Background Information
As legal entities and practical realities, energy communities are in their infancy in Finland. A considerable number of issues and questions are yet to be answered. This said, elements intrinsically involved in communities have been made legally and technologically possible long before the concept of energy communities became recognised.
Today, the Ministry of Economic Affairs and Employment (Työ- ja Elinkeinoministeriö, TEM) formally recognises three types of energy communities in Finland. The first two types, single property energy communities and cross-property energy communities, are currently implementable in practice. The third type, dispersed energy communities, is presently subject to scrutiny, and work to deliver a feasible and implementable legislative framework for them is currently underway (Elenia & VTT, n.d).
The actual number of active energy communities in Finland is not monitored, although according to Datahub there are more than 80 communities that use the compensation calculation provided by Datahub. Additionally, there are several housing companies that have one singular meter and can be considered ECs. Hence, the estimated number is that there are more than 100 ECs in Finland.
An interviewee highlights that Energy communities comprise a prevalent theme in local energy research. Specific focal areas concern local solutions, like the optimisation of the exploitation of solar energy as well as opportunities for charging. The research is also widely concerned with relevant legislation to identify the most sensible terms regarding the operation of the communities. A central point of concern in the process is the division of roles and responsibilities.
Single-property Energy Communities
Single property energy communities comprise the simplest and most implementable energy community at the moment. Aligned with the term, a key characteristic for these communities is that both the production and the point of consumption are located within the same property. Intended as a clean energy solution for people not living in detached houses, the most typical example of single property energy communities is a housing cooperative (Elenia & VTT, n.d). This said, the single property aspect applies to larger entities too. A few of the interviewed experts estimated that there is much potential for actors like university campuses and business sites to form communities within their properties.
Current energy communities use “compensation calculation” (‘hyvityslaskenta’) to monitor the electricity production and to share the produced electricity among the members of the community. In a cooperative, the consumption is comprised by electricity spent in the premises of its individual members, as well as in the general premises. The calculation prioritises the electricity spent in the general premises with any surplus distributed among the members. If, in turn, the residents are unable to fully spend the generated surplus, the community can choose whether the excess is attributed to the community or to the individual members. In this instance, the electricity is sold tax free. (Single property energy communities are still connected to the main grid and pay for the electricity accessed through the grid, tariffs etc.) (Elenia & VTT, n.d).
The electricity system in Finland recognises DSOs as the sole network operators in their locations and the construction of parallel networks is strictly limited. This is exempted within individual properties wherein energy communities have been enabled to build internal connections without permit requirements. This has provided single property communities with a degree of freedom to optimise their processes.
Cross-property Energy Communities
A cross-property energy community, like single property communities, is a local model in which the production and consumption are connected via a separate electricity line. As the name suggests, however, the difference between the two models is that the cross-property communities establish the mode of production in a property adjacent to the point of consumption. The rationale for this is to allow the community to optimise the production, should a neighbouring property be better suited for it. A commonly presented example for this is a scenario where the energy community resides close to a field optimal for a solar panel (Elenia & VTT, n.d).
Some technical details (e.g., how close together the properties may be) are not strictly defined in the legislation, and are mostly left determined by practicalities. One critical legislative detail in the process, however, concerns the connection to the main grid. Cross-property energy communities may only have a single point of connection to the main grid. Where both properties previously have their respective connections, one must be undone. If the community interconnected at least two connection points to the grid, the entity would become a licensable electricity network.
Dispersed Energy Communities
Dispersed energy communities are yet to be realised in practice. Much of the current policy work concentrates on how best to facilitate them. The defining elements for dispersed communities are that they do not need to be geographically connected. Their members, as well as the production may be located anywhere in Finland. In theory, this mode of community may best optimise generation with the freedom to choose an ideal location anywhere in the country. The lack of limitation to a single location may potentially enable dispersed communities to be considerably larger in size and include thousands of members (Elenia & VTT, n.d).
The point where dispersed communities are distinct from single property and cross-property communities is the increased reliance on the main grid. While local communities must be connected to the grid, the electricity produced within the community is mobilised for consumption via a separate line. Dispersed communities make use of the main grid for this purpose. Therefore, dispersed communities will likely be subject to the same grid service charges and taxes as the general population but avoid the electricity tariff. (Elenia, n.d). This said, the potential for dispersed communities to grow larger beyond local limits may ultimately enable larger investments, such as entire solar fields (Elenia & VTT, n.d).
