**Formation and Continuation of Thermal Energy Community Systems: An Explorative Agent-Based Model for the Netherlands**

#### **Javanshir Fouladvand 1,\*, Niek Mouter <sup>2</sup> , Amineh Ghorbani <sup>1</sup> and Paulien Herder <sup>3</sup>**


Received: 17 March 2020; Accepted: 26 May 2020; Published: 2 June 2020

**Abstract:** Energy communities are key elements in the energy transition at the local level as they aim to generate and distribute energy based on renewable energy technologies locally. The literature on community energy systems is dominated by the study of electricity systems. Yet, thermal energy applications cover 75% of the total energy consumption in households and small businesses. Community-driven initiatives for local generation and distribution of thermal energy, however, remain largely unaddressed in the literature. Since thermal energy communities are relatively new in the energy transition discussions, it is important to have a better understanding of thermal energy community systems and how these systems function. The starting point of this understanding is to study factors that influence the formation and continuation of thermal energy communities. To work towards this aim, an abstract agent-based model has been developed that explores four seemingly trivial factors, namely: neighborhood size, minimum member requirement, satisfaction factor and drop-out factor. Our preliminary modelling results indicate correlations between thermal community formation and the 'formation capability' (the percentage of households that joined) and with the satisfaction of households. No relation was found with the size of the community (in terms of number of households) or with the 'drop-out factor' (individual households that quit after the contract time).

**Keywords:** energy community; thermal energy systems; agent-based modelling and simulation; formation and continuation; critical factors

#### **1. Introduction**

All around the world, energy systems are going through a transition [1–3]. The energy transition, mainly fuelled by climate change, requires a concerted change in technological developments and institutional settings, while not hampering economic growth. This transition is being discussed and executed at different scales: international, national, regional and local [4,5]. Energy communities are considered key by many scholars and politicians for realizing the energy transition at the local level as they allow the generation and distribution of renewable energy at the local level [6,7].

There are different definitions of energy communities. Energy cooperatives, as more formal energy communities, enable citizens who participate to collectively own and manage renewable energy projects at the local level [8]. Based on this organizational model, participants generate, and in some

cases, consume renewable energies. One of the most important aspects of energy cooperatives is that they are commercial organizations that operate in a market [8,9]. Energy communities, however, are projects/organizations that, in addition to financial benefits, also consider other aspects, such as environmental concerns [10]. In other words, apart from possible financial benefits, environmental concerns, norms and values also play important roles in energy communities [11,12]. While an energy cooperative's goal is mainly to generate financial benefits (by generating, participating in the market and consuming in some cases), in energy communities, generation and distribution of renewable energy are for the participants' consumption to address goals, including environmental concerns and financial benefits. Therefore, leadership, membership and interactions between the energy community participants are important [13].

In a broad sense, [14] defined an energy community as "a group of consumers and/or prosumers, that together share energy generation units and electricity storage". Energy communities are also presented as initiatives that focus on renewable energy generation, distribution and consumption (including considering energy-saving measures) for all involved stakeholders [15,16]. In this study as [7] defines, we consider an energy community as the combination of a technical energy system (mainly renewable energy technology) on the local level (e.g., an urban neighbourhood), its associated group of stakeholders that share common interest(s) and problem(s), and institutions (formal and informal rules) that govern these systems. Participants and stakeholders of an energy community share resources and collaborate on energy generation, distribution and conservation processes [9,12]. Typical energy community characteristics are: operation at the local scale, community engagement, participatory decision-making, involvement of local actors and distribution of financial resources [17]. Different stakeholders (including households) who decide to participate in an energy community, would have different roles, such as leader [13] or investor/shareholder [18].

Recent literature on the establishment and management of community energy systems predominantly focuses on electricity systems (e.g., [4,7,19,20]). However, thermal energy plays an important role in the urban context, as it is used for the purposes of heating, cooling, bathing, showering and cooking, covering approximately 75% of the non-transport related energy consumption among households [19,21,22]. Although heating energy cooperatives (such as district heating cooperatives) are discussed in the literature (e.g., [23–25]), thermal energy communities are relatively understudied. It is meaningful to study whether thermal energy communities are sustained over time and, if so, which factors influence their formation and continuity or decline. Such study will increase our understanding of thermal energy community (TEC) initiatives, how TECs would function and what factors are more important to consider to facilitate their formation and continuity. In this paper, we present the basis of an agent-based simulation model that provides insights into factors influencing the formation and continuation of TEC initiatives.

The structure of the paper is as follows: The next section presents the methods that were used in this research. Section 3 presents the data collection procedure. The structure of the abstract model is presented in Section 4. Section 5 discusses the model results. The model's limitations are presented in Section 6. Finally, Section 7 provides a discussion and conclusions.

#### **2. Research Methods**

A literature review and several interviews were conducted to first deepen our understanding of factors that influence the formation and continuation of thermal energy communities (TECs). The literature review was based on peer-reviewed material collected from scholarly databases, www.scopus.com and www.sciencedirect.com, using keywords including: "energy community/ies", "thermal energy community/ies", "heat energy community/ies", "thermal community energy systems", "factors of thermal energy community/ies", "formation of thermal energy community/ies" and "agent-based modelling AND thermal energy community". As the existing literature on TEC (including both thermal/heat energy systems and community energy systems) was relatively small, articles that focus on community energy systems, in general, were also included. The focus of this literature

review was to provide an understanding of TECs and the factors which influence their formation and continuation. Therefore, in this step, a snowballing method was used, focusing on the most cited articles. In the next round, backward snowballing was applied, reviewing the articles that were cited in the articles found in the first round of snowballing. Furthermore, since the peer-reviewed literature related to TECs is relatively small, non-peer-reviewed documents cited in the reviewed articles were also considered, which led to a better understanding of the factors that have influence on the formation and continuation of TECs.

To delineate and focus on the important and unexplored factors, nine semi-structured interviews with main stakeholders in the Netherlands (policy makers, municipalities, community's presenters, energy companies and researchers) were conducted. These stakeholders were closely involved in projects related to local thermal energy transition in the Netherlands and were already working on TECs projects. The focus of the interviews was on TECs and on discovering the main factors and narrowing them down to a selected number of factors that influence their formation and continuation. Interviewees were explicitly asked to discuss the main factors which influence the formation and continuation of TECs. The interviews were transcribed, and the mentioned factors were extracted.

To deepen the understanding of the influence of these factors on the formation and continuation of TECs, there is a need for a set of experiments. In such experiments, measures related to the formation and continuation of TECs can be studied. However, performing these experiments in the real world would be time-consuming and costly and would have an actual, not necessarily beneficial, impact on individuals' lives [26,27]. Therefore, given the complexity of TECs and lack of possibility to perform a wide and varied set of experiments in the real world, a simulation model can provide benefits of experiments more quickly and less costly in a virtual setting. Simulation models that present a simpler version of the real world would help to demarcate certain design options or variables. [28,29].

In our research, we used agent-based modelling and simulation (ABMS) to study TEC initiatives. ABMS is an approach where a system is modelled as a collection of autonomous decision-making entities called agents who interact with each other and the environment [30–32]. In ABMS, Agent-based models consist of a collection of agents and their states, the rules governing the interactions of the agents and the environment within which they live [33,34]. ABMS was selected for our research due to the importance of actors, their decision-making process and interactions within thermal energy community systems, which aligns with the specific strengths of agent-based modelling [35,36]. Due to the complexity of the real world, an agent-based model cannot represent all of the details of a real-world decision-making process. However, ABMS could facilitate decision-makers by equipping them with insights about crucial variables affecting the decision-making process, thereby allowing decision-making in a less time-consuming and costly way. A sensitivity analysis [37] was conducted for various model parameters to explore various experimental configurations. The results of the model were evaluated through expert interviews.

#### **3. Data Gathering**

#### *3.1. Literature Review*

The literature on energy communities is mainly dominated by electricity systems (e.g., [4,19,20]). However, since thermal energy applications, such as heating, cooling, bathing, showering and cooking, cover 75% of energy consumption among the households, it is vital also to discuss thermal energy systems and communities (TECs) and their related challenges.

Based on the literature and studies, such as [13–16], we defined TECs based on three main components: a renewable energy technology (for thermal applications), involved stakeholders and related institutions. The technology component includes generation, distribution and consumption of thermal energy [38,39]. Involved actors and their roles [13,40] are related to stakeholders component. Finally, the institutional component covers both formal and informal institutions that govern an energy community [6,12,41].

TECs have technical, social and governance challenges. These challenges can be translated into factors that influence the formation and continuation of TEC initiatives. System challenges, such as system design, system efficiency and intermittency in generation and use, have been discussed in the literature (e.g., [42–44]).

Technical challenges and factors related to infrastructure and thermal technologies are discussed extensively in studies in which authors explore various technologies and integration and deployment of infrastructure in local energy systems (e.g., [20,38,45–47]). Furthermore, there are different studies related to demand-side management and its application for energy communities (e.g., [48–52]). In relation to these technical challenges, reported factors that influence the formation and continuation of (thermal) energy communities are (i) the availability of technology, such as solar thermal technology, geothermal wells or heat pumps (e.g., [53–55]), (ii) available resources for energy generation (e.g., [9,56]) and (iii) the number of households (e.g., [57,58]). Finally, (iv) the influence of the initial community size is also discussed in [57,59].

