Mathieu Simona and Maurice Sila
Chabrier Avocats Sàrl, Geneva
simona@chabrier.ch

Background

Switzerland^[1] has set itself the goal of achieving carbon neutrality by 2050. Achieving this objective means investing massively in renewable energies, the decentralised nature of which poses fresh challenges. First, the investment required, as well as the regular maintenance that must necessarily follow, can be complicated for small players who are not used to setting up projects of this kind. These players can therefore benefit from local groupings. Second, the grid is not designed for the production of decentralised electricity and will therefore require investment as well as encouragement for an efficient use of existing infrastructure.

In response to this, the Self-Consumption Community (SCC) was introduced in 2016. This allows neighbouring landowners to pool a renewable energy installation which they consume themselves. Typically, this involves solar panels on a building, the electricity from which is consumed directly instead of being fed into the grid. Excess production is sold to the grid, however, while residual needs are covered by the distribution network operator (DNO).

The LEC concept, for its part, is largely inspired by European Union legislation, which aims to increase citizen participation in energy production, in particular via the Renewable Energy Community (REC). However, the LEC differs in that its approach is more open in terms of possible participants, and more closed in terms of the community’s purpose. Whereas access to RECs is limited to local players, large companies and DNOs can participate in LECs. However, the latter only involves electricity, whereas the REC can also concern other forms of renewable energy, such as heat.^[2]

How LEC’s work

The essence of LECs lies in the fact that their members are able to produce and market the energy they generate, while benefiting from reductions in grid usage charges. In practical terms, members of an LEC can sell their surplus energy to other members or sell it to the DNO. Electricity produced within the LEC benefits from a 30 per cent reduction on the grid usage tariff for local consumption. This reduction lowers to 15 per cent if several network levels are used. On the other hand, no discount is applied to electricity provided by the DNO.

LECs have a great deal of freedom when it comes to setting prices for electricity generated in-house. They can therefore set their own rules for billing and remunerating members, which encourages flexibility and autonomy in the management of locally-generated energy.

The use of the grid by a LEC is limited to low and medium voltage grids, up to 36 kV, which corresponds to the reality of local infrastructures in Switzerland.

For members, the advantage of participating in a LEC lies in the pooling of resources and in making their surplus energy profitable by selling it directly to end consumers or to the grid.

Access conditions

The law lays down a number of conditions for access to LECs. Those communities can be accessed by prosumers (a category that includes SCC), ordinary end consumers, storage facility operators and producers of electricity from renewable energy sources. Electricity supply companies can also integrate production or storage facilities into a LEC. All must be equipped with a smart meter, which are now compulsory in Switzerland for end consumers.

Participation in a given LEC is also limited geographically. All participants must be located in the same municipality and be served by the same DNO.

Finally, the capacity of the generation facilities included in the LEC must represent at least 20 per cent of the connection capacity of all participating end consumers.

Each LEC may also set additional entry requirements and conditions.

Criticisms and conclusion

Internationally, the scientific literature tends to focus on local energy communities from a political or sociological angle, for example by studying the forms of organisation that emerge in this context.^[3] There are few studies as to their actual effect on grid consumption and renewable energy production.

Industry players warn that because LECs are limited to the lowest network levels, combined with too small a reduction in the grid usage tariff, the savings made under an LEC are unlikely to be enough to outweigh the additional administrative costs. Lacking profitability, this structure would be condemned to remain limited in practice.^[4]

In conclusion, the CEL is part of a European trend to encourage self-consumption and citizen involvement in the production of renewable energy at local level. Practical experience will tell whether this new structure fulfils its promises, whether adaptations will be necessary to make it usable in practice, or whether it is just an attempt to stick to a ‘fad’ with no real practical implications.