Energy Communities

Groups of citizens, local authorities, or businesses that collectively produce, consume, store, and share energy — forming a legal entity recognized under EU law. Energy communities (ECs) are increasingly relevant to the flexibility wiki because they represent a potential new category of aggregated Flexibility service provider (FSP): a community of households, buildings, and small businesses pooling distributed resources for collective market participation.

EU legal framework

The 2019 Clean Energy Package formalized two EC types:

Renewable Energy Communities (RECs)

Defined in Renewable Energy Directive II (RED II, 2018/2001, Art. 22). Key characteristics:

• Open, voluntary participation; proximity-based membership (individuals, SMEs, local authorities — not large utilities)
• Primary focus on environmental, economic, or social benefit over profit
• Scope: renewable energy generation, supply, storage, sharing across any energy domain (including heat and transport)
• Governance: democratic (1 member, 1 vote)

Citizen Energy Communities (CECs)

Defined in Electricity Market Directive 2019/944 (Art. 16, citing Art. 13 of the Directive). Key characteristics:

• Open, voluntary; no geographic proximity requirement; controlled by natural persons, local authorities, or SMEs (large utilities can participate without controlling rights)
• Not restricted to renewables; covers electricity sector broadly (generation, supply, aggregation, EV charging)
• Can engage in aggregation and participate in all electricity markets, directly or via a third-party aggregator
• Democratic governance; community benefit primacy

Both types sit above the concept of a Virtual Power Plant — a VPP is a technology arrangement, not a legal entity; an EC is a legal entity that may use VPP technology to manage its distributed resources.

As of 2026, more than 8,000 energy communities are active in Europe, but the Commission estimates the untapped potential is large — particularly in rural areas. The Commission’s 2026 Citizens’ Energy Package (COM(2026)115) sets a target of up to tenfold increase in EC installed renewable capacity by 2030, producing power for 25–30 million households — the source states only this 2030 target, not a current/2026 baseline household or GW figure (a previously stated “~9 GW / 8 million households today” baseline could not be traced to any cited source and has been removed). Projected individual savings: EUR 260–550/year for solo solar prosumers; EUR 440–930/year for communities with combined wind and solar.

Governance risk — “corporate capture”

A 2025 report (Cots, Corporate Capture of Energy Communities: A Threat for a Citizens Energy Transition in Europe, eco-union and Friends of the Earth Europe) warns that the growth cited above is not unambiguously positive for the EC concept’s original goal. The Clean Energy Package’s ambition for RECs/CECs was broader than deploying more renewable capacity — it was explicitly about citizen governance, local ownership, and democratic control (hence the 1-member-1-vote governance and independence-from-dominant-actors requirements in both REC and CEC definitions above). The report documents cases across Europe where large incumbent energy companies, via subsidiaries, have gained substantial influence over projects still marketed as “energy communities” — generally without breaking any rule, but blurring the line between a genuinely citizen-governed EC and a commercial energy service using EC branding.

The report’s recommendations: clearer statutory definitions of what counts as an energy community; transparency requirements around ownership and decision-making; control mechanisms to detect misuse; support targeted specifically at genuinely local initiatives rather than any EC-labelled project; and safeguards against large companies using subsidiaries to circumvent independence requirements. It does not argue companies should be excluded from ECs — technical expertise, financing, and professional support are often genuinely needed — the challenge is balancing that access against loss of independence. Jenny Palm (professor, IIIEE Lund) frames this as directly relevant to Sweden precisely because Swedish ECs are still at an early stage: the definition-and-safeguard questions are live design choices now, not retrospective critique of a mature market. (Source - Second Opinion Energigemenskap Medborgarinflytande (2026))

Commission Recommendation C(2026)2850 — 2026 policy framework

On 30 April 2026, the Commission adopted a non-binding Recommendation on supporting the development of energy communities and maximising the potential of self-consumption (Source - Commission Recommendation C(2026)2850 Energy Communities). Fifty numbered recommendations to Member States, accompanied by an Energy Communities Action Plan targeting 90 GW of EC renewable capacity (roughly tenfold from 2026 levels).