TEC initiatives also have challenges related to social, governance and economic arrangements. For instance, the involvement and analysis of stakeholders in energy communities is the focus of studies such as [5,60,61]. These studies focus on the important role of municipalities and households in energy communities. In this group, important factors for the formation and continuation of (thermal) energy communities that are discussed include trust [59,62] characteristics of participants, such as willingness to participate [63,64] or satisfaction [56,63–68].

Studies such as [5,45–47,57,67,68] are focused on the challenges and factors related to regulation and governance in energy communities. Financial aspects, such as investment, payback time and subsidies, are the focus of [17,31,56,57,63,69,70]. The size of the community and investment (e.g., [4,6,56,71]) are examples of factors in this group that influences the formation and continuation of (thermal) energy communities. Furthermore, other important factors related to interactions within the community, such as satisfaction and quitting the community (drop-out rates), are also discussed [7,17,31,71–73]. Table 1 presents the most cited studies in recent years, which explicitly focus on different factors and challenges related to energy communities.


**Table 1.** Studies with a focus on factors and challenges related to energy communities.


**Table 1.** *Cont.*

1 : In the current literature, studies usually discuss energy communities as a general term for both electricity and heating systems. But the studies which are mentioned as heat/thermal energy communities, specifically focus on heating systems.

As Table 1 shows, a limited number of studies [22,42,57,59] (gray rows in the table) specifically discuss the challenges and factors of TEC initiatives in depth. The available studies mainly focus on technical challenges. In the scarce literature on influencing factors related to energy communities, factors such as the size of the community, financial aspects (e.g., cost and investment) or satisfaction of participants (with relation to financial and social aspects) are studied through empirical studies, such as [17,62,72]. However, the computer modelling of these factors is rarely explored. According to the literature, besides technical challenges, trust, governance, willingness to participate and size of the community are important factors that are discussed through joining, satisfaction and dropping out of the community participants.

#### *3.2. Interviews*

After the literature review, nine semi-structured interviews were conducted to gain a deeper understanding of TEC initiatives and to narrow down the number of factors that were found in the literature (main focused factors in Table 1) to a limited set of factors. The interviewees were stakeholders involved in the Dutch thermal energy transition, mainly at the local level. They included policymakers (municipalities of the Hague and Amsterdam), representatives of communities (from the cities of The Hague and Rotterdam), researchers and energy companies (one energy company, one network company, one consultancy firm and one energy branch organization). All these stakeholders were actively involved in the development of Dutch local heat transition. Interviewees discussed the factors for the formation and continuation of TEC initiatives (with a focus on the factors which are presented in Section 3.1.). Although interviewees elaborated on some of their ideas on a specific case study, the focus of the interviews was on an overall view related to TECs. The main topics for the interview were:


Three components of energy community definition, technologies (e.g., geothermal and solar) stakeholders (e.g., households and municipality) and institutions (e.g., energy policies and incentives), were discussed in detail in the context of TECs. From this, we extracted the main empirical challenges and factors for the formation and continuation of TECs.

Policymakers at the municipalities and researchers mainly mentioned the financial aspects (e.g., investment and payback time) and size of the neighbourhood (the number of households) as an important factor for the formation and continuation of TEC initiatives. Willingness to participate and the trust among participants, and the influence of these challenges and factors on current and future status of TECs, were also mentioned in these interviews.

Energy companies and representatives of communities also referred to the importance of drop-out processes of unsatisfied households. Although financial aspects were also mentioned, the importance of quitting the energy community when the participants were not satisfied was emphasized. Furthermore, energy companies and also policymakers discussed their ambitions for investments in local energy systems (e.g., district heating) for energy communities. As the Dutch government and municipalities have targets for natural gas free cities, stakeholders, such as municipalities and energy companies, are willing to invest in local energy systems. Energy companies and policymakers extensively elaborated on different renewable thermal energy technologies that are available for this purpose. Geothermal wells, heat pumps, bioenergy and waste-heat, were the main thermal sources in our interviews.

Among the factors which surfaced during the interviews, the size of the neighbourhood, the minimum member requirement and member interactions (such as the satisfaction of members and dropping out) were mentioned most often. Knowledge about these factors was limited, and interviewees raised questions about the influence of these factors on the formation and continuation of TEC initiatives in their current ongoing projects in the Netherlands. There are few studies about these factors, and most of them are empirical studies. The size of the neighbourhood and the minimum member requirement are discussed in empirical studies, such as [17,20,77]. Satisfaction and dropping out are discussed mainly in studies related to the characteristics of households and neighbourhoods (e.g., environmental concerns and financial status) [11].

Furthermore, interviewees reflected on the factors which were found in the literature and elaborated on them according to their own ideas. The interviews led to four factors that have an influence on the formation and continuation of TEC initiatives. These will be further explored in our modelling efforts:


Further elaboration about these four factors will be presented in the next section.

#### **4. Model Conceptualization**

The purpose of the abstract model is to explore the relation between the four unexplored factors and the formation and continuation of TECs. In this section, first, the main components of the model are presented. Then the structure of the model is introduced. Finally, the experimental setup of our simulations and the model's outputs are discussed.

#### *4.1. Model Components*

The model consists of agents that represent households. The model also contains various technological options, and various energy plans that households can choose from. The agents join a community initiative based on their personal characteristics (financial benefits, environmental stance, willingness to participate) and their interactions with their peers in the network. Further elaboration on each of these model components, agents, different options (financial options, technological options and energy plans), network and interaction is presented next.

#### 4.1.1. Agents

Before joining a TEC initiative, each household evaluates various options and makes a decision based on this evaluation. The options fall into the following categories:


#### Financial Options

As mentioned in the literature, financial factors play an important role in the decision making of the agents. For the model, we define a financial package as a combination of three elements:


While deciding to join a community, each household calculates a financial package (parameter: idea-about-budget) that is based on the three financial parameters explained above (investment, monthly payment and payback time) (Equation (1)).

$$\text{Financial package} = \text{investment} + \text{(payback time} \times 12 \times \text{monthly payment)} \tag{1}$$

#### Technology Options

The three technological energy generation options that are implemented in the model are:


Solar thermal is the smallest sized technology which is used only for one building (maximum five households). Heat pump technology is the medium-sized technology which is used for up-to five buildings (maximum 20 households). Geothermal wells are the biggest sized technologies which are used for more than twenty buildings (maximum 100 households). Although there are other renewable energy technologies (e.g., bioenergy, waste heat), these three are chosen for the following reasons: (1) These three technologies represent different possible sizes for a community. (2) There are existing Dutch thermal energy communities that are working with these three options, which makes them the most viable options in this country. (3) The focus of the model is not on technological feasibility; therefore, a comprehensive set of technologies is not required.

In the model, the assumption is that the initial investment of the households is only spent on thermal energy generation. For the distribution system, the model assumption is that the infrastructure (i.e., district heating) is available for the whole neighbourhood. This assumption is endorsed in the literature [3,83,84] and in interviews with policymakers in the Netherlands. Given that the Dutch government and municipalities, such as Amsterdam and Utrecht, want to meet the targets for natural gas free cities in the coming years, they are willing to provide such infrastructure. In addition, energy companies who are already providing thermal energy for households in the conventional way (e.g., natural gas and electricity), want to be still involved in renewable thermal energy systems and would therefore support the system by providing the distribution infrastructure [6,21,66,71,73,75,84,85]. Households' monthly payment is spent on the maintenance of the energy system.

#### Energy Plans

The agent follows a certain energy plan. Using the results of our interviews, in a TEC initiative, there could be financial income (when more energy is generated than needed), which would need to be distributed among the members of the community. Three energy plans were implemented in our model, based on the agents' environmental-economic trade-offs [57,86,87]. The options were:


#### 4.1.2. Decision Making

According to the literature (e.g., [11]), households have incentives, such as environmental concerns, independency, perception of belonging to a community and financial benefits, to make a decision to join energy communities. In this study, the households will make decisions mainly based on financial benefits, environmental concerns and perception of belonging to a community.

At the start of the simulation, all households calculate their own financial package (Equation (1)) and preferences based on the assigned variables. The most popular technology, energy plan and budget/financial package among households would be considered as the final plan for the TEC. After this, households select one of three main choices:


comparisons: first, the comparison of its own idea about the budget with the budget required to join the community project, and second, its own energy plan and current energy plan of the project.

3. Decision to drop out: After the payback time, each individual household inside the community can make a decision to drop out of TEC initiatives. This decision is based on the self-satisfaction of an individual and the satisfaction of its network (Equation (2)). If the individual is unsatisfied and its network is minimally satisfied, after the payback time of a household is passed (otherwise they would make a financial loss), the household will drop out of TEC initiatives.

