**3. Method**

#### *3.1. The Case Study*

This study analysis the set-up and operation of an innovative energy community project in the municipality of Eemnes. With 3600 households, Eemnes is located in the centre of the Netherlands, roughly 35 km from Amsterdam. The municipality has set a goal of meeting its energy demand entirely through renewables by 2030 [27,28]. Therefore, the municipality is supporting local citizen efforts to install more renewable energy assets in Eemnes [29]. In 2018, the municipality helped the Eemnes Energy Cooperative (EEC) apply for a Dutch regulative exemption experiment on decentralised sustainable electricity generation, which the EEC received in 2018 [17]. Furthermore, the project concept received support from the European Commission's H2020 programme as part of the project RENAISSANCE [30].

The Eemnes experiment aims to establish, based on flexible pricing, a consumercentric centrally handled electricity market [30], i.e., a peer-to-pool community market where an ICT-based community manager enables local trading [4,30].The market is today only for electricity, thus other energy vectors are not part of the experiment. The physical community consists of homeowners with or without their own renewable generation assets. EEC conducts consumer onboarding, billing and site management. The community will also trade energy with the wholesale energy market [30]. The experiment begins with 10 homeowners; the ambition is to scale this up over a period of 10 years to approximately 1500 households. During the project set-up phase, the name of the pilot was changed from Micro Energy Trading Eemnes to LEF in Eemnes. The experiment of LEF in Eemnes is not the only activity the EEC is promoting among its members. The EEC is promoting a national green energy provider contract and providing advice on energy savings and joint investment options in renewables that takes advantage of the zip code regulation.

#### *3.2. The Use of Barriers as an Analytical Tool*

This paper employed barrier analysis as an analytical assessment tool [31] to compare an energy community set-up in Eemnes under regulative freedoms and an energy community set-up under traditional energy market rules. The academic literature details a number of barriers local energy initiatives face under the present energy market rules, identified in a meta-analysis of the literature. First, several overall key barriers were identified. To narrow the scope of the barrier analysis, the SCOPUS database was used to search for articles. The most widely cited articles focusing on energy community barriers between 2014 and 2020 were taken into consideration, given that it was during that time that the most recent and significant policy schemes were adopted. A literature search was thus performed for the period between January 2014 and December 2020 using only the keywords "energy community", "energy communities" and "community energy". The results were organised in descending order, from the most cited to the least cited works. Two main criteria were used for choosing articles from the search results. First, the articles had to include a section where barriers were analysed; secondly, the articles had to analyse more than one community in order to cover a variety of issues. The key articles contributing to the analysis were those by Brummer [10], who compared and analysed the barriers for 62 energy communities; Koirala [9], who conducted a literature analysis of 1285 articles mentioning terms relating to community energy systems; and Caramizaru and Uihlein [1], who reviewed 24 energy community case studies in Europe. The literature provides a long list of individual barriers that can fit under several theoretical categories of barrier [31]. However, for the purpose of this paper, the barriers are categorised into three broad groups: institutional barriers, technology related barriers and socio-economic barriers [9,32]. Regarding institutional barriers, this paper analyses the obstacles that derive directly from policies or regulation [33]. Technology-related barriers pertain to the selection, use and accessibility of technology. Socio-economic barriers are broadly related to the monetary issues that surround energy communities [9].

#### *3.3. Empirical Data Collection*

For the empirical research element, qualitative methods were employed to compare state-of-the-art literature on the common barriers energy communities face, with a real-life case study. The RENAISSANCE project deliverables and minutes of the meetings describe the process and results of the pilot set-up and operations. The barriers were contrasted with the evidence from these documents. The study has one limitation, namely the energy community is using a novel energy market model. The innovative nature of the project may have added new barriers and difficulties that were not present before.

#### **4. Analytical Findings**

In this section, traditional barriers for energy communities are compared with the exempted case study results. Three broad types of barriers identified in the literature are compared with the empirical evidence from LEF in Eemnes. The key barriers that energy communities encounter are broadly related to institutions, technology and socioeconomics [9,32]. Although divided in this paper to enhance readability, the three categories are empirically intertwined [31]. For example, the institutional context defines the legal form that an energy community may take [9], which determines the business models that can be used in the community. The business model impacts the economic return that a community can generate. Similarly, technology barriers influence the ability to design different energy sharing models, impacting the business model. Following this logical pathway, this section first analyses the institutional barriers, then discusses technology and finally examines the socio-economics.

