Renewable Energy Communities: what they are, how they work, and how to get involved

Renewable Energy Communities (RECs) are playing an increasingly important role in Italy's energy transition, making it possible to capture local value from renewable energy production and contribute to a more efficient use of energy resources.

The model originated at the European level with the RED II Directive, which gives Renewable Energy Communities a specific role in the spread of renewable sources and defines them as autonomous entities, open to voluntary participation, aimed at generating environmental, economic or social benefits for their members and the local area rather than maximizing financial profit.

But how does a REC actually work in practice? What advantages can it offer a business, and what are the requirements for joining? In this guide, we look at how Renewable Energy Communities work, the regulatory framework, and the factors to consider when assessing their potential.

What are Renewable Energy Communities?

The Renewable Energy Communities model was implemented in Italy through Legislative Decree 199/2021, which set out the regulatory framework for RECs and their energy-sharing arrangements. The system allows businesses, citizens and local bodies to join an energy community and link renewable energy production and consumption between withdrawal and injection points located within the same primary substation area.

Within the community, members can take on different roles: producers, who make the energy generated by their plants available, and consumers, who use it to meet their own needs. The same member can also play both roles at once, producing and consuming energy.

The underlying principle is that of collective self-consumption: energy is shared virtually through the grid, based on the time match between what's fed in by the plants and what's drawn by members. It isn't a physical transfer of electricity from a specific plant to a specific consumer. The amount of energy shared is determined from meter readings, following the rules set by GSE — the Italian Energy Services Operator — which manages the collective self-consumption service and its related incentive mechanisms.

How does a REC work?

How an Energy Community works comes down to a few key elements that shape its organization and how it's managed. These can be summed up in four points:

• Production: one or more members make renewable-powered plants available, such as solar PV systems.
• Consumption: community members use electricity for their own activities.
• Sharing: when production and consumption happen at the same time, the energy can be counted as shared under the rules of the collective self-consumption service.
• Value creation: shared energy can qualify for the economic mechanisms set out by regulation, including the incentive tariff.

This model turns a renewable plant from a simple production source into an energy asset within a broader configuration, one where the production, consumption and energy behavior of all participants need to be analyzed together.

What are the benefits for businesses and local areas?

Joining a REC can give businesses concrete opportunities to optimize how they manage energy while also contributing to the energy development of the local area. Sharing renewable energy makes it possible to capture more value from locally produced energy and reduce reliance on energy bought from the grid, adding an extra opportunity on top of traditional self-generation and self-consumption strategies.

In this context, even a solar PV system can be sized by taking into account not just the consumption of a single site, but also the sharing potential within the configuration. Producing and using more renewable energy also helps decarbonize the energy system and reduce dependence on fossil fuels.

The benefits aren't purely economic, though: RECs also play an environmental and social role, encouraging local participation and the rollout of new renewable capacity across the area, as envisaged by the RED II Directive.

The Italian regulatory framework

In Italy, this model was implemented through Legislative Decree 199/2021 and later completed by the CACER Decree — Ministerial Decree No. 414 of December 7, 2023 — which sets out the incentive scheme for self-consumption and renewable energy-sharing configurations. For RECs, the scheme provides an incentive tariff on shared electricity, granted for 20 years from the plant's start-up date. The tariff ranges between €60 and €120/MWh, with a bonus of up to €10/MWh for solar PV plants depending on their geographic location. On top of this, there's a payment for the value of self-consumed energy, set annually by ARERA.

To support investment, a capital grant funded by the PNRR (Italy's Recovery and Resilience Plan) is also available, covering up to 40% of eligible costs for renewable plants up to 1 MW, within the approved configurations and in municipalities with fewer than 5,000 residents. The grant is subject to specific cost caps based on the plant's capacity.

The regulatory framework therefore sets out not only the requirements for setting up and running a REC, but also the financial tools that can make investments in new renewable capacity more viable.

How to join a Renewable Energy Community

Joining a REC isn't just about installing a solar PV system. Before moving forward, it's essential to check that the configuration is technically and economically viable. The process can be broken down into four main phases.

Analyzing consumption and production

The first step is to analyze the energy profiles of potential participants: consumption, time bands, contracted power, existing plants and renewable production potential. This phase helps determine how much energy can actually be shared and identify the most suitable plant sizing.

Technical and regulatory checks

It's necessary to check the requirements set out by the regulations and by GSE's rules, including those relating to the self-consumption configuration and the connection of the plants. A key factor is the primary substation, since energy sharing is assessed within its boundaries for the configurations allowed under the CACER Decree, following GSE's operating rules.

Setting up the legal entity

A REC must be set up as a specific legal entity, with bylaws or articles of association consistent with the requirements set by the regulations and the operating rules. Its organizational structure must ensure open and voluntary participation, autonomy, and the pursuit of the environmental, economic or social goals expected of energy communities, in line with the RED II Directive.

Implementation, management and monitoring

Once the community is set up and the interventions are in place, production, consumption, shared energy and incentives all need to be managed over time. Ongoing monitoring becomes essential — not just to check the financial results, but also to understand how consumption profiles evolve and to maximize the value of the energy produced.

Managing and optimizing a REC with an Energy Management System (EMS)

How worthwhile an Energy Community turns out to be, then, doesn't depend solely on how much energy it produces, but on how that energy is managed over time. A digital Energy Management System (EMS) makes it possible to collect and integrate production, consumption and plant performance data, giving a more complete view of the REC's energy management.

With E-BOOST, the EMS developed by Veil Energy, a REC's energy management can be centralized in a single solution, bringing together data from the various plants and consumption points. The platform correlates energy data with operational performance, making it easier to spot anomalies, inefficiencies and room for improvement. This turns data into a concrete basis for decisions and for managing the community's energy resources.

This approach to data management reflects, more broadly, the very nature of RECs: not just an incentive mechanism for renewable energy production, but a model of energy collaboration linking production, consumption, infrastructure and the local area. For businesses, this can mean getting more value from renewable investments, making better use of the energy produced, and contributing to decarbonization goals.

To assess a REC's potential, though, it's necessary to weigh technical feasibility, economic sustainability and regulatory requirements together with participants' production and consumption profiles.