? Rita: Ideally yes, but not… You are different… You cannot expect that everyone in the community will respond this time. We have people that we know are very keen to use such a system and they always say if that system system as an app for you or for your phone so we know that some of our members will be always on their phone seeing when the electricity is cheaper or… so you have that kind of demand response from them. But… And flexibility… But I don't think all the members of the community are like that in every type of community that you can see are people that don't are really interested about it. Usually they only have… Want to have cheaper electricity bills. So that's the only common thing with all the people in those communities they all want to have really cheaper electricity bills. So if we can assure that all the people will have cheaper electricity bills, they'll be engaged but not all of them will be engaged in those types of flexibility markets or peer to peer markets if they could be a thing here in Portugal which they could not yet. 123 Aleksandra: And did you investigate or did you discuss some measures that can… Let's say, <…> electricity usage in the system to still provide flexibility. But without active… Taking the attention from the people like, I don’t know, some controllers that warm up the space in the rooms or warm the water in the boilers according to their own control optimization. Rita: These projects that I'm talking about with that apartment building only started a few months ago. It's included in a European project that Coopérnico is going to participate, called <NAME> which is H2020 projects and it's going to last the next four years, well three and a half right now. And only in the beginning of the third year and is the technological tool being installed and yes,, obviously we are concerned about it but we still haven't gathered enough information. We do know that some of our members based on the questionnaire, their response, they wouldn't mind giving up the control of such a system. Let's say, if they knew the house would be warm enough for the winter they wouldn’t mind that the grid, the manager or operator would control when the ACs, for instance or to say to them: “OK, just do your wash machine then and you’ll be compensated for something later.” Yes, some of them will be keen on that. Others, not so much. They like to control their houses so it is important to establish also a system that could allocate both to both needs. I think I think that the way to evolve to that system is to have the economic benefits for those who don't… Who give up their control of such a such systems in order for a grid to have more flexibility. Aleksandra: And in Coopérnico, in the new systems that you're going to create, how do you envision the decision making processes of members in the local community especially with the focus on the finances? How do you want to solve it? Do you have any plans on that already? Rita: Right now we only one tool to make sure it is possible for them to collective self-consume and to have a simple business model installed or established around the collective self-consume, consumption. I think in Portugal, we are a little bit behind when it comes to systems that could be controlled by any kind of grid operator to control those types of appliances. So the first step for us is to establish a collective self-consumer citizen energy community. Then, when we have that in place and regulation is therefore for this part then we think Portugal we start to think about what type of control too… it is possible to… in the grid. Because our grid is still very centralized. So we only of one grid distribution operator and one transport grid operator. So because the system about until 7 years ago was still operated and managed by just one company in Portugal. Aleksandra: The edp? Rita: Yes, I think it's about them. Well, the word to have a liberalized electricity market started before but that wasn't about seven years ago where it was really liberated and more electricity agents appeared in the market especially electricity suppliers appeared in the markets, so this… Despite those electricity suppliers, the grid is still operated by one company in terms of the distribution grid and the transport grid. So when we talk about high tension and medium tension we have another company which is to manage of the global system. So because our… our grid is still very , if we can talk we can talk with the distribution grid operator and establish those local communities then we are one step ahead towards the goals of flexibility and demand response management here in Portugal. But right now we still just the really good dream. So we have to talk and the distribution network needs to to evolve more. To have more intelligent systems. So to have more flexibility in the grid integrated with those local energy communities and then from that I think those types of systems could be possible. Aleksandra: I also imagine since you're active in Coopérnico for quite a long time, you already have some even personal opinion on how you would like to see Coopérnico working. So still, I am super curious about your opinion about the role of the members like… Would you rather envision a very democratic decision making process or representative…. Or kinds of levels of membership would you like to propose? What’s your personal opinion about that? Rita: So, Coopérnico, being a cooperative it means that it has a general assembly at least one, but we have two. Two General Assemblies each year where to activity plan is presented to the members attending the General Assembly and its voted. So it's a very democratic process. Cooperatives are very democratic. It's the base of their foundation. So but what happens afterwards of the plan being voted is that management direction was voted as well by the members in