#### *4.1. Institutional Barriers*

The growth of local energy initiatives in Europe derives, to a large extent, from the fact that many citizens are not satisfied with the progress in greening our energy systems

[2,9]. Since the 1970s, different forms of energy initiatives have emerged in Europe as alternatives to the incumbent energy companies [5]. Nonetheless, sudden surges in the number of consumer-centric grassroo<sup>t</sup> initiatives have emerged following legislative or policy changes [1,2]. For example, in Germany, the re-municipalisation of the grid has accelerated the growth of energy communities [5]. Similarly, in the Netherlands, following the liberalisation of the energy market, the number of energy cooperatives increased over a 6-year period, from approximately 40 initiatives to over 360 initiatives [2,34].

#### 4.1.1. Frequently Changing Policies

Unclear, complex and frequently changing policies make it difficult for energy communities to grow [5,10]. Quickly changing policies do not allow communities to plan their activities securely [10]. The inability to construct clear plans limits the growth of the community because energy communities depend on the interpersonal trust between community members and initiators [9].

In the case of LEF in Eemnes, the exemption has been granted for a period of 10 years [17]. The exemption period starts from the moment the implementation commences, and thus the years spent preparing the experiment are not counted. In the case of the EEC, the exemption was granted to the cooperative at the beginning of 2018 and the implementation was anticipated to start in mid-2021. This allowed the EEC to take the time needed to prepare the experiment for implementation and build trust within the community [35]. The clear 10-year implementation period and flexible starting date have allowed community initiators to build internal trust and establish a clear timeline for future developments.

#### 4.1.2. Organisational Form

Institutions determine the legal form that an energy community can take. In some cases, the models permitted can pose a barrier to community growth. For example, a notfor-profit nature may limit the long-term financial stability of the organisation, rendering the community dependent on voluntary work [10].

The 2015 regulative exemption was granted only to cooperatives and associations of owners [11]. On the one hand, this means that the EEC is an energy cooperative and thus its primary goal is not profit generation. On the other hand, the exemption affords the EEC the right to manage its own grid, making it possible for the cooperative to test new energy market models, such as peer to pool, as well as experiment with different business models [20]. Thus, the barrier related to limitations in the organisational model has not been resolved; but the possibilities under the same organizational model to stack up more revenue streams (Section 4.1.3) has increased. Thus, some of the pains from the barrier have been relieved. The community has more opportunities to breakeven in terms of cost and reduces the dependency on voluntary work in the long run.

#### 4.1.3. Roles in the Energy Market

The regulator defines the roles an energy community is allowed to take in the energy market [5,9]. The energy market regulations limit the options for community energy trading models or access to the grid [4]. With limited possibilities to access certain energy markets, such as wholesale or ancillary services, the community has limited ability to stack up revenue streams [5,10]. Moreover, for any kind of energy sharing within the energy community, the law requires the organisation to have a supply licence, acquiring which is complex and costly procedure [20]. Similarly, rules regarding balancing responsibility activities and connecting new assets to the energy communities can "present a challenge for small energy communities" [5].

In terms of administrative barriers, the greatest benefit of the exemption is the ability to be freed from the supply licence, which helps to avoid various administrative procedures [17,20]. However, to fulfil the balancing responsibility requirement and have access to wholesale energy markets, the cooperative had to purchase these services from a white label

energy supplier. This procedure has been used before by Dutch local energy cooperatives because it helps to reduce their administrative burdens [2]. Thus, although the EEC has the ability to take on the balancing responsibility role, the process is still too complicated for local initiators to manage on their own. However, due to the exemption, the community is able to offer new services to its members, with hope of lowering their electricity bills.

