Energy communities

Energy communities are local energy systems where participants produce, consume and share energy. Supported by energy management software, they gain real-time insights, optimize usage and integrate renewables. Recognized by the EU, they enable citizen participation and help build a decentralized, digital and sustainable energy system.

What are energy communities?

As energy communities are a fairly new concept, there’s no “official” definition yet, but they can be defined as locally connected energy management systems(EMS) that enable a visualization of the energy flow within a local community. This allows the produced energy to be shared within the interconnected participants of the community, such as neighborhoods, work spaces or local businesses. 

Energy management software plays a key role in this process by enabling real-time monitoring, forecasting and optimization of energy production and consumption within the community. It supports efficient decision-making, enhances transparency, and facilitates the integration of renewable sources.

Energy communities are also important for fostering public trust and acceptance of renewable energy initiatives. Within the European Union, they are formally recognized as legal entities under two distinct categories: Citizen Energy Communities (CECs) and Renewable Energy Communities (RECs). This legal recognition provides a framework that supports their operation, governance and participation in energy markets. By granting communities legal status, the EU ensures that local groups can actively engage in energy production, distribution and consumption – helping to decentralize the energy system and promote the energy transition.

Characteristics of energy communities

Energy communities are generally city-driven and are initiated and led by citizens or local energy actors in order to contribute to a controlled energy supply. Most participants are prosumers – energy consumers who also produce and manage their own energy. Through collective action, communities can actively produce, sell and consume renewable energy.

With the help of energy management software, like XENON, these communities can operate as a single, optimized entity. The software coordinates energy flows, monitors performance and ensures efficient use, which enables easier and more effective participation in energy markets.

Types of energy communities

There are two main types of energy communities: physical and virtual.

Physical energy communities 

Physical energy communities operate through private or semi-private grids. In collective self-consumption setups, energy is often produced with photovoltaic (PV), and distributed within a private network. The public grid serves as a backup, helping to balance out any surplus or deficit. To further support flexibility, storage systems like electric vehicle batteries can be integrated.

Communal self-consumption communities however, make use of the public grid but function locally within the same network level often behind the transformer station. Here, energy generation and consumption are bundled and balanced, with metering and optimization systems in place to ensure efficient use.

Virtual energy communities 

Virtual energy communities don’t rely on a physical grid connection. Instead, they function through decentralized balancing, allowing producers and consumers to share energy across distances. These virtual setups can be regional or even nationwide, depending on the structure. They are often facilitated through cloud platforms.

The benefits of energy communities and energy management

Energy communities offer a wide range of benefits. They allow members to become more independent from the conventional power grid by actively participating in it, and they provide access to local, sustainable energy sources. This fosters a more reliable and environmentally friendly energy supply. Using energy management software, communities gain deeper insight into their energy flows, making it easier to optimize usage, reduce waste and cut costs. These tools support smarter, data-driven decisions and improve overall system efficiency.By encouraging the use of renewables and reducing emissions, these communities directly support climate goals. They also help reduce energy costs through a better understanding of how energy flows within the system, enabling smarter resource use. Beyond the technical and economic advantages, energy communities play a key role in democratizing the energy system. They empower individuals and communities to take ownership of their energy future and make the system more transparent, collaborative and fair.