#### 4.1.3. Network

Agents' interaction is determined by a social network model, which in this study is a "small-world" network [88,89]. This means households' interactions with their connections (other households in their neighbourhood) depend on the small-world social network structure, which is discussed in [31,90]. In the model, each household has up to 10 other households in its social network [31]. These 10 other households are in the same neighbourhood and are chosen randomly for each agent. According to network's assigned variables and satisfaction, the network of the agent influences its decisions regarding dropping out and joining TEC initiatives after its formation. For instance, if the network of an agent is satisfied, it would have positive influence on the decision of the agent on joining the TEC initiative.

#### *4.2. Model Structure*

In each round in the simulation, each agent makes a decision to join a TEC initiative or not. In the first step, all households in the neighbourhood are randomly assigned an available investment package and an energy plan. In the next stage, the package and the plan that are most popular among the households will be the selected options for the whole neighbourhood. Then, each individual household will decide about its participation according to the energy plan and the budgets. If the number of households who are participating in the community energy initiative is equal or higher than the required participants for the chosen technology, the community is formed.

The formation of a TEC leads to the start of the generation of thermal energy. After the formation, the important criterion to be calculated is the satisfaction of the households. The satisfaction is based on the comparison between their monthly payments and their previous energy bills and their budget, as shown in Equation (2), which means the satisfaction of a household mainly depends on the financial benefits. In other words, households are satisfied when

$$\begin{aligned} \text{((Selectted actual budget) < ((satisfaction level) \times idea about budget)) AND} \\ \text{((monthly payment) < ((satisfaction level) \times (previous energy billls)))} \end{aligned} \tag{2}$$

If they drop out, they return to natural gas consumption. Dropping out is based on the self-satisfaction and the satisfaction of the households' network. As presented in Equation (3), if the individual agent is not satisfied and if unsatisfied households in the agent's network are more than the specific percentage (a parameter that is varied for the experiment), drop out factor \* number of join households, after the contract time (payback time) of each household is passed, the household will drop out of the community (Equation (3)).

(satisfaction of an individual household is false) AND (number of satisfied households in the household's network) < ((drop out factor) × (households who participate in the community)) (3)

There is always an opportunity to rejoin the community. The households can join an existing TEC throughout the simulation regardless of having joined before or not. Joining an existing TEC initiative is mainly based on two factors: (1) satisfaction of the household's network and (2) comparison of the required budget to join the project and the agent's preference about the budget (Equation (4)). Therefore, each individual household will join an existing TEC initiative when:

(number of satisfied households who already joined the community) > ((satisfaction join threshold) × (number of satisfied households in the household's network)) AND ((selected actual budget) > ((afterwards join factor) × (idea about budget)) (4)

Figure *Energies*  1 presents the oviewview of model structure. **2019**, *12*, x FOR PEER REVIEW 10 of 22

**Figure 1.Figure 1.** Overview model structure of thermal energy community (TEC) initiatives. Overview model structure of thermal energy community (TEC) initiatives.

#### *4.3. Experimental Setup of Simulation and Factors*

As discussed, the formation and continuation of TEC initiatives can be influenced by four factors which are simulated in the agent-based model as follows:

• Number of households in the neighbourhood:

This input parameter concerns the size of the neighbourhood within which TEC initiatives may be formed. The size of the neighbourhood is equal to the number of households in that neighbourhood. For this model, the number of households has three values: 200, 500 and 700 households, representing three typical sizes of small scale neighbourhoods in the Netherlands.

• Minimum member requirement or formation capability:

This input parameter refers to the minimum percentage of households in the neighbourhood that needs to join TEC initiative at the start, to initiate a community energy system. For this model, minimum member requirement or formation capability has three values: 0.2, 0.5 and 0.8. These represent the percentage (20%, 50% and 80%) of households in the neighbourhood that should join TEC initiatives at the beginning. These values randomly selected to cover the whole range of possible values.

• Satisfaction factor:

This parameter represents the satisfaction of each individual household who has joined a TEC initiative. It is calculated based on the comparison of the initial idea about the budget and the actual invested budget, and the money they earn in terms of energy saving. If the satisfaction factor is set to a smaller number at the beginning, it means the individuals would be satisfied more easily. For this model, the satisfaction factor has three values: 0.5, 1.5 and 2.5, which will be multiplied to the other aspects of the model, such as the budget. Equation (2) illustrates how this parameter is used in the model.

• Drop-out factor:

This input parameter influences individual households that have joined TEC initiatives but drop out after the contract time. If the drop-out factor is set to a smaller number at the start, it means that the individuals would drop out more easily. For this model, the drop-out factor has three values: 0.2, 0.5 and 0.8, representing the percentage of households in agents network compared to all unsatisfied joined households (see Equation (3)).

Since the goal of TECs and also this model is to generate and distribute thermal energy based on renewable energy sources, if the agents do not participate in TECs or drop out from TECs, the conventional form, national natural gas grid, will be the source of thermal energy supply. There are four factors, and each has three options; therefore, we have 3<sup>4</sup> = 81 scenarios to study. We repeated each run 100 times (to have enough experiments to decrease the influence of the parameters that agents choose randomly (e.g., number of the links with other agents). Therefore, there were 8100 runs in total. The model will run for 50 years, which is the age of an energy infrastructure and technology that is deployed, using time steps of one year.

#### *4.4. Model Outputs*

To explore the influence of these four factors on the formation and continuation of TEC initiatives, three output variables will be analysed:

• Percentage of joined households:

Percentage of joined households is an indicator of the formation of TEC initiatives. Since the experiments are in different neighbourhood sizes, this output is in percentage (Equation (5)).

Percentage of joined households = 100 × ((number of households who joined the community)/ (number of households in the neighbourhood)) (5) • Percentage of households who joined afterwards:

This variable captures how many of the households in the neighbourhood have joined the TEC initiatives after it has been initiated. This provides information about the process of continuation of thermal energy systems (Equation (6)).

Percentage of households who joined afterwards = 100 × ((number of households who joined the community afterwards)/(number of households in the neighbourhood)) (6)

• Satisfaction of the households who joined the community:

This variable reflects the satisfaction and continuation of the TEC initiatives (Equation (7)):

Satisfaction of the households who joined the community = 100 × ((number of joined households who are satisfied)/(number of households who joined)) (7)

#### **5. Model Results and Discussion**

In this section, we present the results of our simulation analysis. First, we give an overview of how many TEC initiatives were actually initiated in all 8100 runs. The analysis of four factors (number of households, formation capability, satisfaction factor and drop-out factor) through three outputs (percentage of joined households, percentage of households who joined afterwards and satisfaction of the households who joined the community) are shown in the next Tables. To provide a better understanding and overview, the results are first presented separately for each of the three output variables.

As Table 2 presents, the results show that in 26% of the model runs, the percentage of joined households was less than 20% of the whole neighbourhood. According to the interviews, less than 20% of joined households means the TEC is not initiated. In fact, of this 26%, in 7.5% of model runs, no household joined a TEC initiative, which shows that there was no community formation at all. In the other 18.5% of the model runs, the number of the joined households was less than 20% of the whole neighbourhood. According to the interviews, around 80% of the neighbourhood need to join to consider the TEC as established, which only happened in 5.7% of all model runs.



The percentage of households who joined after the initial community was formed, is presented in Table 3.


**Table 3.** Percentage of households who joined afterwards in 8100 runs.

Table 3 reveals that in the majority of model runs, households did not join TEC initiatives after their formation. Out of 8100 runs, in 7083 runs, there was no household that joined TEC initiatives after their formation. In 12.6% (10.4% + 2.2%) of the model runs, fewer than 50% of households joined TEC initiatives after initiation. There was no run in which more than 50% of households join the TEC initiatives after initiation.

As presented in Table 4, the satisfaction of households who joined the community was divided mainly between no satisfaction among households or the majority of the joined households were satisfied. In 4958 runs (out of 8100 runs), there was no satisfaction among joined households. In contrast, in 2714 runs, most of the joined households were highly satisfied. These results present a polarized satisfaction, which needs further exploration to find the possible root causes.


**Table 4.** Percentage of satisfied households in each run in 8100 runs.

Two of the factors, i.e., the number of households and the formation capability, were analysed further to understand their influence on the model's outputs. This is shown in Figures 2 and 3.

*Energies* **2019**, *12*, x FOR PEER REVIEW 14 of 22

**Figure 2.** Influence of the number of households on the outputs. **Figure 2.** Influence of the number of households on the outputs.

presented in Table 5.

*Energies* **2019**, *12*, x FOR PEER REVIEW 15 of 22

**Figure 3.** Influence of formation capability on the outputs. **Figure 3.** Influence of formation capability on the outputs.

Figure 2 shows that there was no significant impact on the outputs when the number of households was changed. Based on the model's structure and assumptions, the number of households (size of the community) did not have considerable influence on the results. Figure 2 shows that there was no significant impact on the outputs when the number of households was changed. Based on the model's structure and assumptions, the number of households (size of the community) did not have considerable influence on the results.