an extraordinary general assembly. And that's management's board are the ones making the decisions on the day to day basis. And in terms of the energy community I do believe they could work in the same way. So even though the operational system could be hand delivered to a cooperative in the Energy Community as well, they must have some type of General Assembly where, let's say, like the… the big picture, the ideals where the community must follow are voted by the whole, but then like a management board should be elected so they could make those decisions day to day. You see in Portugal that type of arrangement around apartment buildings. So these type of apartment buildings and management boards is usually elected for a two year period. They are the ones making the day to day decision around that apartment building. But let's say, the small stuff: something needs to be arranged, fixed. So they are the ones to be contacted and they do the work to fix what needs to be fixed or arrange what needs to be arranged. But in like, big things that need like let's say like for example to the PV system or change the entire lighting system to LED and everything else that it's brought to a general assembly where all the tenants votes for the… for implementation are a lot of those decisions. So I think personally it's a… it's a good system and it is the one that should be applied to energy communities as well. Aleksandra: And do you know if they have problems with the situations that let's say that the owner of the apartment is one person , but the person living there is not the owner, but for example is renting and whatever improvement is being done, the renter is the 124 one benefiting but maybe the owner is the one who has to pay via some tax or whatever. Do you think if they have such problems and if yes, how they solve them? Rita: Yeah, I think that could be a.. could be a problem if the renter is paying, let's say… Because in Portugal we have two types of renting. You have renting with the expenses included which includes usually the water bill, the electricity bill, then the gas bill if you have gas in your apartment. And then if such a system was purchased by the owner and then the electricity bill let's say it's paid by the owner and include on the rent, I don’t think that would be a problem. If the electricity bill is paid aside from the rent then it would be the renter who would be profiting from the system paid by the owner. But when you install such a system in your apartment you are already putting value, adding value to that property so the owner could also see it that way. So I'm paying for this system. The guy living there, will save up in electricity bill but because renewable energy is so good then, I’ll put a bigger price on the rent. Aleksandra: So if I understand correctly, for you it's not a problem if even the savings achieved by some efforts with the new flexible systems are not going to the end user but they are staying in the pocket of the apartment owner, right? Rita: Or the apartment owner could also profit somewhere else. Because it would not be fair if the apartment owner is the one to pay for the system. But when he's renting the house for the same amount he doesn't receive…. The savings are going to the renter. So when you buy a house in Portugal and if the House has PV or Solar thermal, whatever, in their rooftop, it's a house with added value. So you have to pay more for that house. I don't see why you do it…. You wouldn’t have to pay more for a house where renewable energy is possible. Aleksandra: In a shared apartment building? In the building with shared with many apartments, right? Do you mean that? Rita: Yes. Aleksandra: In fact that's all the questions that I wrote down. So do you have any other comments any of these things that you will want to add about Coopérnico and you can both your vision for the local energy community? Rita: I don’t know. I would have to ask you first if you don't have any more doubts about the work that we do currently here in Coopérnico because I do know we've talked about the future and that we want energy communities. That some people sometimes are not understanding exactly what you do. So I just want to make sure that everything is OK from your side. Aleksandra: If I understood, you mean? Rita: Sorry? Aleksandra: If I understood everything you said, you mean, right? Rita: Yes yes yes yes. Aleksandra: So yeah I understood everything because also I'm digging into this topic for almost five months already. So in fact uh yeah I, I don't participate in such a project or there's no possibility for me to join any cooperative right now. I'm working for the university Master Thesis but also I have the support from the startup that has software and hardware that enables bigger flexibility to usage from warming up water and warming up the space of the apartments without that much attention from the user. And then there that technology provider for a similar project in Belgium, for shared building of many apartments and in fact I'm working with them to also help establish the definition of the local energy communities and what should be the business model or the organizational models taking into consideration the flexibility potential, the savings potential and also then the needs of the people. So that's why I also… Since these Belgian people are not accessible yet because the project has just started. Thanks to Simon Pannett, we reached to Coopérnico and that's why I wanted to study maybe the Portuguese market more and to see what are the biggest needs, what are the biggest potential and how this how these initiatives can be operated because for me is an amazing idea and I would really love to establish it even in Poland and in my hometown. But I see that in Poland for sure it's in the distant future. Rita: It's a little bit out of work. I know that's the