Risk-sharing in energy communities

Abstract

Energy communities are considered one of the pillars of the energy transition, owing to the rapid development of digital smart appliances and metering. They benefit from strong political support to accommodate their penetration in Europe. Nevertheless, the pace at which they have developed has been very slow compared with what was expected a decade ago. Many articles have revealed some of the underlying reasons, among which are social heterogeneity among participants, unfavorable local regulations, and inadequate governance. Most recently, a nascent body of research has highlighted the need to find adequate sharing rules for the benefits of community projects. Because of the complexity of these rules, the appointment of a community manager or coordinator may be necessary. This paper follows suit by providing guidance to policy makers or community managers about optimal risk-sharing schemes among members of an energy community. By modeling and simulating energy communities that invest in a rooftop photo-voltaic project and face some degree of production and remuneration risk, we find that a high level of risk aversion makes it impossible to allocate the risk in a stable way. Furthermore, we show that some communities whose members’ risk aversion is too heterogeneous cannot form successfully. Besides, even when risk can be allocated in a stable manner, we show that fair allocations are so complex that they require the intervention of a coordinator or a community manager. Finally, we analyze the advantages of developing judicious risk-sharing instruments between communities and a central entity for providing stability.