Figure 3 shows the results for the formation capability (minimum member requirement). As the figure shows, the formation capability had considerable influence on the behaviour of two outputs: the percentage of joined households and the percentage of satisfied households. When the formation capability was changed, the outputs change. Figure 3 shows the results for the formation capability (minimum member requirement). As the figure shows, the formation capability had considerable influence on the behaviour of two outputs: the percentage of joined households and the percentage of satisfied households. When the formation capability was changed, the outputs change.

This comparison between the correlation of two factors, number of households and formation capability, on the model's outputs, shows that the influence of factors on the outputs was different. This comparison between the correlation of two factors, number of households and formation capability, on the model's outputs, shows that the influence of factors on the outputs was different.

To have better insights from the results, the correlation between each factor and each output is

To have better insights from the results, the correlation between each factor and each output is presented in Table 5.


**Table 5.** Correlations between factors and model outputs.

The correlation of formation capability and the satisfaction factor with the model outputs was strong, highlighting the role of satisfaction in the formation of TEC. The satisfaction factor had a positive correlation with all of the model outputs, which means that the satisfaction of households would boost the formation and continuation of TEC initiatives. While the correlation between formation capability and percentage of joined households was positive, the Pearson Correlation was negative between formation capability and the other two model outputs (percentage of joined households afterwards and percentage of satisfied joined households). This means that it is important to incentivise households to join the community at the beginning of its formation because making people join later and increasing satisfaction are hard to achieve.

In contrast, the number of households and the drop-out factor did not show a strong correlation with the model outputs, especially the drop out factor. However, due to the model limitations, this needs further studies.

#### **6. Model Limitations**

Although this study brought interesting and important insights into light about the formation and continuation of TEC initiatives, it can be developed further to have more in-depth results. All four factors can be structured in the model with more details and complexity, especially the satisfaction factor and drop-out factor. Other related factors, such as available technology and economies of scale, were not captured in this version of the model. Although, size of the neighbourhood and the percentage of participants have an influence on the initial investment of the whole neighbourhood, the assumption in the abstract model is that the chosen technology would not face financial problems in the model (households will successfully provide the needed finances). To provide more insights about technical options, the techno-economic feasibility study of different heating technologies is necessary.

Factors which were already implemented in the abstract model, but are not the focus of the study, such as social aspects (e.g., trust) and financial aspects (e.g., payback time and investment), can be made data-driven to gain more insights about their impact. The technical aspects can be modelled in more detail to understand their role on the formation and continuation of TECs. This would help to have a more comprehensive overview of TECs and the related decision-making processes.

The model is abstract in the sense that the data used to build it were either qualitative (based on interviews) or general statistics (from National websites). This limits the model in exploring the influence of actual demographics and characteristics of a given neighbourhood on the formation and continuation of TEC initiatives. Furthermore, since the model did not include detailed financial specifications, the relation between financial packages and the model's results were not explored. This implies that the financing options, such as bank loans, energy company lease, governmental subsidies, and their influence were not studied

In the current version of the model, each neighbourhood had only one energy community. Theoretically, each neighbourhood can have several energy communities. Apart from the values of the household, other aspects, such as technical feasibility, play a role in choosing one of the communities in the neighbourhood for joining. Providing the opportunity for households to choose between different TECs in a neighbourhood, would provide more insights into the households' decision-making process.

To address these limitations, using other qualitative and quantitative approaches would be beneficial. Some examples are:


#### **7. Conclusions and Further Study**

Our research aimed to increase our understanding of the formation and continuation of TEC initiatives. In this paper, we presented the basis of an agent-based model that allowed us to explore four main factors: number of households, formation capability (minimum member requirement), satisfaction factor and the drop-out factor. Their correlation with our model outputs (percentage of joined households, percentage of joined households afterwards and percentage of satisfied households) was investigated, as they are prime indicators for TEC initiative formation and continuation. This model can be deployed for studying certain factors that affect the formation and continuation of TECs. The model provides a simplified version of the real world to provide insights into the potential importance of the factors.

Our preliminary results show that while the formation capability and the satisfaction factor have a strong positive correlation with the percentage of joined households, the number of households and the drop-out factor have relatively weak correlations. Furthermore, both formation capability and the satisfaction factor show a stronger correlation with the percentage of households who joined afterwards and the satisfaction of joined households.

The satisfaction factor has a considerable positive correlation with the percentage of households who joined afterwards. Hence, the model showed that the satisfied households would influence their network to make them join the community or not to drop out of the community. Furthermore, the satisfaction factor has a positive correlation with the percentage of satisfied joined households. In contrast, the number of households and the drop-out factor have weaker correlations with the model's outputs. The negative correlation of the number of households with all the model's output needs further study. Although this model did not investigate the causality between the factors, one of the possibilities for this might be the negative impact of the size of the neighbourhood on the formation and continuation of the thermal energy communities.

Based on preliminary results, the following suggestions to policymakers and households can be made:


The results and recommendations would provide new insights for stakeholders to focus on the important factors to further developments of TECs, which leads to the establishment of thermal energy communities. The model presented in this paper is only the start of the modelling effort required to study thermal community energy systems. We are expanding the model further to include more details that make it more representative of actual communities. For that, a more comprehensive data collection will also be pursued. For example, the literature suggests that institutional configurations of such communities are decisive factors for the success of these communities along with individual characteristics, such as willingness to contribute. These factors, among others, are included in the next version of this model. These will provide more concrete recommendations in our future work.

**Author Contributions:** J.F. built the agent-based model and took the lead in writing the paper. The rest of the authors (N.M., A.G., P.H.) provided feedback on the conceptualization model, verification and validation. They also provided feedback on the paper. All authors have read and agreed to the published version of the manuscript.

**Funding:** This research was funded by Netherlands Organization for Scientific Research, for their financial support (NWO Responsible Innovation grant—313-99-324).

**Acknowledgments:** The authors wish to thank the Netherlands Organization for Scientific Research for their financial support.

**Conflicts of Interest:** The authors declare no conflict of interest.

#### **References**


© 2020 by the authors. Licensee MDPI, Basel, Switzerland. This article is an open access article distributed under the terms and conditions of the Creative Commons Attribution (CC BY) license (http://creativecommons.org/licenses/by/4.0/).

## *Article* **Status and Evolution of the Community Energy Sector in Italy**

#### **Chiara Candelise 1,2,\* and Gianluca Ruggieri <sup>3</sup>**


Received: 15 February 2020; Accepted: 31 March 2020; Published: 13 April 2020

**Abstract:** Community energy (CE) initiatives have been progressively spreading across Europe and are increasingly proposed as innovative and alternative approaches to guarantee higher citizen participation in the transition toward cleaner energy systems. This paper focuses the attention on Italy, a Southern European country characterized by relatively low CE sector development. It fills a gap in the literature by eliciting and presenting novel and comprehensive evidence on recent Italian CE sector developments. Through a stepwise approach it systematically maps and reviews Italian CE initiatives, to then focus the attention on three specific case studies to further explore conditions for development as well as of success within the Italian energy system. The analysis presents an Italian CE sector still at its niche level, characterized by small initiatives largely dependent on national photovoltaics (PV) policy support. It also points out how only larger initiatives, able to operate at national scale, developing multiple projects and differentiating their activities have managed to continue growing at the time of discontinuity of policy support and contraction of the national renewable energy market. Recent EU and national legislative development might support revived development of CE initiatives in Italy.

**Keywords:** community energy; renewable energy; citizen participation; energy cooperatives

#### **1. Introduction**

Commitments and efforts in reducing greenhouse gas emissions as well as increasing concerns over energy security have triggered the transitioning of the European Union (EU) energy system toward a higher proportion of clean energy generation and reduction of energy use through the implementation of energy efficiency measures [1–3]. In most of the EU much of the transition to decarbonized energy systems has to date been led by major investors and large companies [4,5], but smaller players as well as citizens and local communities are increasingly playing an active role in delivering clean energy investments. Transition toward decentralized energy systems, progressive liberalization of energy markets, and technological innovation have left space for an active role of energy users, which are turning into "prosumers" or co-providers of energy services [6,7]. While consumers' participation to energy transition is increasingly concerning the policy makers [8], community energy (CE) and shared ownership approaches for investments in the energy sector have been developing worldwide [9–11]. They enable citizens to collectively develop and manage energy projects or services, presenting a different model of development and ownership than traditional business organizations [12,13].

The first CE initiatives date back to early 20th century, when rural electrification cooperatives existed in Europe in countries such as Germany, Italy, or Spain [14–16]. They have been later associated with renewable energy production with the rise of wind cooperatives in Denmark in the late 1970s and with new waves of citizens' initiatives after Chernobyl disaster in 1986 (in particular in Germany and Belgium). It is from the 2000s that they began emerging as new paradigms of people engagement in the energy transition toward renewable energy production, facilitated and driven by the last decade's energy system liberalization and transition toward more decentralized energy systems [12].