fact that the Clean Energy package being approved and now the definition of the community is there, it's a big step forward. But the problem I think most countries like Portugal is they don't have that regulated yet and the.. You have to regulate it first in order for it to be installed and to be developed. And we look like a lot to have more flexibility in those types of technology is you know in our community for sure. But it's still a little bit too far away for us. So yeah. 125 Aleksandra: Also I'm very curious that you said that the environmental impacts or environmental is so important for your members because that is something that I'm sure for my neighbours and my hometown wouldn’t be a feeling at all! Because they would only look at the finances. So it's yeah I'm very happy that you sacrificed your time to tell me more about Coopérnico. Rita: In Portugal you have to understand that the sustainability has been a current issue for I don't know 10 years now that more people are pressing the governments to take more and more actions and private companies, in order to be sustainable. Nowadays, I think it's like a trend. If a company has some kind of sustainability like logo or stamp or project then the population will go to buy that product. If they can afford it. So I think it's about let's say like a 50/50 situation. So you have part of the population without the financial let's say capacity to buy the products, but they are the ones that also understand that is important and they want to support those types of initiatives. But they don't have the financial capacity to do so. So they stand, like, in the back lines and got the cheaper available possibilities or opportunity for them. But it's almost like a trend in Portugal. Every company wants to make a type of sustainability brand associated with them because it means more sales at the end of the month. So I'm happy about it because it means that the companies are also putting a lot of effort and money to have more sustainable options available. That has been a long process. I remember when I was in primary school they started to talk about recycling for instance. So it has been and my parents didn't recycle at all. We didn't recycle our… our house so I was the one that brought the topic of recycling to our house and my father and my mother, both, nowadays living apart, they both recycle and they didn’t. So we tried, like, we say, a young age nowadays to incubate these ideas of sustainability and energy efficiency and smart consumption and the sustainability of grants and projects in the young minds of our generation because they will be the future generations and it is a proven system because nowadays it's almost like a trend everyone wants to be sustainable here in Portugal. Aleksandra: And what about these doing things together as a group of neighbours or as a group of individuals? Is it also something that warms up the hearts of people so much in Portugal? Rita: Well, in the rural areas of Portugal you still see that has… because they are small towns and village people tend to really know each other well or actually know everyone. So it's more easily to bring up these types of local energy communities. In terms of the big cities, it’s in terms of apartment buildings… You must… Sometimes you have apartment buildings with the apartment owners or tenants that are very strong believers of the energy transition movement and they try to inhibit those ideas with the other tenants. Most likely, when they try to do it, it's not only about the environmental benefits but it has some type of economical benefits attached to this idea. Aleksandra: And for example if … <interruption>… Were you saying something? Rita: No, no. Aleksandra: OK. So my question, because I'm very curious about. If you were searching for a new apartment for you for some reason, I don’t know, moving from Porto to Aveiro or whatever would it be an advantage for you if you saw an announcement of the flat that it participates in some energy co-operative project. Rita: Yes, for me personally, yes. I don't know about all of the people living in Portugal, but for me personally, yes, that would be a great thing to see. What I usually do, not about local energy communities because there are none yet in Portugal but searching an apartment, I think most people nowadays tend to see… It's mandatory by law to have a certificate…. An energy certification of that building or apartment. So people tend to look for an apartment with better energy certifications because when most young people now know that those apartments with better energy certification means that their electricity bill will be lower. We have a lot of old buildings here in Portugal which have not the proper insulation system. Usually, in the old days people didn't mind it because your electricity was cheaper. And because you don't have that harsh climates here in Portugal. So… But people nowadays see if they are… Some friends have… I see it amongst my friends: the ones with houses better equipped save a lot more in their electricity bill than the ones that have, let’s say the rent a little bit less expensive, but then they paid a lot for their electricity bill at the end of the month. So people nowadays have also that consciousness. Especially, like, the people from the let's say 25 years old to 50 years old that are searching for houses have that type of mentality nowadays. Aleksandra: OK. Yeah, that sounds very promising then and very hopeful. OK, I am super happy that you sacrificed your time. So now I'm going to stop the recording because. Yeah. It’s the end of the content. Analysis and reflection The research question of the interview was as follows: What values, and specifically what economic value can Local Energy Community create to its members and other actors in residential sector? [Document text truncated for crawler view.]