The Renewable Energy Communities (REC) are a crucial turning point towards a more sustainable and democratic management of energy resources. RECs enable citizens, businesses and local authorities to produce, consume and share renewable energy, actively contributing to the energy transition and climate change mitigation. A necessary process, considering the new and ambitious climate objective announced by the European Commission on 6 February 2024: to reduce net greenhouse gas emissions by 90% by 2040 (compared to 1990 levels). In this article we’ll examine the nature of energy communities, their growth in Italy and the world, and the updated regulations in light of the much-awaited REC Decree in force from 24 January 2024, and the incentives available to promote their development.

In the definition provided by the Ministero dell’Ambiente e della Sicurezza Energetica (MASE [Ministry of Environment and Energy Security]), an REC is a collection of citizens, small and medium-sized enterprises, territorial and local authorities – including municipal administrations, cooperatives, research organisations, religious organisations, third sector organisations and environmental protection organisations – who share renewable electricity produced by plants at the disposal of one or more community members.

But how exactly do they work? Within a Renewable Energy Community (REC), electricity produced from renewable sources – e.g. photovoltaic solar panels, wind turbines, small hydroelectric plants, biomass plants – can be distributed and shared by producers and consumers located in the same geographical area. This is made possible through the use of the national electricity distribution network, which facilitates virtual power sharing. It is referred to as “virtual” sharing, as the various players are not directly interconnected through a private network, instead they share energy through public infrastructure with a calculation based on an energy balance.

Investments are multiplying worldwide for renewable energy communities. In the USA alone, according to reports from the Treasury Department, since the signing of the Inflation Reduction Act in 2022, announcements for investment in clean energy in energy communities have risen to 5 billion USD per month (from 2 billion USD prior to the reform). In Europe, it was the European Directive RED II (2018/2001/UE) and the “Clean energy for all Europeans” package adopted by the EU Commission in 2019 that gave the first impulse for the spread of energy communities. According to a study published in Nature in January 2023, in the 26 Member States analysed there are over 9,200 energy communities. More than half of these are found in Germany.

In Italy, according to the Energy and Climate in Italy report by the Gestore Servizi Energetici (GSE [Energy Services Manager]), published in May 2023, at the end of 2022, there were 21 renewable energy communities registered. We only are at the dawning of this movement. According to the Analyses by the Energy & Strategy Group of the Polytechnic University of Milan – published in the Electricity Market Report – it is estimated that there will be 40 thousand Italian energy communities by 2025 involving around 1.2 million families, 200 million offices and 10 million small- and medium-sized enterprises (SMEs). As a result, the projection is for 10,000 new energy communities in the next five years, especially as the legislative obstacles have now been overcome. The topic of energy communities will be central during the next edition of KEY - The Energy Transition Expo, Europe’s most important event dedicated to energy transition that will be held in Rimini on 27 February 2024.

After month of legislative stalemate for the development of Italian energy communities, on 24 January 2024 the REC Decree finally came into force. As provided for in the measure, within 30 days the operating rules for accessing the incentives were approved. On 23 February MASE approved the GSE document, which regulates the modalities and timing for accessing the economic benefits provided by the REC Decree. In addition to the Ministry website, the rules can be consulted on the GSE site. It will be the responsibility of this latter, the manager of the measure, to set up the portals through which applications may be submitted. The GSE has therefore already announced that the portals will be operational on 8 April 2024. Finally, a simulator for the energy and economic evaluation of the initiatives will soon be launched on the GSE site, while the interactive map of the primary substations nationwide is already available.

The text identifies two alternative, but cumulative, paths to encourage the developments of RECs. The first is a non-repayable grant for up to 40% of admissible costs, financed by the Piano Nazionale di Ripresa e Resilienza (PNRR [National Recovery and Resilience Plan]) aimed at communities with plants located in municipalities with less than 5,000 inhabitants. A measure that will support the development of 2 gigawatts in total. The second path is an incentive tariff on the renewable energy produced and shared for the whole national territory. Therefore, the measure will promote the construction of renewable energy plants for a total capacity of 5 GW.

According to the FAQ published by the Ministry, to be eligible for the incentives provided for the RECs, the production plants from renewable sources must have a capacity of no more than 1 MW. These plants are generally of new construction, even if already constructed plants may be part of an REC, provided they became operational after 16 December 2021 (the date on which Legislative Decree 199/2021 came into force) and, in any case, after the regular establishment of the REC. Furthermore to access the benefits provided for in the Incentive Decree, the plants must not benefit from other incentives for electricity production.