As mentioned above, dispersed energy communities are not reality of the time of this case. However, it is possible to create a dispersed energy community within the same supplier. At the time of writing, in December 2022, there is an active Working Group focused on the legislative framework for dispersed communities due to finalise their work in February 2023.
Models for Energy Communities & National Legal Framework
The major actor in the Finnish electricity ecosystem is the state-owned national transmission grid operator, Fingrid, operating as a natural customer-centred monopoly. Connected to the main grid (and supervised by Fingrid) are distribution networks operated by about 70 DSOs that form another monopoly (HELEN, n.d). The DSOs act in accordance with the policies reinforced by the Energy Authority, the regulative body for energy markets, renewable energy and energy efficiency (Energy Authority, n.d). The Energy Authority, in turn, implements, supervises and reinforces policies set by the legislation.
Fingrid has also established a Data Hub for the standardisation and centralisation of data exchange on the market. Some of the DSOs are also currently the source of compensation calculation required by energy communities. The Hub went live in February 2022 but is expected to be better realised in 2023, when Data Hub starts to offer the compensation calculation. More importantly, the Hub is expected to take over the compensatory calculation function by June 1, 2023 which will enable anyone to establish a community regardless of their local DSO.
As of 2009, the Energy Market Act has allowed the construction of separate lines. The Act considers the separate line an electric line that connects a unit of production to the owner’s own premises, spin-outs or customers for direct energy supply. According to the Act, DSOs have a monopoly to construct networks in their areas with some exceptions. One of the exceptions concerns a separate line connecting a small-scale electricity production (max. 2 MW) to its designated point of use, or to the grid of a designated property or cluster of properties (Market Energy Act 9.8.2913/588).
In September 2016, the Ministry of Economic Affairs and Employment established a working group to explore and propose concrete measures through which the smart electricity system could facilitate the ability of customers to actively participate in the electricity market. The Working group oversaw the agreements regardingl arger, overarching elements pertaining to energy communities (Government of Finland, 2018). This work laid down important groundwork in preparation for the introduction of the directive on energy communities by the European Union in 2019. By 2021, energy communities were formally recognised as micro grids in an update to the Energy Market Act. With the formalisation of the communities came the requirement for a juridical individual (i.e., a collective, like a cooperative, acting as one voice with legal rights and responsibilities) (Tommiska, 2020). Finally, by taking over the compensation calculation function, Data Hub, once it is scaled up in 2023, is expected to enable energy communities to anyone with the wish and means to establish one.
The Finnish energy grid is built on the principle of fairness. As a sparsely populated country, Finland has multiple regions with far less concentrated inhabitation than in the larger cities. If not for the decreed fairness, the costs of maintenance of the grid would end up placing the inhabitants in those sparsely populated areas at a considerable disadvantage. Thus far, this principle blocks the potential for deals for energy communities. The topic emerged in a number of interviews with a tentative consensus on protecting the fairness principle. A few interviewees, however, considered separate pricing possibilities in exchange for the benefit of increasing renewable energy and potentially providing added stability in the networks.
Legal and Practical Barriers
Inhibition on Applications
The main legislative limitation for the future applications concerns the regulations regarding connections to the network. Cross-property communities are strictly regulated in terms of connection-building beyond property lines to prevent more than a single point of connection. Cross-property communities must take careful steps to avoid resembling a parallel network. In addition, the Electricity Market Act does not recognise “island” energy communities (i.e., those entirely off the grid). The regulative framework, still partially underway, limits the experimental application element in this sense. Some interviewees brought up the concept of regulative sandboxes in the future as a means to consider future applications. However, they are not a current priority in the legislative work.
State of Networks
A more practical barrier concerns the state of the local networks. The dispersity of the inhabitation in Finland constitutes a factor in the renewal and maintenance of the networks. Grids in concentrated urban areas tend to be newer and laid underground, thus lengthening their lifecycle and rendering the need for maintenance more infrequent. By contrast, grids in more rural, less populated areas tend to run off utility poles, making the maintenance more challenging in practice and its need more frequent. This is expected to negatively impact the likelihood of establishment of energy communities in rural areas.
DSOs
Additionally, the way in which DSOs approach energy communities will impact the ease at which communities can be maintained. Until the Data Hub incorporates the compensatory calculation service at the beginning of 2023, energy communities depend on their local DSOs for this function. Beyond compensatory calculation, DSOs are anticipated to take on a key role in supporting the implementation and maintenance of energy communities. However, there was a concern voiced in the interviews that DSOs may consider energy communities as competitors, which may suppress interest in collaborating on their part.