The Recommendation is soft law — it guides Member State implementation but does not create new binding obligations. Its practical significance lies in making explicit what the existing Directives already require, filling in design details, and establishing the Commission’s enforcement and monitoring intentions.

Key recommendations most relevant to the flexibility wiki:

• Rec 11: Grid operators must account for the expected growth and impact of self-consumption and energy community operations in their DNDPs, to allow for anticipatory investments. This extends the DNDP’s existing obligation to quantify flexibility needs to explicitly include self-consumption growth as a planning variable.

• Rec 12: Where grid capacity is insufficient, energy communities and energy-sharing participants may enter into flexible grid connection agreements (villkorade avtal / Art. 6a agreements) when operating storage or achieving high self-consumption. See Villkorade Avtal.

• Rec 28: Minimum bid sizes, contract durations, and prequalification requirements for local energy service markets must accommodate smaller aggregated assets managed by energy communities, either directly or through an aggregator. This directly intersects with the Network Code on Demand Response local services market design.

Action Plan highlights (Commission-level actions, not MS recommendations):

• Citizen Energy Advisory Hub (CEAH) — new EU-wide EC support hub; EU-wide indicator tracking; dialogue with MS/EP in 2028
• Energy Communities Facility — refinanced beyond 2027 for seed funding to 140+ communities at pre-development phase
• InvestEU guarantees awareness campaign for ECs (2026); financing toolbox via CEAH (2026)
• EUR 12M Horizon Europe for AI-based forecasting algorithms to optimize energy sharing value (2026)
• Explore integration of local energy markets at distribution grid scale with the wholesale market in a standardized manner (2027) — first explicit Commission language for distribution-level spot market investigation

Flexibility roles

Energy communities contribute to flexibility through several mechanisms:

• Aggregated demand response: coordinating multiple households/buildings to collectively shift or curtail demand — providing significant volumes to DSO local markets or TSO balancing markets
• Local generation and storage: communities often integrate solar PV, batteries, and EV infrastructure that can be optimized for grid-responsive behavior
• Value stacking: communities can participate in both Flexibility Market (DSO-level congestion management) and Balancing Markets (TSO-level frequency regulation), stacking revenue streams from a single flexible asset pool
• P2P energy sharing: members can trade energy internally, reducing grid dependency and cost
• Reduced peak demand: internal optimization reduces community-level peaks, benefiting the local DSO’s capacity planning

In the Flexibility Market context, ECs can act as FSPs directly or appoint a third-party aggregator. With sufficient aggregated capacity, they can meet the minimum bid thresholds for both DSO local markets (currently 0.1 MW minimum on Swedish markets) and TSO balancing products.

Energy sharing is legally distinct from peer-to-peer (P2P) trading, even though the two are often discussed together. In P2P trading, participants remain separate market actors exchanging electricity through price-governed contractual transactions — a decentralized version of an ordinary supply relationship. Energy sharing, as defined by Art. 15a of the Electricity Market Design Directive, is instead collective self-consumption: participants consume electricity generated by installations they own, lease, rent, or otherwise control, and the flows between them are an allocation within a shared arrangement rather than a market transaction — even where a price changes hands. This distinction was legally ambiguous before the 2024 reform’s explicit definition resolved it. (Source - Virardi Unpacking Electricity Market Design Reform Energy Sharing (2026))

Sweden

Sweden’s regulatory history (Energimyndigheten’s 2024 origin assignment, the energidelning law in force January 2027, the rejected V/MP push for a statutory EC definition), sharing mechanisms (virtual vs. complementary-net vs. own-net, IKN, the topplast finding), Swedish project examples (Tamarinden, Hammarby Sjöstad, EnergyNet, and five earlier-stage projects), Energiföretagen’s industry position, and the tax-avoidance critique are covered in Energy Communities in Sweden (split out 2026-09-05 as this content had grown into its own coherent sub-topic).

