Energy Communities to deliver the EU Cities Mission: What is the role of the private sector?

Energy communities can be a key pillar of the EU Climate-Neutral and Smart Cities Mission, as described in a recent Policy Brief by the mission platform (NetZeroCities, 2024).📜 As Mission Cities advance in implementing their Climate City Contracts (CCC), numerous energy community projects are emerging as tangible examples of climate action.

What insights can we gain from these actions? And what role do private finance and businesses play in driving these actions?

💰 Private Finance

A major challenge in scaling up energy communities is funding. Such projects often present a strong business case, leveraging complementary consumption profiles and economies of scale. Here are examples of financial solutions identified by Mission Cities.

🏢 Energy Service Companies (ESCOs)

• The Mission City Guimarães explores a 100% external funding model via ESCO & PPA structures. (NetZeroCities, 2024) Cities’ upfront investments costs are thus limited.

🌍 Power Purchase Agreements (PPAs)

• Milan’s CCC plans photovoltaic plants through a PPA in combination with energy communities. Energy communities benefit when combined with PPAs, as they simplify contracts and reduce exposure to wholesale price fluctuations.

🎗️ Philanthropy

• Initiatives like Sinergie condivis showcase how data aggregation can spur faster rollout. For example, Fondazione Compagnia di San Paolo plays a valuable role in identifying, enabling and setting up energy sharing in the region of Piemonte and in the Mission City Turin.

💳 Banks Loans

• Combining loans with technical & operational assistance works well, particularly for cities. See for example the one-stop-shop to finance solar roofs on public building via WeSmart and Belfius Bank in Belgium (Belfius, 2024).

✨ Economic growth

Tech innovation allows SMEs, building owners, farmers & industries to benefit from energy sharing models.

Industrial parks:

• The Mission City Zaragoza plans a business-oriented energy community in an industrial park in the MercaEnergy project. The 1 MW solar brings energy, social and economic benefits to actors located in the same cadastral reference. Kalamata’s CCC not only plans the establishment of energy communities, for each urban and municipal unit but also for manufacturing plants. Similarly, the Mission City Porto’s energy community plans encompass industrials. Showing that the scope goes beyond citizen and municipality buildings.

Local innovation :

• Citizens, cooperatives, industrials, farmers and building managers are able to actively participate, learn and profit thanks to energy sharing models. Mission Cities like Thessaloniki, Parma, Kozani, Seville, Madrid, Valladolit and Barcelona promote social innovation and citizen participation via concrete energy community projects in their CCCs. Renewable energy community pilots on public buildings function well as catalysts.

Blue infrastructure:

• Infrastructure projects in complex systems like marinas and ports are well suited for energy community projects. The Mission City Limassol Marina energy community project details economic benefits to various businesses, such as real estate, shops, restaurants and yachting services.

Energy security:

• Energy communities reduce reliance on external energy sources like gas imports. Prices are less dependent on external energy prices. For example, Vitoria Gasteiz’ CCC plans an energy project in the rural area of the municipality to define a renewable thermal energy community that uses local resources, namely forestry and agricultural waste.

The missing ingredients

Existing financial and business solutions are well-positioned to drive this growth market. To unlock its growth potential, we shall focus on:

Clear rules:

• National an regional rules are still fragmented as pointed out by the CCCs of Espoo, Bergamo, Turin amongst others. Limassol's CCC details for instance regulatory sandboxes for energy communities as a solution to fast track the rollout.

Access to data:

• Access to relevant data from smart meters and Distribution System Operators (DSOs) is a must-have to roll it out.

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