The EU’s solar strategy calls for at least one energy community to be established in every municipality with a population over 10,000. Community driven decentralized solar generation can improve access to clean energy in urban areas, help to alleviate energy poverty and is crucial to ensure a citizen's participation in the energy transition. Ambitions to promote energy communities are set in Europe, yet the realization of possible initiatives often lacks behind due to regulatory obstacles and difficult framework conditions.
We talked with Maria Colom Cifuentes, Head of Decentralized PV at ENGIE Spain, about the Spanish case and how she evaluates the future of energy communities in Spain.
Can you give us a brief description of the role energy communities play in shaping the energy transition across Europe and how ENGIE supports them?
The energy transition will not be complete until collective self-consumption has been established. ENGIE has developed pilot projects in France, Italy and Belgium that have already introduced laws enabling collective self-consumption. We manage several projects, grants and programs, all of which are still at the pilot stage. Not every company or private individual owns a rooftop, but energy communities or collective self-consumption projects can still allow them to reap the benefits of the energy transition.
According to my colleagues at ENGIE France, 15 to 20 percent of French rooftops are suitable for energy communities. The reason why these roofs are not yet being used for solar energy generation is that self-consumption for the roof owner alone is not profitable.
The first energy communities will look towards solar power because it's the most mature technology. It's very profitable in countries like Spain and Portugal. You don't need a remuneration scheme for them to work. Solar power is the obvious place to start, but we will be adding levels of complexity with storage and electrical vehicles among others. Solar installations are only the beginning.
Let´s talk about Spain: Since the Sun Tax for the residential sector was scrapped in 2018, decentralized PV generation has experienced strong growth.
In 2018 the Sun Tax was scrapped and collective self-consumption was made possible. This gave individual self-consumption an enormous boost. According to the Solar Photovoltaic Association UNEF, the newly installed capacity for 2022 was 2.5 Gigawatts (GW) in total. Spain now has more than five GW of installed capacity, which clearly shows that the change in law worked. The high electricity prices have been an additional driver. European funds have given self-consumption a massive boost, but the share of collective self-consumption is still very small.
Are there any cities that promote decentralized urban energy generation or any pioneering projects in Spain? How are such schemes supported?
Spain does not yet have a functioning national registry, but in Catalonia, Navarra and the Canary Islands registries do exist and are public, and they reveal that collective self-consumption makes up less than 1% of all self-consumption in those regions. In Catalonia, only 1.64% of the total capacity installed in 2022, which is 3 Megawatts (MW), was for collective self-consumption. This is not enough to make the energy transition happen.
The first energy communities were set up in 2022 when the Spanish Ministry for the Ecological Transition started providing subsidies under the CE Implementa program, which pays up to 60% of the project costs. The scheme is working well, and many regional energy agencies and municipalities are launching collective self-consumption schemes. I think one of the most prominent examples is the Institut Balear de l´Energia, which is expected to provide 2.5 MW of capacity – enough for 1,500 homes and 300 companies.
The European funding programs, the ones that will run out at the end of the year, are far more generous with collective self-consumption than they are with individual self-consumption. So we do have some grants, but we still need to do a lot more to create incentives. After all, setting up a cooperation project is much more complex than putting a PV panel on your roof.
The Spanish energy agency IDEA, has published a map online showing all the energy communities that are being deployed in Spain.
What are the main obstacles that energy communities are facing in Spain and Europe?
Making administration easier is key. Administrative barriers to self-consumption slow down projects, especially projects for collective self-consumption. It may take up to one year for a collective self-consumption to get approval. At the same time, the processes vary greatly from one autonomous community to another. In Catalonia, for example, a permit for an individual domestic installation can be obtained in around one month, while the approval process for a collective domestic self-consumption unit may take one year.
Companies also have to deal with a lot of frustration from clients, because they have to tell them that installation might take a year or six months, but that they actually simply don’t know. Most Spanish companies do not work with collective self-consumption.
Have there also been improvments in the regulation since collective self-consumption is promoted?
