Implementing energy sharing needs more clarity

Energy sharing is an opportunity for small customers to participate more concretely in the energy transition at the local level. It will foster individual involvement and awareness on energy topics while providing an opportunity for new decarbonisation solutions for the energy system. 

Member States have time until June 2026 to transpose the changes in the Directive 2019/944 on common rules for the internal market for electricity. That seems like a long time, but it’s in fact not a lot if we consider the Directive’s lack of clarity over the definition of energy sharing. Something EU countries will have to deal with before transposing it into national law.

Clearly, the implementation of the EMD directive revision provides an opportunity to clarify the European framework for energy sharing, but the new definition does not encompass all the possible structures for energy sharing, namely:

1. Peer-to-peer (household to household, for example) trading;,
2. collective self-consumption; and
3. energy communities.

These  are  all great ways for smaller customers to engage more concretely in the energy transition, but their structures should not be overly complex and their implementation should fairly allocate costs, taxes, network charges and compensation to avoid discrimination in the market. This would ensure that customers are encouraged to engage and provide the flexibility benefits of energy sharing without endangering local grids, which would in turn put customers at increased risk.

We also need to ensure a fit-for-purpose customer protection to not put those who engage in energy sharing at undue risk and fully recognise the role of energy sharing in providing flexibility to an increasingly variable generation-based energy system.

Proper implementation is key to unlock all the potential benefits that energy sharing has to offer. To this end, Eurelectric has expressed in its position paper 5 key asks to policymakers for a fair and functional implementation of energy sharing: 

1. Devise a fair cost, tax and network charge allocation and compensation scheme to avoid discrimination among market actors, distortion of competition and cross-subsidisation associated with energy sharing.
   
2. For the same reasons listed above, provide a clear definition of individual parties’ rights and obligations while mitigating the administrative burden. 
   
3. Ensure the existing consumer protection framework is fit for purpose so that the implementation of energy sharing does not put active customers at increased risk.
   
4. Support investments and create structures so that energy sharing can lead to greater alignment of energy supply and demand in terms of time and location, and thus contribute to more efficient use of the local electricity grid. 
   
5. The regulatory framework must take into account what energy sharing has to offer in terms of flexibility, but as indicated in the first point, in a way that does not lead to discrimination among market actors, distortion of competition or cross-subsidisation of costs. This consideration should include a thorough impact assessment looking into how energy sharing can contribute flexibility services to the system.

For more information, take a look at our full paper or reach out to us!