Models for Energy Communities & National Legal Framework
Present Models for Energy Communities
As previously noted, energy communities conforming to the definitions of CECs and RECs in accordance with the EU directives have not yet been implemented in Norway. Interviewees state that actors in Norway do not relate to these definitions of energy communities. There are, however, currently multiple active energy community initiatives in Norway with various scopes. The main factor differentiating these initiatives is their organisational structure and model for energy production. Our combined data indicate that the present models forenergy communities in Norway mainly consist of DSOs investing in local flexible markets, energy production and storage, development of microgrids on remote coastal islands to stabilise energy supply, and various actors investing in renewable energy in residential housing associations (borettslag) (McElhinney et al, 2022).
As indicated by interviewees, various models for energy community initiatives in Norway are driven by DSOs to reduce future investment costs on distribution grids. These projects are mainly initiated to add flexibility to the system and to lessen the strain on the main grid during peak demand by installing locally flexible loads systems and investing in local production (typically solar power) and storage of energy. The initiatives are almost exclusively driven by economic incentives from the DSOs but could lead to other effects, such as decreased future costs for consumers, and additional renewable energy and flexibility within the system.
Another currently present model for energy community initiatives in Norway is property developers, real estate companies, residential housing associations (boretsslag), and other actors, investing in the production of renewable energy on residential buildings for internal consumption. The most common example of these projects is property developers investing in solar panels on the roofs of housing associations to produce energy for the building. There are, however, legislative constraints related to these projects, as pointed out by interviewees. According to the Energy Act, only one person can be a solar power customer, effectively limiting the possibility for multiple consumers to share the energy produced within a residential building. To overcome this constraint, consumers could form a power production company and act as shareholders.
This would, however, effectively make it an investment and not a non-profit community, producing renewable energy. In interviews, representatives of NVE-RME emphasise that they have been assigned by the government to develop new legislation to improve the conditions for housing associations to produce and share renewable energy, thereby improving the capacity for “prosumers” (pluskunder) (NVE (2022).
Finally, another example of present energy community initiatives in Norway is the development of microgrids in remote areas that can produce, store and share energy. One example of these types of projects, described by multiple interviewees, is the development of microgrids on islands off Norway’s Atlantic coast (see examples 1 and 3) (McElhinney el al, 2022). Due to harsh weather conditions and outdated grids, many remote islands experience an unstable power supply with frequent power failures. This is a substantial problem for the residents and not least for the nationally important fishing industry, often present on these islands. Due to these problems, several projects are developing complementary internal energy systems and implementing various solutions for renewable energy production, energy storage, and smart distribution, to strengthen stability and flexibility. Multiple actors are involved in these projects, including DSOs, citizens, local companies, tech companies, municipalities, and universities. Interviewees further state that NVE and NVE-RME are closely monitoring these projects and their results.
National Legal Framework
The framework encompassing the energy system, and thus the implementation of energy communities, is regulated by national legislation. The main national legislative frameworks are the Energy Act (Energiloven), Energy Regulations (Energilovforskriften), Grid regulation and the Energy Market Regulation (Nettregulering og Energimarkedet-forskriften – NEM). As Norway is not a member of the EU, EU directives do not automatically apply national legislation. However, through the EEA agreement, the directives can be implemented in Norway if the EEA and EFTA agree that the directive is relevant to the EEA agreement (Government of Norway, n.d).
The Energy Act (1990:50) was implemented in 1990 to ensure that all produced energy in Norway is used in a societally rational manner. The framework regulates the production, transformation, sale, distribution and use of energy in Norway. As stated previously, the Energy Act provides the legal basis for regulating the DSOs that are responsible for developing and maintaining the distribution grid. The act further imposes that the production, conversion, transmission and distribution of electricity cannot be operated without an area license. By owning area licenses, DSOs do not need to apply for licenses for each separate installation within their designated areas. Other actors, such as energy communities, need to apply for a license to produce, store, share and sell electricity. NVE’s praxis, however, is not to permit licenses for other actors to develop distribution grids than to those who own area licenses (i.e., DSOs), which significantly limits the possibilities to form larger energy communities that can produce and share energy (NVE n.d).
Another important legislative framework is Energilovsforskriften (Energy regulations). The framework was implemented in 1990 under the Energy Act (1990:50) and regulates the production, conversion, transmission, turnover, distribution, and use of energy in Norway. The framework shall ensure that all operations within the Norwegian energy system should be rational from a societal perspective and further should consider private and public interests. Energy regulations constitute a more comprehensive and detailed framework of the conditions to be granted licenses to develop and maintain regional and local distribution grids.
Forskrift om nettregulering og energimarkedet (NEM) was implemented in 2019 to regulate the Norwegian energy market. NEM is intended to facilitate an efficient energy market, where the operations within the market are conducted in a socially rational manner and to ensure effective market surveillance. NEM furthermore constitute a detailed framework of the Norwegian energy market's legislative conditions. NVE-REM is responsible for monitoring the energy market to ensure that NEM is enforced (FOR-2019-10-24-1413).
Lastly, there are several legislative frameworks in Norway ensuring that energy production is conducted in an environmentally sustainable manner. In 2011, The Electricity Certificate Act (No. 39 2011) was implemented to promote the production of energy from renewable sources by establishing an electricity certificate market in Norway. The act constitutes a market-based scheme, shared with Sweden, where producers of renewable electricity receive one certificate per MWh of electricity produced for a period of up to 15 years. The National Climate Plan and Climate Change Act are furthermore the most significant sustainability-related frameworks regulating the energy system. The Climate Plan defines Norway’s prioritised measures to reduce emissions while the overall objective of the Climate Change act is to reduce GHC emissions by 2050. All actors need to consider these overarching environmental frameworks when operating within the Norwegian energy system (Government of Norway, 2021), (McElhinney et al, 2022).
Drivers and Benefits
Our combined data indicate that there are several drivers and potential benefits of implementing energy communities, on multiple levels. The interviewees emphasise financial and environmental incentives as driving factors for citizens to engage in energy communities, while public actors in Norway engage in energy community initiatives as measures within the green transition. Additionally, securing a stable energy supply is stated as an important driver for citizens and organisations situated in rural communities. Lower costs, additional flexibility and stability, reduced load on grids, and increased knowledge and consumer power are a few of the highlighted potential benefits of implementing energy communities on a greater scale in Norway.
There is a consensus among interviewees that financial incentives are an important driver for citizens and organisations in Norway to engage in energy community initiatives or other innovative measures to produce renewable energy. Due to recently increasing energy prices, citizens and organisations in Norway are exploring new and alternative solutions to produce energy. One of these solutions is to invest in locally produced energy within an energy community. Interviewees state that many citizens in Norway are starting to show an increased interest in energy communities with the expectation to decrease future costs. Further, housing developers have started to invest in solar panels on residential buildings due to the consumer demand for being able to lower their energy costs and live in sustainable apartments. Financial incentives are also an important driver for DSOs investing in microgrids or other models for energy communities. By investing in new solutions to produce renewable energy locally and smart steering capacity, the companies are expected to reduce the load on grids, thereby limiting future investment costs.
Also noted as an equally important driver is environmental-related motives. Citizens and organisations in Norway see investments in energy communities or other innovative solutions as a measure to facilitate the green transition, thereby contributing to reach Norway’s climate goals. As noted, governmental actors are financing and monitoring research projects aimed at implementing various innovative solutions to produce, store, and share renewable energy, such as energy communities. The objective is to gain knowledge and to determine if the solutions are scalable and societally rational, as part of Norway’s future climate measures.