However, the degree of recognition of the potential contribution of citizens to the energy transition and the level of deployment of CE initiatives still varies considerably across Europe. CE initiatives are more common in Northern Europe, particularly in Denmark, Germany, and the United Kingdom, and far less developed in Southern Europe. Germany hosts more than 800 energy cooperatives, accounting for about 34% of the citizenship [17] whereas in countries like Spain or Greece less than 10 initiatives have been reported [16,18]. Indeed, most of the academic literature researching dynamics, drivers, and conditions for implementation of CE initiatives mainly focus on Northern European countries [19–23]. This suggests the need of deeper analysis on the status of the CE sector in Southern Europe.

The intention of this paper is to contribute to this debate by providing new evidence on the Italian CE sector, which has been to date overlooked by scholars. Magnani and Osti [24] have looked into the role of Italian civil society in energy transition, and few other contributions have studied some specific Italian CE initiatives [25,26]. However, no academic contribution has to date provided a comprehensive review of the Italian CE sector.

We use a qualitative and descriptive approach to search, analyze, and present evidence of CE initiatives that emerged in the country in the last decade. We firstly characterize the sector through a systematic review of the Italian CE initiatives which, as experienced in other northern European countries [14,21], are very heterogeneous. They can take multiple forms depending on the type and scope of their activity, the approach taken for their development as well as the level of citizens' financial involvement, ownership, and co-determination implied by their legal structure and governance. The objective of the review is providing novel data and evidence as well as a clearer characterization of CE initiatives in Italy. We then focus the attention on three specific case studies representing those larger initiatives still operating to date with the objective of further analyzing and understanding characteristics and conditions for deployment and success of CE within the Italian energy sector.

The paper is structured as follows: Section 2 defines the boundaries of the analysis and introduces the methodology adopted. Section 3 presents the results of the systematic review of the Italian CE sector and the case studies. Section 4 discusses the results of the systematic review and the comparative case studies and in Section 5 we present the conclusions, including possible future developments.

#### **2. Materials and Methods**

Civil society engagement in energy markets can take several forms [9,27] and the concept of CE is subject to different interpretations within the academic literature. Some define it in a broad sense: any sustainable energy initiative led by non-profit organizations, not commercially driven or government led [4,28], others have stressed the grassroots innovation nature of CE, as driven by civil society activists and by social and/or environmental needs, rather than rent seeking [29]. Overall, citizens' participation is commonly identified as a major defining characteristic of CE, but it can encompass a wide range of initiatives: green associations, collective purchasing of energy services, community or local authority led schemes for renewable energy implementation, community programme for energy poverty alleviation [17,30,31]. Such variety would in turn imply different levels and forms of participation and co-determination of citizens in energy services provisions. Similarly to other relevant contributions in the literature [13,29,32,33], this paper takes a specific perspective in interpreting citizens' participation in energy service provision by focusing on CE initiatives:

1. which imply a form of citizen ownership or financing of an energy project, as well as control over the initiatives;

2. where citizens directly benefit from the outcomes of the initiative.

This study will not focus on other forms of civic engagement in the energy service provision, such as green associations, collective purchasing of energy services, and ethical consumerism, although present and active in the Italian energy ecosystem and in some instances involved in emerging CE initiatives studied in this paper [24]. The historical hydroelectric cooperatives established in Italian alpine regions at the beginning of the 20th century are also not included in the analysis. They are very specific and currently not replicable cases, functioning as a group of special legal status which in particular allow them to own and manage the local distribution network. Instead, this paper specifically looks at paradigms of citizens' financial and ownership involvement in energy initiatives which began appearing in Italy and the rest of Europe since the late 2000s [12,15]. They are mostly initiatives focused on development of renewable energy production facilities and, most of all, differentiate themselves from Italian historical cooperatives as they do not benefit from their special legal status and cannot own local distribution networks. We took a stepwise approach to investigate the Italian CE sector (Figure 1).

**Figure 1.** A stepwise approach to investigate Italian community energy (CE) sector.

The first step was a systematic search and review of CE initiatives in Italy (step 1 in Figure 1). A starting point in the search was the REScoop energy cooperatives inventory [18] which has been integrated through web-based searches as well as interviews with relevant Italian organizations and stakeholders. These included regional and national green organizations (such as Energoclub, Gas Energia), the Italian ethical bank which has financed several CE initiatives (Banca Etica) and researchers active in the field [24]. Although the majority of the population has certainly been targeted, it is realistic to assume that some initiatives have slipped through the searching net. This could in particular apply to early stage and civil society led projects not connected to relevant networks and without web presence. The systematic review allowed identification of 17 CE projects in Italy providing a level of financial and/or ownership involvement of citizens.

We then collected qualitative and longitudinal data on the identified initiatives (step 2 in Figure 1) through semi-structured interviews with one to two representatives for each of them. In some instances, further communication exchange with the representative (both in person and through emailing) allowed us to fine tune and better understand information and data gathered. We gathered data and evidence along the following dimensions:


We then organized and analyzed data collected together with interviews transcripts and notes (step 3 in Figure 1). The objective of this evidence gathering was to provide a comprehensive picture of the heterogeneity of the Italian CE sector, to analyze their dynamics of creation, organizational dynamics and level and forms of citizens' engagement, their type of activity and timing, as well as their outcomes delivered.

Following on we undertook an in-depth comparative case study analysis (step 4 in Figure 1) of three specific CE initiatives in order to provide a further understanding of CE initiatives conditions for development as well as of success within the Italian energy system (step 5 in Figure 1).

#### **3. Results of Systematic Review of Italian CE Sector**

We used the evidence gathered through the systematic review of the Italian CE initiative to explore their characteristics, dynamics of development, and the forms and level of citizens' involvement. Although rather complete, the sample is relatively small (17 experiences), but nonetheless provides a snapshot of the Italian CE sector to date and highlights some trends in their characteristics and in the conditions for their development. Data and evidence gathered are presented in Appendix A (Table A1, Table A2, Table A3) and discussed in what follows.

#### *3.1. Dynamics of Creation and Organizational Structures*

In Figure 2 we present the distribution of the initiatives between top down and bottom up approaches, i.e., showing to which extent the initiatives identified have been proposed and developed by citizens or other types of grassroot organizations (bottom up) or instead by an institution that defines the project and the form of citizens' involvement. The majority of the initiatives have been proposed through a top down approach; of those, five have been proposed by a municipality and seven by a commercial actor (either a company or a municipal utility). Only five initiatives have been initiated with a bottom up approach by either a group of citizens or green associations (Figure 2).

**Figure 2.** Dynamics of creation: top down versus bottom up approach and proponents.

The role of local authorities as facilitators of several projects also emerges, by providing the assets to develop the initiative, such as public building rooftops, or by creating the local regulatory and financing framework conditions to allow it. This reinforces literature views on their potential key position in facilitating energy transitions and influencing local energy system change [34–36].

As also experienced in other countries [12,17] the legal structure adopted varies, including limited companies, non-profit associations, and cooperatives, which account for about 60% of the sample (Table A1). Cooperatives are the legal form mostly used in the European CE sector [12,14,37,38] and are generally deemed to provide the best institutional framework for locally owned and participatory approaches to renewable energy projects. They encompass both the social and economic dimension in their scope and are characterized by a 'one head one vote' decision making process, with the aim to provide higher levels of co-determination [9,37,39,40]. However, generally speaking, the level of participation and co-determination of citizens is not determined only by the legal form adopted and the relative internal governance as defined by national laws and regulations. For example, in the case of cooperatives the 'one head one vote' may be applied only in the annual general assembly, resulting in a formal rather than a substantial approach to participation. In order to facilitate co-determination, a wider involvement and influence on the project development and management must be experienced by members of the initiative on a permanent basis and not only sporadically.

For example, Dosso Energia and Kennedy Energia are limited companies, but fully owned, financed, and managed by citizens located close to the renewable generation plant [41,42] (Table A1). Similarly, the Comunità Energetica San Lazzaro has been totally financed and managed by citizens (which also enjoy the relative economic returns and participate in the company governance) although the municipality has retained the formal ownership and the legal form adopted is an association [43]. Vice versa, evidence shows that some cooperatives may be included among initiatives reaching lower levels of participation and co-determination. They are those developed by companies and/or with a strong top down approach, e.g., Energyland, Masseria del Sole and Comunità Solare. The first two have been promoted by a company, which have firstly fully developed the renewable energy project to offer participation to citizens in a second phase. However, they reached lower levels of citizen ownership than initially planned and through longer processes than other initiatives (several months versus e.g., less than a month for Kennedy Energia [44,45]). Comunità Solare shows a similar experience, where ownership has been offered to citizens once PV systems had been already developed by local Energy Service Companies (ESCOs) resulting in very low citizens' involvement (less than 1% citizens' ownership [46]).

Overall, initiatives proposed by companies and with a strong top down approach have been developed with lower involvement of citizens and their organizational structure implies lower citizens' co-determination. This also emerges from the financing structure adopted: both the three cooperatives proposed by a company and the project proposed by a municipal utility have been initially financed through some form of project financing and then opened to citizens' financing in a second phase. Instead, initiatives promoted by communities and municipalities have been founded through direct financial contribution of citizens.

