What are the financing models and opportunities to set-up and run energy communities?

In response to the current climate and energy emergency, many citizens and communities across Europe are looking towards establishing their own energy community or energy cooperative as a viable solution for a socially fair energy transition towards a fossil-free inclusive energy system. Energy communities are one of the key elements for achieving the EU’s energy transition: by 2050, half of Europe’s citizens could be producing up to 50% of the EU’s renewable energy. 

However, the number of energy communities within Europe is growing too slowly, mainly due to political, economic and social barriers. Moreover, energy communities have different financing processes and needs to traditional energy initiatives, given they are often characterised by a small-scale, volunteer-run and mission-driven nature. Energy communities typically follow four different stages throughout their lifetime: inspiration, preparation, implementation and operation. Each of these stages comes with specific financing needs. This complicates the process of securing financing. 

Different types and models to finance energy communities and projects initiatives are available, such as equity financing, debt financing, grants, crowdfunding, and crowdlending. Here are some of the key ingredients discussed in our most recent webinar, “Unlocking Sustainable Futures: Financing Energy Community Projects”, co-organised with the LIFE-BECKON project and the European Network of Living Labs (ENoLL). 

Financing community energy projects and the energy community itself 

Firstly, there is a difference between financing community energy projects like solar installations or collective retrofitting and financing the energy community itself. 

Typical costs to establish and run an energy community include human resources, office space, IT material, and costs related to the management of the legal entity. As the ownership and financing of these costs usually do not depend on a specific project, equity financing is the most suitable model to finance energy communities, while maintaining a long term organisational stability for the energy community itself. 

Regarding the financing of community energy projects (installations and services) this can be done both by equity financing, debt financing or grants, typically following three distinct stages: preparation stage (technical, legal and financial feasibility study), implementation stage (building and installation or setting up of the service), and operation stage (maintenance of the installation or service). 

Useful and updated materials are available on the LIFE-BECKON One-Stop-Shop (OSS) platform, a comprehensive toolkit for developing energy communities. 

Energy communities backed by EU Legislation 

Through the Clean energy for all Europeans package, adopted in 2019, the EU introduced the concept of energy communities in its legislation. Energy communities are promoted as a social concept, highlighting the importance of citizen and local stakeholder empowerment in energy markets, and leading to the establishment of legal frameworks for citizen energy communities (CEC) and renewable energy communities (REC). More specifically, the Directive on common rules for the internal electricity market (EU/2019/944) supports the uptake of energy communities, with the introduction of new rules to enable active consumer participation, individually or through citizen energy communities, in all markets, by generating, consuming, sharing or selling electricity, or by providing flexibility services through demand-response and storage. The revised Renewable energy directive (2018/2001/EU) strengthens the role of renewables self-consumers and renewable energy communities. 

The directives contained in the Clean energy package are currently being  transposed into practice in EU Member States, including definitions for energy communities, supporting mechanisms and access to financing. More information on the progress of the national transpositions of the main EU legal provisions on enabling frameworks and national support schemes for energy communities is available on the Transposition Tracker and on the REpowerEU Tracker. 

EU technical support for energy communities 

The EU directly supports the development of energy communities through several initiatives and support services that provide tailored technical assistance to a wide range of beneficiaries (e.g. energy communities, cooperatives, local authorities, energy agencies, etc,). 

• The Communities for Climate (C4C) initiative supports 50 community-led projects in eleven EU countries, covering four areas: renewable energy, sustainable water management, circular and resource-efficient economy, and biodiversity. Selected projects receive tailored support to develop a climate-related project and to become replicable models for other local communities.  
• The Citizen-led renovation (CLR) support service empowers existing and prospective energy communities and to put citizens in the driver’s seat for energy-saving renovation projects. For those interested in joining as a pilot, learner or follower, don’t miss the opportunity to apply to the Citizen-led renovation open call. 
• The EU Energy Communities Facility, foreseen to start in autumn 2024 with a budget of 10 million Euro, will support the development of business plans for energy community projects. The first call for grant support is expected in 2025. 

EU funding support for energy communities 

In addition to technical assistance services and initiatives, the EU supports the development of energy community related projects by providing several investment policies and funding programmes. 

• The Recovery and Resiliency Facility, is a crucial instrument for implementing the REPowerEU plan and has already supported several projects linked with energy communities (e.g. renewable energy production, retrofitting). 
• Some funding opportunities are delivered through funds of the Cohesion Policy 2021-2027: the European Regional Development Fund, to invest in social and economic development of all EU regions and cities; the Cohesion Fund, to invest in environment and transport in the less prosperous EU countries; the Just Transition Fund, to support the regions most affected by the transition towards climate neutrality, supporting investments on energy efficiency and renewable energy. 
• The Modernisation Fund supports the modernisation of energy systems and the improvement of energy efficiency in 13 lower-income EU Member States. A few Member States already awarded funds for national programmes on ECs. 
• The Social Climate Fund will provide Member States with dedicated funding targeting vulnerable groups, such as households in energy or transport poverty (Article 8 (1) (c) EU) 2023/955: Social Climate Plans may include energy community related measures to target vulnerable households, micro-enterprises, and transport users). 
• Several funding opportunities are also delivered through the Horizon Europe and the LIFE Programme, the EU's key funding programmes for research and innovation and for the environment and climate action. 

European Investment Bank funding opportunities 

European Local Energy Assistance (ELENA) is a joint initiative of the European Investment Bank and the European Commission. It provides grants for technical assistance focused on the implementation of energy efficiency, distributed renewable energy and urban transport projects and programmes. The grant can be used to finance costs related to feasibility and market studies, programme structuring, business plans, energy audits and financial structuring, as well as to the preparation of tendering procedures, contractual arrangements and project implementation units. 

ELENA supports programmes above EUR 30 million over a period of around 2-4 years, and can cover up to 90% of technical assistance/project development costs. Smaller projects can be supported when they are integrated into larger investment programmes. The annual grant budget is currently around EUR 20 million. Projects are evaluated and grants allocated on a first-come-first-served basis. 

Take a look at the full list of completed and ongoing projects to see which energy communities projects have been funded to date. 

To find out more, rewatch the webinar "Unlocking Sustainable Futures: Financing Energy Community Projects” here and download the webinar presentations here. 

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