Approval laws are becoming less strict: Especially for systems under 100 kilowatts (kW), building permits are no longer required in a growing number of regions. The introduction of EU directives in 2022 made the approval process much easier in Spain. The application now has to include a start date, and a building permit can be assumed to have been granted if no notification to the contrary has been received within a certain period.
The maximum time for obtaining a permit for self-consumption systems below 50 kW is one month. This is helpful for small commercial or domestic self-consumption units. The process for obtaining an environmental permit has also been simplified and things are also improving for collective self-consumption. Most projects are still below 100 kW though and that's why I think it's important to bring bigger projects into the equation. To achieve that, we really need to prioritize decentralized generation for grid access. Here’s the problem: For a bigger collective project, the process for obtaining a permit is much more complex and you usually lack grid access.
What progress is digitalization for a more decentralized energy production making in Spain? Who needs to act and contribute?
The integration of decentralized energy production is creating many challenges for the sector. How these are overcome will mostly depend on the Ministry for the Ecological Transition and the Demographic Challenge. They need to keep up the momentum of the last three or four years.
One of the challenges in terms of digitization is that the public self-consumption registry is not regularly updated. There might be discrepancies between supply and demand, especially when the installed capacity of self-consumption is high, much higher than estimated, and these discrepancies may pose a risk to the functioning of the grid.
The roadmap to self-consumption that was published one year ago forecast around 9 GW in the worst-case scenario and 14 GW in the best-case scenario by 2030, and now, in 2023 we already have 5 GW.
We need to have a fine-tuned, automatic, digital self-consumption registry. The existing RADNE system for data provided by the autonomous communities barely contains 24,500 PV self-consumption installations, equivalent to around 300 MW in total. This is 15 times less than estimates about already existing installations by the National Association for today. For the grid to operate smoothly, we need accurate information as a basis for demand estimates. We need to actually know how many MW are being installed rather than rely on the figures provided by Energy Associations.
What steps need to be taken to switch from a centralized to a more decentralized system with a strong share of solar energy?
We need batteries because solar energy is being deployed much faster than expected. We’ll need to promote storage sooner than originally thought through incentives. In Spain, we currently do have grants for storage behind the meter. They work well for domestic installations. Some industry experts have calculated that around 30% of newly installed residential PV is combined with storage, but this does not apply to industrial and commercial PV applications. There's no business case there. We are not installing batteries and the price of batteries is not expected to drop as fast as we would need it to. To promote batteries, we need additional incentives and grants that can help create a business case.
In Spain and Portugal, grants are not necessary to make individual self-consumption or PV in general profitable. But we do need grants for batteries. So we need to develop schemes to give the proper signals, otherwise the deployment of solar installations could slow down and we could enter the duck curve sooner than we thought. The right incentives would have the double advantage of supporting grid stability and of dispelling any doubts people may have about installing solar now when they expect prices to drop dramatically in the coming years.
Could there be a conflict with big players in the PV industry competing for funds, production capacities and grid access?
I don't think there is a competition between big companies and small producers. All producers, whether big or small, are in some way competing for grid access, because grid capacity is scarce. Even the projects at ENGIE for decentralized PV that are within my scope are mostly without grid feed-in. This is bad because we are denying the option of giving flexibility to the grid while most of our industrial installations will not be able to contribute to the system. We can squash the demand or we can electrify or we can reduce consumption on the client side. But we cannot contribute to the grid because there's no grid capacity to allow feed-in.
This stifles self-consumption projects and also big projects. The ministry should prioritize self-consumption projects as a main priority in the sector. In the last auction in Spain in October 2022, there was reserved capacity for projects under five MW of distributed energy (140MW out of 520MW). Still, only 31 MW of solar installations were awarded. Auctions are complicated and not open to just anyone. I think that they really need to take steps to reserve part of the grid for self-consumption and energy communities. Otherwise, it will be difficult for energy communities to become bigger participants in the energy transition simply because the average project size is currently too small.
Maria Colom Cifuentes spoke to Sarah Hommel de Mendonça.