#### *3.2. Type of Activity and Timing*

CE projects have been deployed since the second half of the 2000s (Table A2), particularly since 2010 onwards. This timing coincides with the rapid increase in distributed renewable energy capacity installation in Italy as a result of the implementation of renewable energy support measures, in particular feed in tariffs (FiT) schemes for photovoltaic (PV) systems [47] (Figure 3).

Between 2008 and 2013 PV technologies have been benefiting from generous and uncapped FiT schemes [47] which have guaranteed fixed long-term tariffs and net-metering to PV system owners. Such strong policy support, combined with remarkable reductions in PV modules and installation costs since 2010 [53,54], has made PV investments quite profitable and relatively low risk in the wider context of the Italian energy sector. These favorable conditions have been a major driver for

the development of Italian CE sector, opening a window of opportunity for the development of PV systems by proponents generally not equipped to deal with large, complex, and high-risk project development in the energy sector. Apart from one initiative providing electricity supply (È Nostra) and one dedicated to wind, electricity production from PV systems is in fact the primary activity across the whole sample (Table A2).

**Figure 3.** Renewable cumulative installed capacity in Italy (MW), 2001–2018 (data collected from reports by the Gestore dei Servizi Energetici (GSE)) [48–52].

With the reduction of FiT support in 2013 the Italian PV market has contracted (moving from 3.5 GW/year of installed PV between 2008 and 2013 to 385 MW/year in the period between 2013 and 2018, as shown in Figure 3) and the Italian CE sector with it. CE sector dependence from PV FiT incentives is clearly shown in Figure 4, which highlights how the majority of renewable energy plants have been developed between 2008, date of implementation of first FiT scheme in Italy, and 2013, date of discontinuity of FiT support to PV.

**Figure 4.** Timing of renewable energy plants development across CE initiatives.

Moreover, up to 2013, the Italian CE sector has been mainly characterized by the development of rather small, 'ad hoc' initiatives with a strong local focus. While PV systems installed vary in size and application, the majority are small/medium size projects, more easily developed and financed by actors with lower experience in the energy sector (see Table A2). The focus on smaller, roof mounted PV plants has also been reported by some representatives interviewed as a consequence of a deliberate choice of community or municipality led projects to focus activities on investments perceived more sustainable and with lower impact on the local environment than large ground mounted plants [41,42,55]. The largest projects (ground mounted PV systems in the megawatt range and a wind farm) have been developed by the initiatives led by commercial actors, either company or municipal utility (see also Table A1). They developed larger projects thanks to their higher internal technical knowledge and expertise which made the founding and development process easier; they were also more connected with economic networks which allow them to get access to capital more easily, making them able to develop more complex projects and bear higher risks (e.g., the risk of not raising enough capital among citizens to finance the investment).

Figure 4 shows how only a few CE initiatives have been developing renewable energy plants after the cancellation of the FiT in 2013, the larger ones and with a national scope in their activities or promoted by commercial actors: Retenergie (which has then merged with È nostra), Masseria del sole, Fattoria del Sole e Fattorie del Salento (the latter three developed by the same company, ForGreen), and Energia Positiva. Moreover, those still operating after 2013 have rarely developed new renewable energy plants and mostly focused their activity on acquiring operating PV plants on the secondary market, which are still benefiting from the FiT support. We will further analyze these initiatives in Section 3.4.

#### *3.3. Outcomes of CE Initiatives*

All the CE initiatives surveyed involve a form of financing or ownership from members against which a monetary return is offered. The returns on investment offered to citizens can vary quite substantially, from 8% to about 1% (Table A3). Such variation is particularly striking considering that most initiatives have been investing in the same energy technology, PV systems (see Table A2). This can be partly explained by the size and typology of the PV system: larger ground mounted plants allow higher economies of scale in the investment (both in terms of initial capital costs and transaction costs) and therefore higher returns than smaller roof mounted systems. However, what makes a stronger impact on the monetary returns offered to citizens is the typology of the initiative. Indeed, two distinctive typologies of initiatives emerge (Table A3):

Initiatives whose primary activity is the production of electricity from a renewable energy plant (in most cases PV) and having as their main objective the distribution among their members of the revenues accruing from the operation of a renewable generation project. The revenues are generally distributed in monetary terms or in electricity bill savings or a combination of both. These kinds of initiatives have generally developed a single renewable generation project, as unique primary activity. Higher financial returns, on average around 6%–8%, are offered by these initiatives. Sole per tutti is the only exception generating lower returns due to the inclusion of roof insulation in the initial total investment cost

Other initiatives which are set up not just to develop renewable energy plants and aggregate citizens around the relative financing and ownership, but also to offer other energy and social services to benefit both cooperative members and wider local communities. These initiatives generally offer on average lower financial returns on the investment as they tend to have more complex financing and organizational structures and, mostly, redistribute revenues from investments in renewable generation projects across a wider set of activities including those that do not generate monetary benefits for their members. An example is Retenergie which offers returns around 0%–3%, but besides fostering deployment of renewable generation plants offers to their members energy and community services, including domestic energy efficiency audits and consultancy, collective purchasing of energy services (for PV systems, storage, electric bikes, and cars as well as wider services such as discounted insurance, banking, internet provision) as well as wider community development schemes (such as information campaign or activities with schools) [46,55].

#### *3.4. Case Studies*

In what follows we focus the attention on three specific case studies: Retenergie/È nostra, WeForGreen, and Energia Positiva. They are the only CE initiatives that managed to continue activities after 2013. The following paragraphs describe and analyze the initiatives in greater detail and explore the reasons behind their success.

#### 3.4.1. Retenergie and E'nostra

Retenergie was founded by 12 citizens in 2008 with a strong bottom up approach. Its aim was to "contribute to a new economy based on the principles of environmental sustainability, sobriety and solidarity" by promoting renewable production and supply as well as energy efficiency services [55]. By 2017 Retenergie had developed 13 projects, seven of which newly built PV rooftop plants, developed under FiT support (Table 1). Since the discontinuity of FiT support to PV in 2013 Retenergie has acquired four PV plants on the secondary market (hence plants initially developed under FiT support) and managed to develop a small wind power project (60 kW turbine located in Sardinia) and an energy efficiency project (the energy retrofit of a building in Vicenza acting as an ESCo) [56].


**Table 1.** Projects developed by Retenergie.

Note: Plant operating year is the year in which the plant was installed and started operating; Operating year by Retenergie is the year in which Retenergie began operating it.

The cooperative has been growing steadily in members (Table 2) which have been progressively involved in the initiative through public meetings and campaigning in collaboration with social and environmental associations, collective purchasing groups, and other actors active in the Italian solidarity economy. It was later organized as a national initiative across territorial nodes in order to facilitate the development of local initiatives.

**Table 2.** Retenergie, summary of activities.


Renewable plant development has been mainly financed through members/citizens contributions (about 70% of the total investment, with the remaining 30% covered by debt) which could take two forms: (1) citizens can buy equity of the cooperative (minimum quote of 500 €) or, (2) they can finance the cooperative through social lending. In the first case returns for citizens depended on the annual profits of the cooperative and on the assembly decision on whether to redistribute them or keep them as reserve capital (to date the assembly has never earmarked any return on the capital invested, Table 2). Social lending returns were instead from 1.5% to 3% for two years to six years bonds.

Retenergie also offered a series of other services, which were granted against a membership of 50 € for those that had not already invested in the cooperative. They included discounts on different services and products (insurance, internet providers, bank services, magazines, and books) and collective purchasing groups for PV, storage systems, and electric vehicles. Retenergie had also established a network of energy advisors that offered discounted domestic energy audits to the members of the cooperative.

In 2014, Retenergie was one of the founding members of È nostra, the first electricity supply cooperative in Italy. È nostra activities started in 2015, with a membership campaign and in 2016 began to supply green electricity to its members, i.e., domestic and commercial consumers and not for profit organizations (the latter benefiting of a special tariffs). Table 3 presents the increase in members, contracts, and sales volume of È nostra between 2015 and 2018.



\* Number of members after merging with Retenergie.

Since the beginning of the operations Retenergie and È nostra activities were closely linked: È nostra purchased from Retenergie the electricity produced by renewable energy plants and Retenergie offered to È nostra members the services provided by its network of energy advisors.

In 2018, Retenergie merged into È nostra, thus creating a cooperative able to provide both production and supply of renewable electricity and to serve a national community of prosumers, with the objective of enabling them to access sustainable electricity provision and energy services at better conditions than the traditional market.

This new EC stands on three pillars: production, supply, and energy services. The renewable electricity produced by the plants owned by the cooperative currently covers about 15% of the members' consumption and the remaining is covered with certified renewable electricity purchased on the national electricity market. Similarly to Retenergie, the new È nostra also provides energy services to its members, besides renewable electricity production and supply. The cooperative provides assistance to its members, both domestic and commercial, in designing energy efficiency measures, including energy audit, thermal plants renewal, insulation, and PV installation.

