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 (up from roughly 8 million today). Projected individual savings: EUR 260–550/year for solo solar prosumers; EUR 440–930/year for communities with combined wind and solar.

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.

Sweden — energy sharing framework in progress

As of early 2025, Sweden had not transposed either the REC or CEC definitions into national law. Stakeholders described the legal environment as one where energy sharing between separate connection points lacked legal status. (Source - BeFlexible D5.2 Demo Planning and Deployment 2 (2025))

Prop. 2025/26:240 (submitted April 13, 2026; in force January 1, 2027) introduces comprehensive energy sharing rules in the new Elmarknadslag replacing ellagen. Key design choices:

• Only renewable electricity qualifies as shared energy
• Permitted within the same bidding zone (SE1–SE4) — more permissive than the concession-area restriction some industry groups requested
• Large companies (>250 employees + >€50M turnover or >€43M balance sheet) limited to ≤6 MW total installed capacity
• Shared electricity is deducted from the customer’s electricity invoice
• No obligation to feed in (mottagningsplikt)
• New role: energy sharing organizer (organisatör av energidelning)

This makes energy sharing legally possible from January 2027 — a significant shift from the previous legal vacuum. The framework does not implement full REC/CEC definitions (those remain unresolved), but provides a workable foundation for collective prosumer arrangements. (Source - Prop. 2025-26-240 Nya lagar om elsystemet (2026))

Remaining Swedish barriers (post-January 2027):

• No tax incentives: no equivalent to Italy’s €110/MWh self-consumption incentive
• Non-standardized data formats: integrating diverse resources requires common data protocols not yet standardized
• Economic uncertainty: long ROI horizons for collective storage/PV; complex multi-party arrangements
• No full REC/CEC transposition: the cooperative/non-profit legal form for energy communities is still not formally implemented

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

• Any existing Swedish ECs operating informally and their flexibility contributions before January 2027
• Ei or Energiföretagen response to C(2026)2850 Recommendation — Swedish position on EC enabling framework
• 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)