#### 4.1.4. Additional Observations on Institutional Aspects

In the context of wider policy, RVO does not provide structured support for activating the exemption and helping communities to better understand all the administrative and legal provisions that need to be fulfilled before local trading can start. Furthermore, there seems to be a mismatch between the policy support that the Dutch governmen<sup>t</sup> is offering and recognition of the Eemnes experiment as an innovation project by other governmental organisations. The experimentation proposal was submitted to both European and Dutch innovation subsidy programmes, and though two European gran<sup>t</sup> requests were approved, the Dutch innovation subsidy granting agency did not provide a positive evaluation.

#### *4.2. Technology-Related Barriers*

Technological innovation has the potential to reduce the initial set-up costs of energy communities, but only if deployed wisely. The energy grid involves generation, distribution, storage and control technologies, which have become cheaper and increasingly sophisticated over the last decade, making real-time grid managemen<sup>t</sup> technically and financially possible for local citizens [36]. New technologies can increase system reliability and transparency while paving the way for new services that can increase revenue streams within the community [4]. An increased number of flexible assets at the household level, such as heat pumps and smart appliances, provide an opportunity to exploit local flexibility, which can be traded within the community and with the national grid with the assistance of innovative technology platforms [9]. This provides an opportunity for energy communities to offer their members services such as energy efficiency, energy savings, energy storage, managemen<sup>t</sup> of local distribution networks, aggregation and flexibility managemen<sup>t</sup> [5]. All these opportunities have only become available in the last decade, meaning that in most small-scale initiatives, these opportunities have not ye<sup>t</sup> materialised. Therefore, lack of support regarding technical skills and a limited access or ability to use technologies hinder the take-up of energy communities [2].

#### 4.2.1. Lack of Expertise

Community "initiatives are often started by non-experts" [10], so there could be a lack of technical understanding within the community [9,10]. This could result in choosing hardware or software options that are not optimal for the community, resulting in a technology lock-in or situations where technologies with low payback are chosen.

RVO, before granting the exemption to a cooperative, requires the community to describe in its application which technologies and business models will be employed in the project. Therefore, the EEC has to demonstrate to RVO the innovative aspects and technical soundness of the community approach before being granted the exemption right [37]. Furthermore, already in the exemption application, RVO requires the cooperative to demonstrate that a number of experts will be supporting the project [37]. This reduces the chances that the community will be unsuccessful because of a lack of expertise. Overall, these mandatory provisions and a certain degree of flexibility make energy community projects less prone to the risk of failure than initiatives without exemption.

#### 4.2.2. Barriers to Combining New Technologies

Although hardware and software prices are reducing, the small size of the communities and the lack of initial financing mean there is limited access to these technologies (e.g., community batteries or neighbours' PV panels). Furthermore, energy communities

experience difficulties in accessing different ancillary service markets, not only because of institutional constraints, but also because of their limited size.

In the case of Eemnes, the regulative exemption enables the Eemnes community to manage its own grid [17], allowing the EEC to take better advantage of the assets that its community members already own (rooftop PV, heat pumps), lowering the initial investment costs and potentially improving the business case [38]. On the other hand, managing a grid requires smart software, adding to operational costs of running the community. In Eemnes, energy is traded between citizens with their own PV and community members without generation assets. In a later stage, flexible energy assets could be added [38], providing additional benefits. The exemption is, therefore, alleviating this barrier.

#### *4.3. Socio-Economic Barriers*

One way of reducing socio-economic issues is to establish the energy community by using new innovative electricity market models. The new prosumer models where citizens can trade energy among themselves, such as peer-to-peer or peer-to-pool models, are expected to generate profits [4]. Innovative business models, in conjunction with new ICT, are more likely to find ways to optimise old assets and reduce the up-front costs, as discussed in Section 4.2. In addition, energy communities should be able to generate income near the energy generation site, which will confer local economic benefits by creating local jobs (maintenance, management, etc.), keeping the generated value local [10,39].

#### 4.3.1. Initial Set-Up Costs

One huge obstacle local energy communities face is the lack of initial financing and funding options when setting up [5,9,10]. Energy communities are unable to guarantee revenue streams, and their non-profit nature does not allow them to build up reserves [10], making the up-front expenditure of an energy community higher for local citizens and community members, compared with existing national grid alternatives. This impacts the long-term stability of the organisation [1].