#### 3.4.2. WeForGreen

ForGreen is a limited company born as a spinoff of an Italian multi-utility in 2010 [57] with the aim of developing PV systems and energy efficiency services. The first project, Energyland, was a 1 MWp ground mounted PV plant in Verona province. The project was initially fully financed by a local finance company (Finval) and opened to the participation of citizens afterward. It was intended mainly as a local project, addressed to people living in the Verona province. Citizens could invest in quotas of the plant, each meant to finance 1 kW of the PV plant at a cost of 3600 €, of which 1000 € was contribution to cooperative capital and 2600 € social lending. Citizens would get annually: (1) return on the capital invested (as determined by the annual assembly), here assumed to vary between 0% and 4%; (2) one twentieth of the social lending contribution, i.e., 130 € per year per quota; (3) the value of electricity bill savings over a consumption of 1000 kWh per year, per quota (for a varying electricity price, here assumed between 0.17 € and 0.20 € /kWh). Accounting for the variability of return on capital (0%–4%) and of the electricity price (0.17 € to 0.20 € /kWh), this sums up roughly to a return of 6.5% to 8.8% on the total investment (Table 4). The value of the electricity bill savings accounts for the

higher share of returns offered to citizens (≈500–600 € per year). The initial aim was to involve around 333 people each contributing for 3 kW [57,58], in order to cover the full investment cost of 3.6 M€ [45]. In the end about 123 households have joined the cooperative, for a total of approximately 1 M€ (≈28% of the total investment) [45].


**Table 4.** Summary of Energyland offer and financial scheme.

The group of people that initiated the Energyland project decided to replicate the scheme on a national scale. In 2011 ForGreen developed a new 1 MWp PV plant in Apulia region, which was financed by the company through bank loan. In 2014 a new cooperative (Masseria del sole) was set up to give people the chance to invest in this PV plant. The financial scheme was very similar to Energyland with calculated expected returns for citizens investing of 8% (over 15 years). As in the case of Energyland, participation has been lower than initially planned, with 187 households joining the cooperative out of the about 300 initially planned [45].

Each project developed by ForGreen focuses on the development of a single plant and with the aim of supplying green electricity to its members through an electricity bill saving scheme, which represents a relevant component of the guaranteed return. The electricity produced by the PV plants is sold to an electricity supplier and each member of the cooperative gets an annual amount of kilowatt-hours free of charge for each kilowatt purchased. The change of supplier for each member is associated with the purchase of cooperatives shares, thus the size of the three cooperatives allowed ForGreen to have bargaining power on the electricity supply market. This in addition to its commercial background and other activities in the electricity sector.

In 2015 a new cooperative, WeForGreen Sharing, was founded. The cooperative now works as an umbrella for all projects. WeForGreen, besides managing the previous two projects, has developed three new projects, applying a similar structure to the previous ones: Fattoria del sole di Ugento and the two Fattorie del Salento (Table 5). These three additional PV plants are not new built, but they have been acquired by the cooperative in the secondary market of PV. They were built in 2011, thus still benefiting from FiT support. A 112 kW hydroelectric plant (named Lucense 1923) is also currently under development in Montorio, Veneto region, with expected annual production around 700 MWh. Similarly, to Retenergie/È nostra, WeForGreen has also integrated its activities with the supply of green electricity to its members. It is now possible to become member of WeForGreen in two different ways: Socio Autoproduttore (Self-Producing Member), by investing capital in the acquisition of quotas of existing generation plants, or Socio Consumatore (Consumer Member), by simply switching to ForGreeen 100% renewable electricity supply.

#### 3.4.3. Energia Positiva

Energia Positiva was founded and promoted by one individual with the aim of "bringing to the market a participative initiative, which could bring benefits not just to the environment but to the whole collectivity". Energia Positiva started its operation in 2016, developing a new wind turbine project in Basilicata (Southern Italy). The Muro Lucano wind turbine (19.98 kWp for an expected annual production of approximately 64 MWh) required an investment of 126 k€ and was the first of a series of projects. By the end of 2019 Energia Positiva had developed 15 projects, 10 of which are PV plants benefiting of FiT support acquired on the secondary market (for a total of 1.5 MWp approximately, see Table 6). The cooperative has also acquired one additional 20 kW wind turbine and developed four energy saving projects. At January 2020, Energia Positiva reports a total investment almost 5 M€ by 415 members (average investment of about 12,000 € per member) [59].



Note: Plant operating year is the year in which the plant was installed and started operating; Operating year by WeForGreen is the year in which WeForGreen began operating it.


**Table 6.** Projects developed by Energia Positiva.

Note: Plant operating year is the year in which the plant was installed and started operating; Operating year by Energia Positiva is the year in which Energia Positiva began operating it.

To become members of Energia Positiva individuals invest in quotas of the cooperative, which are linked to specific projects in order to become owners of a "virtual renewable energy plant". The return on the investment is guaranteed with a direct discount on the electricity bill. Energia Positiva in fact manages the electricity bill of its members, in partnership with Dolomiti Energia a national supplier of green electricity with more than 400,000 customers.

The member benefits from a discount on the electricity bill equal to 5% of the investment and can buy a maximum number of quotas equivalent to its annual electricity consumption. Furthermore, Energia Positiva has qualified as an innovative start-up, which, under the current Italian regulation, implies a tax rebate. If the member stays in the cooperative for at least three years, he or she can obtain a tax rebate equal to the 30% of the capital invested. Assuming an average customer with an annual consumption of 2700 kWh, in Table 7 we calculate possible total investment and benefits. Considering an investment of 10,500 € for a duration of 10 years, the internal rate of return is approximately equal to ≈9%.


**Table 7.** Energia Positiva possible total investment and benefits for an annual consumption of 2700 kWh (electricity bill 525 €/year).

Energia Positiva offers membership only to domestic customers. In order to expand the activities, the promoters very recently set up a parallel cooperative (EpCo), which offers the same participation model (investment in virtual renewable energy plant to benefit from electricity bill savings) to commercial customers. To further support their activity of development and acquisition of renewable energy plants they also ran in 2019 an equity crowdfunding campaign which raised about 650,000 €.

#### **4. Discussion**

After decades of inaction the CE sector in Italy has experienced a new growth between 2008 and 2013 with the development of initiatives aimed at people engagement in the energy transition. The majority were local energy community projects, mostly developing PV plants generally of a size below 100 kW, and only very few were initiatives with wider territorial scope and able to develop megawatt size plants or different projects summing up to several hundred of kilowatts.

Despite the prevalence of the local dimension, only a few initiatives (the 24%) have been developed with a bottom up approach, hence characterized by strong involvement of citizens or other types of grassroots organizations in the initiation and development of the project. The majority have been developed with a top down approach, i.e., with an institution (i.e., a local authority or a private company) leading the process, defining structural features of the project and facilitating citizens' involvement. Among those, the role of municipalities and municipal utilities is nonetheless remarkable, which have often acted as promoters or as facilitators of the initiatives.

As also experienced within the CE sector in other European countries, the cooperative emerges as the most utilized legal form. However, evidence presented shows that, although it implies 'a one head one vote' rule, it does not necessarily bring high levels of citizens' participation in the development and in the decision process. The level of participation rather depends on the practices adopted. Overall, initiatives proposed by companies and with a strong top down approach have been developed with lower involvement of citizens and their organizational structure implies lower citizens' co-determination.

A major driver for this new wave of CE initiatives in Italy has been the implementation of the FiT scheme support, which has made PV investments quite profitable and relatively low risk, thus suitable for shared ownership projects and accessible to small scale, local projects. All but two (Energia Positiva and È nostra) of the CE initiatives mapped were established between 2008, date of implementation of first FiT scheme in Italy, and 2013, which has marked a watershed for the Italian CE sector. Since the progressive discontinuity of risk reducing support mechanisms such as FiT and the reintroduction of market-based support (such as capacity and auction-based mechanisms) the scaling up of the sector, either by developing large plants or replicating smaller projects, has proven in most cases to be challenging. The small-scale model became not any more profitable and sustainable, and new approaches were needed.

The three case studies presented managed to start (in the case of Energia Positiva) or continue their activities because they all embraced a different avenue from the small, local scale approach. Firstly, they all increased their activities by focusing on larger size projects and/or developing multiple projects. As a consequence of this evolution they enlarged the territorial scale of their activities, both

by developing projects in different locations across the country and by involving members at a national scale. They thus managed to achieve economies of scale in their activities, which allowed them to involve and hire professionals as permanent staff and progressively enhance the services provided.

In a context of a contracted Italian renewable energy market (as also discussed in Section 3.2, Figure 3) they managed to develop new projects mainly focusing on the secondary market of PV, thus investing in PV plants with higher profitability and lower risk because they were still benefiting from the FiT support. More recently they have started differentiating projects activities by also developing energy efficiency projects and a wind project (Energia Positiva and È nostra).

