Cyprus potentially has a lot of possibilities for energy production. It is a big owner of natural gas and has always the sun shining on it, which allows it to produce a lot of solar energy. In particular last year, in 2023, the first renewable and sustainable energetic community was constituted in Troodos, an innovative and completely new business model for producing energy. Energy communities empower citizens to collectively drive the clean energy transition. By fostering public acceptance of renewable energy projects, they help attract private investments and promote sustainable energy systems. These communities enable individuals to benefit directly from improved energy efficiency, lower costs, reduced energy poverty, and increased local green job opportunities. By pooling resources and working together, energy communities can invest in clean energy projects and participate in energy markets on equal terms with other market players. According to EU law, energy communities can take various legal forms, such as associations, cooperatives, partnerships, non-profit organizations, or limited liability companies. In Europe, this topic is promoted through the clean energy for all Europeans package, adopted in 2019 which introduces the concept of energetic community and the first law about it. The package includes 8 laws favoring decarbonization as set out by the Green Deal. For promoting this innovative and sustainable way of producing energy, the union has done 3 projects that have registered great results in starting the communities across the European Union:
- Support for Citizen-led renovation: The initiative by the Commission aims to empower energy communities, placing citizens at the forefront of energy-saving renovation projects. This approach encourages active participation, enabling individuals and communities to take charge of transforming their energy usage while fostering collaboration and sustainability. Launched to guarantee financial, legal and technical information is also based on 4 pilot projects about 4 energetic communities: Belgium (Energent), Portugal (Coopernico), Ireland (Triple SEC) and Bulgaria (Izgrei).
- Energy communities repository: Ended at the beginning of 2024, it meant to assist citizens who wanted to set up an energetic community or a renewable energetic community in an urban area encouraging development and implementation. The initiative also carried out analyses and impact assessments of energy communities, offering best practices and expertise to support local authorities, businesses, citizens, and citizen organizations interested in establishing energy communities. This effort was particularly focused on EU countries with limited experience or tradition in such initiatives, helping to build capacity and encourage widespread adoption.
- Rural energy community advisory hub: this project also ended at the beginning of 2024. The initiative aimed to support citizens, rural actors, and local authorities in establishing Citizen Energy Communities or Renewable Energy Communities in rural areas through technical and administrative advice. Key activities included: Identifying best practices for supporting rural energy community projects, providing technical assistance to selected rural energy communities and facilitating networking opportunities for local stakeholders. The advisory hub, closely linked to the Energy Communities Repository and the Covenant of Mayors, focused on accelerating the development of energy communities in rural areas in collaboration with local authorities. Data collected from this initiative serves as a valuable resource for European institutions and local stakeholders, helping to share best practices and knowledge with local authorities, businesses, farmers, and citizens interested in creating rural energy communities.
As explained, energetic communities involve a large number of people. Renewable energy communities allow broad participation, including individuals who might not otherwise take an active role in the energy transition. They should remain as inclusive as possible, enabling anyone to invest while also providing benefits like cheaper energy to economically marginalized individuals, even if they are not investors. While offering all these benefits there are also several challenges hindered in its development. These include a lack of leadership, necessary skills, and financial resources, as well as obstacles related to regulation, the existing energy market, and cultural attitudes.
The first step in building a community energy system is to gather interested individuals and establish a legal, administrative, and management framework. This requires strong leadership, financial and legal expertise, and a clear understanding of regional resources. Without political support or guidance from public authorities, it can be difficult for individuals to take on leadership roles. Renewable energy projects often demand substantial upfront investment, even though long-term operation and maintenance costs are low. If the community cannot raise sufficient funds, external financing is needed. However, many banks and financial institutions are unfamiliar with community energy models and may be hesitant to invest, with some lenders outright refusing to provide loans to cooperatives. Regulatory barriers, such as complex land management and planning laws, can also pose significant challenges for local actors, who may lack the capacity to navigate these requirements. Issues with permits, environmental impact assessments, and grid access further complicated project development. Communities often face difficulties competing fairly in the energy market, as distribution system operators may not recognize them as legitimate suppliers or may prioritize other energy sources. Cultural factors also play a role. Countries with strong traditions of cooperative ownership, such as Germany and the Netherlands, have seen greater success in community energy initiatives. In contrast, post-communist countries may experience resistance to cooperative models, as some citizens view them as reminiscent of collective ownership.
Juridically energetic communities could be created such as:
- Co-operative: Co-operatives are designed to primarily benefit their members. Membership is open and voluntary, requiring individuals to accept associated responsibilities and risks. Members benefit from the energy produced, participate in decision-making with equal voting rights (one vote per member), and share in profit allocation. Co-operatives may also offer training and additional benefits to members as needed to maintain operations.
- Partnership: A partnership allows individuals to collaboratively form a legal entity to supply energy to a community. Unlike co-operatives, voting power is determined by the financial stake each member contributes. Partnerships can generate profits while also delivering community benefits.
- Trusts and Foundations: Trusts and foundations are charitable organizations focused on providing social benefits rather than financial profit. These entities are designed to benefit entire communities, ensuring inclusion even for individuals who cannot afford to contribute.
- Public Utility Company: Public utility companies are operated by municipalities, which manage energy services on behalf of taxpayers and residents. While less common than other models, they are well-suited for rural or remote areas, focusing on collective benefit and utility management.
- Public-Private Partnership: Public-private partnerships involve agreements between local authorities, citizen groups, and businesses. These partnerships aim to ensure energy supply and provide additional benefits to the community by combining resources and expertise.
As emerges by the classification all are entities of the third sector focusing primarily on creating benefits for the community instead of focusing only on profit purposes.