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Glossary · Energy industry & energy transition

Energy Community

Energy Community Citizen energy prosumer electricity market EU

Energy community refers to a collective form of organisation in the energy system. Citizens, municipalities, small businesses or other local actors generate, consume, store or share energy, or manage it jointly. The term does not stand for a particular technology but for an institutional form. It asks who owns the installations, who decides on their operation, who receives the economic benefits and under which rules energy is allocated among the participants.

European energy law contains two separate legal concepts. The Renewable Energy Community is called Erneuerbare-Energie-Gemeinschaft in German. It is regulated in the Renewable Energy Directive (EU) 2018/2001, namely in the definition in Article 2 and in Article 22. The Citizen Energy Community is called Bürgerenergiegemeinschaft in German. It originates from the Electricity Market Directive (EU) 2019/944 and is regulated there in the definition in Article 2 and in Article 16. Both directives oblige the Member States to create an enabling legal framework. However, the specific design is laid down by national laws and differs significantly between Member States.

There is a risk of confusion with the international organisation Energy Community (Energiegemeinschaft) based in Vienna. It rests on an international treaty and is intended to extend the EU internal energy market to neighbouring states in South-East and Eastern Europe. It has nothing to do with local citizen or renewable energy communities. This entry deals only with the collective form of organisation.

The two EU models compared

Both models are designed as legal entities. Mere contracts without their own legal personality therefore do not meet the EU definitions. Participation must be open and voluntary, and members retain their rights as final customers, such as the free choice of supplier. In both cases the primary purpose is not financial profit. The focus is on environmental, economic or social community benefits for the members or for the area in which the community operates. Member States may permit various legal forms, for example associations, cooperatives, partnerships or small and medium-sized enterprises.

  • Renewable Energy Community (RED II): It may only produce, consume, store and sell renewable energy, so for example electricity, but also heat. It may share among its members the energy from installations owned by the community. Effective control lies with members or shareholders who are located in the proximity of the projects. Members can be natural persons, small and medium-sized enterprises and local authorities including municipalities. Private undertakings may only participate if the participation is not their primary commercial or professional activity. Distribution system operators are to cooperate with such communities so that energy can be transferred within the community. Participation is also to be open to low-income households.

  • Citizen Energy Community (Electricity Market Directive): It relates only to electricity but is technology-neutral. It therefore does not have to operate exclusively renewable installations. It can be active in generation, supply, consumption, aggregation, storage, energy efficiency, charging services and distribution. It is to be controlled by natural persons, local authorities and small businesses. Unlike for the Renewable Energy Community, however, the definition does not require geographical proximity to the projects. Members may leave the community again. As regards network charges, the community is to contribute appropriately to the overall costs of the system.

With the 2024 electricity market reform, the Electricity Market Directive gained a separate right to energy sharing, that is Energy Sharing. Active customers such as households, small and medium-sized enterprises or public bodies are to be allowed to share renewable electricity. This is possible on the basis of private arrangements or through a legal entity, within the same bidding zone or a more narrowly defined area. Energy sharing is thus a tool that energy communities can use. However, it does not presuppose that an energy community within the meaning of the two definitions exists.

Situation in Germany

Germany has regulated the sharing of electricity via the public grid with the new § 42c of the Energy Industry Act (Energiewirtschaftsgesetz). According to the Forschungsstelle für Energiewirtschaft (FfE), the provision entered into force on 22 December 2025. Since 1 June 2026, distribution system operators must enable eligible participants to share electricity from renewable installations within their balancing area. From June 2028 this is also to apply to a directly adjacent balancing area in the same control zone. Two contracts are required: an agreement on sharing and a supply contract for the residual electricity, which the customer can continue to choose freely. The regulation provides neither dedicated support nor flat-rate reduced network charges.

In practice there are still hurdles. Even before the start date, the FfE considered implementation to be only partly feasible technically, organisationally and economically. Open issues related above all to metering concepts, market communication and the distribution of roles. The Deutsche Gesellschaft für Sonnenenergie reports a notice from the Bundesnetzagentur of July 2026 that points to a complex balancing group model. It therefore does not expect broad implementation for the time being. It is also important that § 42c regulates the sharing of electricity but not a complete legal form "energy community" along EU lines. Building-related models such as tenant electricity (Mieterstrom) and collective building supply are regulated separately.

Distinction from citizen energy, self-consumption and prosumers

Energy community is often equated with citizen energy. This is understandable but imprecise. Citizen energy usually means projects in which citizens participate financially or organisationally, regardless of legal form. An energy community within the meaning of EU law must meet additional conditions: it needs its own legal personality, open and voluntary participation, effective control by the eligible members and a purpose that is not primarily aimed at profit. For the Renewable Energy Community, proximity to the projects is added. Citizen energy therefore rather describes who supports a project socially. Energy community rather describes the legal form of organisation.

