Factors of economics of citizen energy communities in the Republic of Croatia - Without Borders

Summary

Despite the fact that the Member States, through their legislative and institutional framework, encourage the establishment and operation of citizen energy communities (ECECs), in the Republic of Croatia, such an impression is acquired, the situation is the opposite. The regulations governing the operations of EZG, despite one amendment, do not create a fertile ground for the growth and development of EZG in Croatia. This text lists the factors from the current regulations that could act as a stimulus and disincentive to the growth of this market in the Republic of Croatia and tested the possible operations of EZG with the aim of verifying the possibility of achieving the interests of community members by association.

1. INTRODUCTION

The Renewable Energy Directive (RED II, RED III) and the Internal Electricity Market Directive (IEMD) introduce the concept of ‘citizen energy communities’ (ECCs), which aim to involve citizens, public authorities and small and medium-sized enterprises (SMEs) as a support and one of the instruments of the energy transition.

The European Union (EU) legislative framework enables energy communities to carry out various activities (production, sharing, supply of renewable electricity, storage, aggregation, development of energy efficiency services and charging of electric vehicles) that can contribute to achieving the objectives for which they are established, as well as objectives related to their cost-effectiveness and long-term financial sustainability. In other words, the framework of regulations contributes to the understanding of the ways and possibilities of achieving the interest of involving the aforementioned entities in citizen energy communities[1].

Legislation contained in the legislative framework governing the establishment, operation and promotion of citizen energy communities (mainly: Clean Energy for all Europeans, European Union Strategy for Energy Renovation, Renewable Energy Directive (RED II), Electricity Market Directive, EU Solar Energy Strategy and similar) highlight several more important objectives that are believed to be easier and faster to achieve by encouraging citizen energy communities are:

Increasing renewable energy sources;
Improving energy efficiency;
Democratisation of the energy sector;
Social inclusion and protection against the risk of energy poverty;
Supporting the transition towards sustainable energy.

The structure of these goals and the importance of citizen energy communities in achieving them is illustrated in schema 1:

Source: Energy Research and Social Science Journal.

Citizen energy communities can be effective instruments for achieving the goal of increasing renewable energy sources because they encourage citizens to participate in the production, consumption, storage and sharing of renewable energy. More energy communities, more members of energy communities, greater maximum power of an energy community, the possibility of connecting energy communities are directly related to the amount of renewable energy produced. Within the energy community, citizens can share an embroidered experience for energy efficiency, its improvement and wider application. Citizens - members of the energy community could be interested in such activities because the applied energy efficiency measures can contribute to the realization of their economic and financial interest. Energy communities enable citizens – members to actively participate in the production and disposal of produced energy with less dependence on energy from standard, traditional supply routes. Energy communities in particular can contribute to achieving the goal of social inclusion because, in specific organizational formations with the local public sector, they can provide affordable energy to citizens at risk of energy poverty and thus become an important factor in reducing negative extrenali, such as public costs of treatment from diseases caused by inadequate heating and cooling of housing. Energy communities can stimulate innovation and investment in renewable energy sources and their sharing, which could contribute to achieving the goal of supporting the transition to sustainable energy, especially because the entire system of production, sharing and monitoring of optimal consumption of renewable energy is based on modern digital technologies.

However, citizen energy communities will exist within a specific national economy only if citizens, companies and public sector entities find their social and financial interest in joining such business formations. It is even more important to align the interests of these potential members of energy communities because the interests may be different and often conflicting. For example, the interests of citizens can be (i) a lower price of electricity, (ii) protection against the risk of an increase in the price of electricity, (iii) a greater financial benefit from producing and sharing the energy produced over one’s own needs. Businesses may have interests in (i) dispersion of the risks of electricity supply routes, (ii) protection against the risk of an increase in electricity, (iii) lower electricity prices. The interests of public authorities may have a so-called non-financial character such as (i) reducing greenhouse gas emissions or (ii) contributing to reducing energy poverty. In each of the above cases, the driver of the involvement of entities in citizen energy communities will be the achievement of the stated interests. If entities assess that joining energy communities will not achieve their interests, or if the legislative and institutional framework acts as a disincentive creating costs that diminish their interests, the establishment of energy communities will most likely not occur. This also leads to measures that policy makers of the energy communities market should apply in order for the market to be established and growing.

2. ORGANISATIONAL OPPORTUNITIES OF THE EC WITH DIFFERENT ECONOMIC FEATURES

Energy communities do not represent a single organisational structure. They can be organized within several options depending on the specific interests of its members both in terms of the process of investing in production capacities and in terms of meeting the set goals. Thus, for example, the ECG can be organised as a community of active members sharing energy surpluses with each other. The second option is a combination of active and passive members within the household category, the third option is a group of active members with one passive member from the enterprise category, while the fourth option could be a combination of one active member – a local self-government unit and a number of passive members – citizens at risk of energy poverty. Every organizational opportunity has an impact on the business economy of EZG and its members.

Option 1 includes active members – self-generated household customers who share surplus energy among themselves. The method of participation is shown in schema 1:

Scheme 1: ECG organised as a group of active household members

Source: Authors

Under option 1, ECG members invest individually in a renewable energy plant and come together to share energy surpluses. The role of the legal entity EZG (in this case, the association) is to provide the infrastructure for energy sharing. Members shall cover the operating costs of the association by means of a membership fee.

Scheme 2: ECG organised as a group of active and passive members

Source: Authors

Unlike option 1 where all members are active (produce and consume the energy produced), option 2 also involves passive members (take over energy surpluses). The role of the association is equal to that of Option 1.

