Energy Communities and Active Consumers: Regulation in Ireland
13 April 2021
The window closes this week for responses to the Commission for Regulation of Utilities (CRU) consultation paper on Energy Communities and Active Consumers (the Consultation). The Paper was published on 5 March 2021 and can be viewed here.
Requirement for the Consultation
The CRU has published this Consultation as part of its implementation of the EU’s Clean Energy for all Europeans legislative package (the CEP). The package provides for the empowerment of individuals and groups of consumers seeking to participate in the electricity market. A typical situation might involve an individual with solar panels on their roof, or indeed a group of neighbours who have installed solar panels on the roof of their apartment block, and who wishes to obtain access to the electricity market.
The CEP includes Directive (EU) 2019/944 (the Electricity Directive) and Directive (EU) 2018/20018 (the Renewables Directive). These Directives contain requirements for each Member State’s regulatory authority to ensure there is an enabling regulatory framework to encourage the development of energy communities and encourage participation by active consumers. In Ireland, this is the CRU.
The CRU’s first step in this regard appeared in an earlier consultation paper entitled Calls for Evidence on Energy Communities under the Clean Energy Package (the Calls for Evidence). This was published by the CRU in August 2020 and is available to view here. Following the responses to the Calls for Evidence, this Consultation seeks to discuss specific topics, present proposals and raise some high-level questions on subjects which were identified as important during the Calls for Evidence process.
Casting the net
The first topic considered in the Consultation is the identification of the energy activities and actors that will attract regulation. The CRU in its Calls for Evidence resolved some differences of terminology, as between the Electricity Directive and the Renewables Directive, by recognising the concepts of ‘active consumers’ and ‘energy communities’, defined as follows:
Active Consumer means an individual who:
Generates renewable energy for their own consumption, or
Sells or stores excess generated electricity, or
Participates in energy efficiency schemes, or
Provides flexibility services
Provided these activities are not their primary profession.
Energy Community means a group of active consumers, who voluntarily commit to providing environmental, social, or economic welfare by engaging in:
Renewable energy generation, or
Energy sharing or trading, or
Provided these activities are not for commercial purposes and do not constitute the primary profession of the members of the community.
One then needs to identify the proper geographic scope of an energy community, bearing in mind that each of the Electricity Directive and the Renewables Directive recognises a slightly different type of energy community. The CRU proposes that the geographic scope of a “renewable energy community”, as per the Renewables Directive, should be limited by connection to a physical asset on the distribution system, such as a 38kV substation. Meanwhile, a “citizen energy community”, as per the Electricity Directive, need not be subject to any geographic or asset-based relationship.
How to regulate?
The second broad theme of the Consultation relates to how these entities would be regulated by the CRU. Neither the Renewables Directive nor the Electricity Directive requires such actors to be licensed, or outlines a specific way to enforce regulatory requirements – whereas the CRU is well used to regulating electricity generators and suppliers by licensing them.
Several responses to the Calls for Evidence pointed out that the level of regulatory oversight to be applied to new market actors should be proportionate for the type and scale of electricity activity being pursued by the market participant. In the case of active consumers and energy communities, this level of activity might well be relatively small-scale.
The CRU is proposing three options for a regulatory tool to monitor the relevant energy activities, mainly so that it can fulfil its responsibilities as a dispute settling forum and ensure that consumer protections are being upheld. The proposed options are as follows:
A. Developing a new type of licence specifically to govern the new electricity activities discussed in the CEP
B. Requiring any market actor, that participates in new energy activities mentioned in the CEP, to either (i) obtain an existing type of CRU licence (supply licence, generation licence or both where applicable), or (ii) establish a partnership with an existing licenced entity, or
C. Developing guidelines for consumer interactions with market actors engaged in new energy activities, and allowing market actors to become “trusted entities” who are required to comply with these guidelines, although not requiring licences
Despite the smaller quantities of energy involved, it is anticipated that the actions of active consumers and energy communities may be relatively complex, as indicated by various additional topics that form part of the Consultation:
Energy sharing and trading: the Electricity Directive and the Renewables Directive both envisage that energy sharing and trading will be possible. The CRU flags that facilitating this activity – both physically and virtually – may be the most complex aspect of this workstream. It is anticipated that a follow-on consultation will be required in order to establish the extent to which these activities require central oversight.
Aggregators: this will be a class of market participant that is able to receive excess self-generation from active consumers, which can then be traded in the Single Electricity Market. The CRU has asked stakeholders what initial considerations should be assessed to enable effective participation by aggregators in the electricity sector
The encouragement of active energy consumers, both individually and in energy communities, is a key feature of the CEP, and is also referred to in Ireland’s Climate Action Plan. However, at a practical level this requires that these actors be accommodated in what is already a closely regulated sector, and it is encouraging that the Commission for Regulation of Utilities is actively grappling with this challenge.
The CRU consultation follows a January 2021 consultation by the Irish Department of the Environment, Climate and Communications, which focused on the potential financial support of micro-generation projects – which will be an obvious area of interest to active consumers.
Facilitating fully-remunerated electricity market participation by active consumers and energy communities is something of a commercial and regulatory jigsaw. The pieces are falling into place.
For more information and expert guidance in all related matters, contact a member of our Energy, Utilities & Projects team.
The content of this article is provided for information purposes only and does not constitute legal or other advice.