Self-consumption is something different. Here someone uses electricity from their own installation themselves, for example from a photovoltaic system on a single-family house. An energy community can include self-consumption but goes beyond it. Several actors are involved, and energy is allocated within the group by calculation, by contract or physically. The individual prosumer, who both generates and consumes electricity, can take on a role in the community. However, they are not to be equated with it.

An energy community does not differ from traditional energy suppliers by not supplying electricity. The difference lies in purpose, control and participation. A supplier supplies customers without them having a say in installations or investments. An energy community is meant to partly remove this separation. However, if it supplies energy or offers aggregation, the usual rules continue to apply to these activities under EU law.

Why energy communities matter in the electricity system

Their practical significance comes from decentralisation. Photovoltaics, smaller wind projects, battery storage, controllable loads and charging infrastructure are increasingly connected to the distribution grid, that is close to households, businesses and municipalities. A community can pool roofs, land, consumption and willingness to invest that would be too small or too burdensome individually.

For the system, it matters not only how many kilowatt hours are generated, but also when and at which grid level. One example: a community generates solar power at midday but cannot adjust its consumption. It affects the grid differently from a community with storage, controllable heat pumps and charging points. The term is therefore closely linked to flexibility, grid connection and metering infrastructure. Energy communities can also increase acceptance of new installations because returns and a say remain in the region. However, this does not happen automatically. Participation on paper only, without a real say, creates different incentives.

Sharing electricity does not mean bypassing the grid

A common misunderstanding is that energy communities are self-sufficient electricity islands. Most remain fully connected to the public grid. When electricity is "shared", it does not flow directly from one member's roof to another member's washing machine. It follows the physical conditions in the grid. The allocation is made on a balancing basis, that is by calculation using measured values, contracts and settlement rules. In Germany, the model under § 42c is based on quarter-hourly values.

This distinction is important for network charges, levies, taxes and supply obligations. Anyone who shares electricity via the public grid uses grid infrastructure. For citizen energy communities, EU law expressly requires network charges that are cost-reflective and ensure an appropriate contribution to system costs. A poorly designed reduction can promote local projects and at the same time shift costs to other grid users without reducing congestion. Grid relief depends on actual behaviour, not on the label. If electricity is consumed nearby at the same time, the grid can be relieved. If, on the other hand, many electric cars charge simultaneously in the evening without control, additional load can arise. For grid operators, the power at a specific point in time counts, not the annual balance.

Market role, metering and responsibility

An energy community operates between local self-organisation and the regulated electricity market. If it supplies electricity, operates storage or markets surpluses, obligations arise. These include metering concept, settlement, allocation to a balancing group, supplier switching, data protection and consumer protection. Whether a community works or fails due to transaction costs is often decided precisely here. The German experience since June 2026 shows how strongly open questions of market communication slow down the start.

Smart metering systems facilitate allocation because they provide time-resolved data. Without proper metering, it remains unclear what share of consumption comes from the shared generation. Economically, an energy community is not automatically cheaper than an ordinary supply contract. It can reduce costs if it coordinates generation, consumption and flexibility well. But it can also become more expensive if administration, metering, financing and advice cost a lot. In addition, the residual electricity that has to be purchased separately can be more expensive than a usual full-supply contract. The benefit often lies in a mix of local value creation, price stability and participation.

Institutional function and area of tension

Energy communities show that the energy transition also changes responsibilities. In the past, generation lay with large power plant operators, consumption with passive customers and grid operation with regulated monopolies. Today, households, municipalities and businesses can simultaneously be investors, operators, consumers and providers of flexibility. Energy law, however, often draws a strict line between generator, supplier, final consumer and grid operator. Questions arise from this: Which obligations are reasonable when citizens jointly operate a solar installation? Which advantages are justified when a community in practice acts like a supplier? And which role may an established energy company take on without displacing the members' control? This is precisely why EU law ties control to certain groups of members.

Good regulation enables participation without weakening basic functions of the system. Security of supply, grid financing, balancing group discipline and consumer protection do not disappear just because a project is organised collectively. At the same time, the requirements must not be so high that only large professional actors can meet them.

What the term achieves and what it does not

The term helps to name ownership, participation and local coordination. However, it does not by itself say whether a project is environmentally sensible, socially balanced or beneficial to the grid. For that, one must look at the installation mix, location, load profile, storage operation, tariffs and governance. A community with a democratic constitution can be poorly coordinated technically. A professionally managed project can save a lot of CO₂ and still offer little say.

Nor does the term replace the distinction between physical electricity flow and balancing-based allocation. For settlement, a local allocation can make sense. For grid planning, what counts is which power levels occur at which connection points. An energy community is therefore not an alternative alongside the electricity system but a regulated form of participation within that system. Whether it benefits the system depends on rules, metering, responsibilities and the actual operation of the installations.

Sources

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Edited by eCMS on 11.11.2026 19:46

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