The potential to create an energy community using innovative market models and technologies made the Eemnes project a more appealing candidate for consortiums seeking state-of-the-art pilot projects, such as RENAISSANCE. The ambition and the ready-togo concept helped Eemnes receive two European funding opportunities, showcasing its European-level innovation [30,40,41]. Furthermore, the exemption reduced the initial set-up costs from a technology perspective, as discussed in Section 4.2.2.

However, the exemption does not provide better financing terms. Nonetheless, Eemnes has been in discussion with battery providers willing to provide support in the form of technical expertise and the organisation of a community-financed battery, partly due to the innovative nature of the project [42]. Therefore, this one-off exemption has helped the EEC obtain access to initial funds and financing, although the financial cost and uncertainty of organising these may outweigh the benefits and may not be replicable.

#### 4.3.2. Uncertainty with Respect to Financial Success

It is difficult for municipalities and citizens to lead initiatives that promise green local energy but at a much higher cost. Financial benefits, such as shares or cheaper electricity prices, are among the most important factors motivating citizens to join energy communities [1]. Nonetheless, small community projects are considered "high risk projects with uncertain probability of success" [10]. Beyond having difficulties attracting new members, this uncertainty further lessens the probability of a community receiving initial financing and building up reserves.

More important than the initial set-up costs has been the impact of the regulative exemption on the potential for increasing the revenue streams of the community using an innovative peer-to-pool energy trading model. The LEF in Eemnes business model is built around two core energy transactions. Firstly, energy will be traded on the internal peer-to-pool community market, where prosumers and consumers are engaged in a mutual

exchange of energy [30]. Secondly, the community will also be trading energy with the wholesale energy market. Before the project began, a simulation of this business case was created based on the PV and consumption data were collected from 50 households. Initial estimates indicate that the costs of consumed electricity in the electricity bill account for only 18% of the entire utility costs [42]. Estimates sugges<sup>t</sup> that households in the community without PV installation would on average receive a lower electricity bill each year if they participate in the peer-to-pool model as they can take advantage of lower local energy prices [42]. At the same time, households with PV would have slightly higher electricity bills than usual as long as the current net metering rule remain in place, given that these offer higher compensation for surplus energy than the local pool market. Once the net metering starts to reduce (as of 2023), the prosumers of the community will also receive gradually lower electricity bills compared with the current bills when acting in the community, with maximum savings expected in 2031 (LEF in Eemnes minutes 2021). The project has also attracted the interest of the local Distribution System Operator (DSO), which announced that it would gran<sup>t</sup> financial incentives to a community member if the community exercises local balancing and acts on the energy market as one connection point [43]. The community is projected to be able to offer lower electricity bills to its members as of 2023, while covering the gap prior to 2023 with the incentives from the local DSO [43]. Without the exemption, this type of local energy trading business model would not be possible.

#### 4.3.3. Split Incentive

Split incentive barrier can appear in an energy community when costs and benefits are allocated unfairly between members. This issue can arise when the social housing sector is involved or if rental properties are part of the community. In such cases, landlords would need to make the initial investments in PV but the tenant would reap all the benefits [9]. Similarly, split incentive problem is present when designing the local electricity market price for a community that composes of individual prosumers and consumers, the latter having not contributed with capital investments into the communally used energy generation assets.

The split incentive barrier in Eemnes from the housing provider perspective was raised as the housing provider is not an active participant in the community and no tenant has raised the question. The problem might arise later, when Eemnes wishes to exploit economies of scale and reach a higher number of participants, given that there are various social housing properties in the municipality [28]. The second, split incentive issues have come out from the simulations of the yearly electricity bills, where the consumer had with peer-to-peer model a higher savings compared to the prosumer (Section 4.3.2). This issue has been solved by a final balanced electricity bill calculation at the end of the year on community level to have more equal compensation.

#### 4.3.4. Economies of Scale

The reduced bankability of assets decreases the size of the community, preventing economies of scale. The local transactions that keep revenue local could also encourage "reinvestments in additional renewable generation" [39], increasing the size of the energy community, which increases the benefits accrued from economies of scale.

Economies of scale are not overcome in Eemnes. After 9 months of being operational the community has 10 active members who are billed through EEC and 135 households who share their energy consumption data with the project. Nonetheless, the regulative exemption is not a barrier here as with the provision EEC could expand up to 10,000 connections, which in the case of Eemnes would cover all the 3600 households registered in the municipality.