As a result, although on one hand they lost the local dimension in project development, on the other they could integrate the proposition offered to their members with a model which combines participative renewable energy production with provision of green electricity. They managed to do so in different ways. È nostra is a proper electricity supplier and directly provides electricity to its members (which then also participate in the investments in renewable energy production) and to non-members. Energia Positiva and WeForGreen instead provide the service through an agreement with other green electricity supply companies, and link the electricity supply directly (and proportionally) to the investment of their members into the renewable production plants. Nonetheless, they all have developed a sort of 'virtual' prosumer model, which allows citizens across the entire Italian territory to support and participate in their renewable energy production projects while also directly consuming green electricity.

In summary the three case studies have managed to continue their activities after 2013 because they have grown to a national scale, have developed multiple projects, and have expanded their member base over time, also thanks to a progressive diversification of their proposition, i.e., offering a combination of production with consumption of green electricity.

A closer look at the three initiatives also highlights different approaches in their development and growth over time. Evidence presented on the Italian CE sector has highlighted two typologies of initiatives: those whose primary activity is the production of electricity from a renewable energy plant (having as their main objective the distribution among their members of the revenues accruing from its operation), and other initiatives which are set up not just to develop renewable energy plants and aggregate citizens around the relative financing and ownership, but also to offer other energy and social services to benefit both cooperative members and wider local communities. Energia Positiva and WeForGreen belong to the first typology. Indeed, Energia Positiva's growth seems to be rooted in the successful replication of a model in which the investments in single renewable energy projects are shared among members through a sort of quota system in exchange of participation in the revenues accruing from them (despite in the form of electricity bill savings). This modular approach has allowed a constant grow over time of the initiative, which has been steadily developing projects and has recently raised more finance through a crowdfunding campaign to support further expansion. A very similar approach has been followed by WeForGreen which has developed less projects than Energia Positiva, but of larger size, probably thanks to the fact that they are supported by an energy company. These typologies of initiatives are typically able to offer higher financial returns and, among all those mapped within the Italian CE sector, Energia Positiva and WeForGreen offer the highest, around 8%–9%.

Retenergie and È nostra belong to the other typology of initiatives. Retenergie was a bottom up initiative, initially constituted with the aim of promoting renewable energy production, supply, and energy services. Over the years, Retenergie activities have in fact been focusing on the development of collectively owned renewable energy plants, but also on offering energy and community services to its members. The structure of the initiative was more complex than Energia Positiva and WeForGreen, both in term of its activities (as it combined renewable electricity production projects with energy and community services) and in its financial structure and citizens' engagement process. Revenues generated by investments in renewable generation projects have been redistributed across a wider set of activities (including energy and community services), which did not generate direct monetary benefits for their members. This has resulted in lower returns offered to their members (ranging from

0% to 3%). Compared to Energia Positiva and WeForGreen, such more complex structure would make quick replication and upscale of the model less viable. Nonetheless, the cooperative managed to continue growing, probably thanks to its longer history (practically one of the first to be founded in Italy), its national scope, a large member base, and the development of an internal structure of permanent staff at the time of the contraction of the renewable energy market in Italy. In addition, the merging with È nostra has been crucial, which has allowed expansion of its member base and support of additional activities. The new È nostra that emerged from the merging has further diversified the initial proposition of Retenergie, by providing to its members not only collectively owned renewable energy production and energy services, but also electricity supply.

In conclusion the evidence presented on the three case studies highlight different scaling up strategies which are affected by the choices on the initiatives' activities and organizational structures made since the founding stage of the initiatives [60]. Energia Positiva and WeForGreen follow a growth path more focused on serving mutual interest (i.e., serving the interest of their members) while Retenergie/E Nostra scale up has been more informed by general/public interest (i.e., serving the broader interest of society) [26].

#### **5. Conclusions**

This paper elicits and presents novel evidence on CE initiatives that emerged in Italy in the 2000s, filling a gap in the literature to date. The findings of this study contribute to better understand the different phases in the development of the Italian CE sector and to explore the conditions that made some initiatives more successful than others.

The evidence presented in the systematic review depicts an Italian CE sector still at its niche level. It has been initially mainly characterized by the development of rather small, 'ad hoc' initiatives, for the majority dedicated to PV system deployment and with a strong local focus. Its development has been largely dependent on generous PV FiT schemes and since its discontinuity in 2013, only three larger initiatives have been able to keep growing and diversifying their activities (i.e., Retenergie/È nostra, WeForGreen, and Energia Positiva). This has been possible thanks to a progressive change in the business and implementation model. They have moved from a paradigm of small, local CE initiatives to a large and national scale, expanding their member base, developing multiple projects, and integrating the proposition offered to their members with other activities, including green electricity supply. This has allowed them to benefit from economies of scale, to hire permanent staff, and become more professional in their service provision.

Recently, community energy has attracted the attention of the legislator both at EU and national level, with a progressive recognition of its potential role within the EU as well as the Italian energy system. In Table 8 we summarize the most relevant legislative milestones for the Italian CE sector.

Energy communities were first mentioned within the Italian legislation and regulatory framework by the Italian Energy Strategy in 2017 and, subsequently, by the National Energy and Climate Plan in 2018. However, they were both legislative framework documents which did not imply any concrete measure to support the implementation of community energy initiatives in the country. In 2018, the Piedmont region implemented a law on energy communities, which has mainly been a declaration of intent, although politically relevant, being the first legislative initiative explicitly dedicated to the Italian CE sector. A recent call for proposal launched by RSE (a public company devoted to research on the energy system) is also acting as showcase and test of pilot projects of energy communities, here intended as local, collective self-consumption initiatives. The conclusions of these pilot experiences are likely to provide the supporting evidence for the design of new incentive schemes currently under discussion.


**Table 8.** Summary of recent legislative and regulation developments having an impact on the Italian energy community sector.

The process of national implementation of the two EU directives (December 2018 and June 2019) supporting two different models of energy communities (renewable energy communities and citizen energy communities) is creating the momentum for the possible design of a national legislative framework in support of the development of the CE sector. In particular, EU Directive 2018/2001 defines the framework for the implementation of place-based renewable energy communities, with the objective of fostering local self-consumption as well as collective self-consumption. The focus is on experiences that link production and consumption on a proximity base. As an initial step toward the national implementation of the EU Directive, a provision has been included in the recent Italian Law 8/2020 to allow small-scale, collective self-consumption of renewable energy plants of size below 200 kW, for customers linked to the same low voltage distribution sub-grid. A typical case is the block of flats, where the electricity produced by a collective PV plant can now be directly supplied to the customers living in the flats.

This regulatory framework goes in the direction of reducing the distance between production and consumption (with positive impacts on grid management), thus increasing the opportunities for citizens and consumers to become prosumers. The three larger Italian EC initiatives presented in the case studies have already made a step in this direction, by integrating their electricity production activities with green electricity supply. They have done so by developing different types of 'virtual' prosumer models, allowing citizens across the entire Italian territory to participate to their renewable energy production projects while also directly consuming green electricity. However, these models work on a national scale, while the evolution of the Italian regulatory framework is likely to foster the development of new small scale, local initiatives across the country.

Thus, in terms of business models, the regulation could lead to a renewed development of local, place-based energy communities. These energy communities could well be deployed by small, local initiatives which might not require a complex organizational structure, including permanent and professional staff. On the other hand, national energy communities (such as those presented in the case studies) may also be well placed to deliver new energy community initiatives, as they might benefit from economies of scale, from a deeper understanding of the energy market and regulation as well as of an internal organization supported by professional permanent staff. An open question remains regarding how they will be able to reconcile the national, larger size of their business models with the dynamics of community engagement at the local level, including the possibility of guaranteeing a high level of participation of their members in the decision processes.

In conclusion, the national evolution of the regulatory framework for energy communities joint with the renewed national support to renewable energy, implemented in July 2019, will progressively shape the CE sector in Italy, which might be on the verge of a profound evolution. As of February 2020, only a first step has been taken by the national legislators (Law 8/2020), which enables small scale initiatives (below 200 kW). Which other CE implementation models that will be supported by the legislator will depend on the policy decisions that will be taken in the future steps of the EU Directive implementation process. Whether this will lead to a revival of local, small-scale experiences as those developed in the 2008–2013 period or will reinforce the national paradigm developed by the larger Italian CE initiatives (or a combination of both) is an open question worthy of analysis and discussion in the future.

**Author Contributions:** Conceptualization, C.C. and G.R.; methodology, C.C.; data curation, C.C. and G.R.; writing—original draft preparation, C.C. and G.R.; writing—review and editing, C.C. and G.R.; funding acquisition: C.C.; supervision, C.C. Both authors have read and agreed to the published version of the manuscript.

**Funding:** Research funding from the Marie Curie Fellowship LocalEnergy (FP7-PEOPLE-2012-IEF, GA-331081) and from COMETS (COllective action Models for Energy Transition and Social Innovation), Call Reference N◦ : H2020-LC-SC3-2018-2019-2020, Grant Agreement N◦ : 837722 are gratefully acknowledged.

**Acknowledgments:** We also acknowledge the data update effort by Veronica Lupi in Oct–Dec 2019.

**Conflicts of Interest:** The authors declare no conflict of interest