European country comparisons

What makes ECs work (stakeholder insights)

From BeFlexible’s 2025 interview study with Swedish EC stakeholders:

Needs:

• Automation is paramount — energy management must be automated (AI-based) to reduce cognitive burden; manual management is not viable at scale
• Clear communication about economic and environmental benefits; targeted campaigns for renters and smaller actors
• Data transparency and GDPR compliance — users must trust how their data is used
• Inclusive design — ECs risk benefiting only wealthier, more technically equipped actors; rental sector and smaller actors must be included on fair terms

Opportunities:

• Energy savings up to 70% achieved in one EC (participant 1’s own EC)
• Community resilience: ECs increase local energy autonomy against geopolitical shocks
• Social benefits: neighbourhood engagement, collective identity, pro-environmental behaviour
• District heating as a natural EC domain for urban collaboration
• Integration of sustainable practices (urban farming, EV fleets) within the EC model

Relationship to the Swedish flexibility ecosystem

Energy communities are relevant to Sweden’s flexibility picture at two timescales:

Near-term (pre-legislation): some aggregators (e.g., Flower, CheckWatt, Sympower — named in BeFlexible 2025) effectively operate as informal community aggregation platforms, creating economic relationships similar to ECs without the formal legal entity. Their platforms aggregate households and buildings into portfolios for DSO and TSO markets.

Medium-term (post-legislation): If and when Sweden transposes REC/CEC definitions, ECs could become a significant new liquidity source for Flexibility Markets — particularly for smaller DSOs serving residential areas where few large FSPs exist. The 15% of DSOs considering joining a flexibility market (from Ei PM2025:03) could benefit from EC-based supply in markets with otherwise insufficient FSP numbers. See Why Swedish Local Flex Markets Are Thin — Structural Causes for the structural context.

EU DSO Entity position on energy sharing

The EU DSO Entity’s 2024 Technical Vision explicitly positions DSOs as enablers of energy sharing and supports the development of a harmonized EU framework for energy communities. Key points from the Vision: (Source - EU DSO Entity Technical Vision (2024))

• Describes a “many-to-many” energy sharing model: active customers can share self-generated or stored renewable energy with others at a distance (offsite) or via contracted rights
• Identifies an Energy Sharing Provider (ESP) as an emerging intermediary role — an entity that facilitates the contractual and technical aspects of sharing between participants
• Positions DSOs as the necessary infrastructure layer: metering, settlement, and grid operation that makes sharing technically possible
• Links to the need for harmonized EU energy sharing legislation — exactly the transposition gap Sweden currently faces

The Technical Vision calls for cooperation with the European Commission on forward-looking regulatory adjustments. This is consistent with pressure on laggard member states (including Sweden) to transpose the REC/CEC definitions.

Glossary definition (from Technical Vision): “Energy sharing is the self-consumption by active customers of renewable energy either: (a) generated or stored offsite or on sites between them by a facility they own, lease or rent in whole or in part; or (b) the right to which has been transferred to them by another active customer for a price or free of charge.”

Data gaps

• Ei or a post-Recommendation Energiföretagen response to C(2026)2850 — the industry position on file predates the Recommendation (Sept 2025); a direct response would confirm whether the stance holds against the Recommendation’s specific asks (DNDP self-consumption planning, flexible connection agreements, local-market bid sizing)
• Whether any Swedish DSO has explicitly planned for EC-based FSP recruitment in their DNDP
• How Sweden will implement Rec 11 (DNDP anticipatory investments for self-consumption growth) in the next DNDP cycle (2027–2036)
• Whether Energimyndigheten and Ei ever acted on the joint “typfall” (approved template cases) mandate proposed in ER 2024:20 — would settle a real practitioner ambiguity (what regulatory-interpretation support actually exists for common sharing configurations) if answered
• Outcome of the 30 MSEK / 10–20 feasibility-study funding call ER 2024:20 proposed for late 2024/early 2025 — whether it ran, and which projects it funded