#### 4.3.5. Other Observations

Given the goal set by Eemnes to reach 1000+ connections [30], community managers will need to hire professional day-to-day managers for the local grid in the long run or outsource this activity to a commercial party. In the project preparation phase, the cooperative members have been working on a voluntary basis to design the local market set-up with support from external experts [30]. At an early stage, instead of an external installation company, cooperative members who were installing the gateways for the community took up some of the engineer-related monetary jobs [30].

#### **5. Conclusions and Policy Implications**

This paper has analysed the extent to which common barriers energy communities face could be removed through the provisions set in a specific policy support tool such as the Dutch regulative exemption. The lessons learned in this paper be transferred to most European member states as the energy regulations across Europe follow similar principles due to the common market.

Regarding, socio-economic barriers, the removal of regulative barriers in Eemnes made it possible to stack more revenue streams and lowered initial set-up costs, this was not enough to confidently defend this as being a more competitive business case compared to traditional utilities. The margins of producing centralised energy versus decentrally produced and managed energy are not ye<sup>t</sup> big enough to sustain the costs of running a community. Thus, testing new models and providing support for early initiatives are key to later replication of the community models elsewhere. Policymakers should consider providing financial support to community initiatives, whether in the form of tax incentives or direct financial support.

In addition, market access rules and grid usage rules could be made more transparent and beneficial for energy communities. In Eemnes, the DSO grid is used for local trading and additional revenue streams could be secured through participation at the DSO balancing market. This has increased the willingness of citizens to join the community and act as a grid balancing node for the remaining grid. Thus, regulators should think of ways in which regional grid operators could remunerate energy communities if the latter offer flexibility services to the grid. This approach would allow citizens to invest in renewable energy production locally while lowering the grid investments for the grid operator and the society as a whole.

Though the exemption opened the possibility for the energy cooperative to act as a utility, taking up DSO and BRP roles, it was not used in practice. The case study confirms that if regulators eliminate some of the institutional barriers, such as access to the grid or exemption from a supply licence, the community can solve technological and socioeconomic barriers only if the necessary technical expertise is available. Therefore, national policymakers need to ensure that local energy innovation is combined with technical knowledge support, either in the form of financial aid or by providing expertise. The lack of such an option can negatively impact the business case, and the regulative changes set out in the two directives will have a limited impact in practice.

In the case of Eemnes, the regulatory exemptions were not combined with financial support for innovation. This meant that nationally recognised innovative local experiments had to be self-funded or make a significant effort to obtain grants. A lack of initial financing is an issue, as those taking initiatives lack the capability to access technical experts and new technology platforms. This further weakens the business case for the community and creates distrust and frustration among the community initiators. All in all, this could lead to a contrary impact on national energy markets, to the policymakers' initial ambition of boosting the energy communities' growth in Europe.

The Clean Energy Package directives [44] force Member States to provide energy communities in Europe more enabling conditions similar to the Dutch regulative exemption. It is in this framework that the Eemnes case study highlights the barriers that remain in place even if regulative constraints are removed. The Eemnes case study demonstrates

that additional regulative freedoms can help the community set-up but, on their own, are not sufficient to address the key barriers the removal of which would allow energy communities to blossom. This demonstrates that providing only additional degrees of freedom to energy community initiators is not enough and that policymakers must also put in place an additional supporting framework of policies to support the growth of local energy communities.

**Funding:** This research was funded by the European Union's H2020 Research and Innovation Programme under gran<sup>t</sup> agreemen<sup>t</sup> no. 824342, RENAISSANCE.

**Institutional Review Board Statement:** Not applicable.

**Informed Consent Statement:** Not applicable.

**Data Availability Statement:** Not applicable.

**Acknowledgments:** The author would like to thank the LEF in Eemnes team for the collaboration in setting up the pilot. I would like to express my gratitude to my primary supervisors, Sebastian Oberthür and Thierry Coosemans from VUB and to Rolf Bastiaanssen from Bax & Company for constructive criticism and paper reviews.

**Conflicts of Interest:** The author declares no conflict of interest.