Scheme 3: ECG organised as a group of active members with one passive from the category of entrepreneurship

Source: Authors

Option 3 is a combination of active members from the household category and one entrepreneur whose demand for renewable energy exceeds all the surpluses produced. In this case, any surplus ends with the passive member – the entrepreneur.

Scheme 4: ECG organised to reduce the risk of energy poverty

Source: Authors

Option 4 is a special case in which the focus is not on the financial statement of economy, but on the social one. Here, the benefits are expressed as positive externalities. Under this option, one active member (usually a public law entity – LSGU) produces renewable energy for passive members – citizens at risk of energy poverty.

3. FACTORS OF ECONOMICS OF ENERGY COMMUNITIES OF CITIZENS

The establishment, organization and operation of citizen energy communities in the Republic of Croatia is determined by several regulations, the most important of which are: Electricity Market Act (ZTEE)[2], Renewable Energy Sources and High-Efficiency Cogeneration Act (ZOIE)[3], Ordinance on licenses for performing energy activities and keeping a register of issued and withdrawn licenses for performing energy activities (Ordinance on licenses)[4], Ordinance on general conditions for the use of the network and the supply of electricity (Ordinance on general conditions)[5], Decision on the amount of fees for performing activities related to the regulation of energy activities (Decision on fees)[6], Law on Associations[7] / Cooperatives Act[8] and the Act on Financial Operations and Accounting of Non-Profit Organizations[9]. These regulations regulate in detail the operation of citizen energy communities, but certain characteristics can significantly affect cost-effectiveness, financial sustainability and the achievement of interests of entities that engage in energy communities. It is about the following:

1. Total installed capacity of renewable energy plants

Under Article 51.3 of the Code of Civil Procedure. ZOIE stipulates that the total connection power of all installations installed in EZG may not exceed 500 kW. Article 51.4 also provides that a final customer with a connection power of less than 20 kW may install an installation of up to 20 kW. A maximum plant power limit of 20 kW may be acceptable because citizens generally have technical limitations for the installation of installations of such power (roof area). However, the limitation of the total power of all installations in ECG is a significant limitation at least according to the criterion of the possibility of achieving economies of scale. Relatively small communities, and those with a maximum capacity of 500 kW certainly are, will most likely be in a suboptimal sharing regime. Suboptimality is understood to mean the greater part of the energy produced that is not distributed but fed into the grid. The higher the installed capacity of the ECG, the greater the number of members, the greater the number of passive members (ECG members exclusively taking over current energy surpluses) and the sufficient number of active members (energy producing members), the greater the likelihood that any excess energy generated will be demanded. In this case, the capacity, i.e. the installed capacity of the plant in the ECG, significantly affects the cost-effectiveness of the ECG and all its members individually.

2. Definition of the term “sharing” of energy between members

In the Croatian energy communities market, the term ‘sharing’ is mentioned in numerous regulations governing this area. But for the purposes of articulating business processes, this term does not have any meaning. In this sense, it is not clear whether the term “giving” of excess energy (surrender of excess energy without financial compensation), “compensation” of surpluses and deficits of energy (surrendering and taking over excess energy at production or grid prices), “sales” of surplus energy at prices accepted by members of the community (contract-based financial transaction) or what else. Without a clear definition of this term in financial terms, it is not possible to determine the economy or financial viability of a merger transaction into an ECG.

3. Operating costs - Compulsory recruitment of workers

The provision of point 8.8.b of the Addendum to the Ordinance on Permits stipulates that professional competence is proven by a list of employed workers and/or members of the citizen energy community and/or shareholders in the citizen energy community who perform tasks in the energy activity of organizing the citizen energy community. For the purposes of determining the economics of the ECG, it is necessary, before the financial implications, to clarify the concept of ‘energy activity of organising a citizen energy community’. Why is this important for the economics of the ECG? It is important because the financial and economic implications of a particular business structure arise from the performance of the activities of that structure. It would be inferred from the provision cited that, in carrying out the activity for which he was employed, that worker organises (founds and assists in the business) of other ECGs and receives from the service sold, ECG (association) income from which it finances the activities for which it was established. This is a contradiction because the activities for which the ECG is established (in legal form, for example, associations) among others are the production and sharing of renewable energy as defined in the provision of Article 26.11. ZTEE. Therefore, the economics of EZG stems from the continued pursuit of its activities, and it is not logical that these are activities of “organising EZG” but energy sharing. The question that follows is also that relating to the work that the employed person is supposed to perform. Modern energy communities are mostly reduced to the operation of computer programs that allow energy sharing. It is therefore not entirely clear what the function of a permanent employee in the ECG would be other than a (substantial) increase in the operating costs of the ECG and a contribution to reduced economy.

4. Participation of medium and large economic operators

Article 26.2 ZTEE stipulates that ECG members may be citizens, local self-government units, micro and small enterprises. Medium-sized and large enterprises shall not be members of the ECG. This factor can have a strong impact on the economics of EZG. Indeed, it is not clear why a medium-sized and large company, the activity of which is not linked to energy activities and which meets all the participation criteria for micro and small enterprises, should not at least be a passive member of the ECG with the intention of absorbing excess energy. It is precisely in small energy communities, and they are the only option arising from the regulations governing the ECG area, that the participation of entities that are able to take over all surpluses of energy produced above current demand is of particular importance for cost-effectiveness. This is so-called ’son’s, i.e. business systems with high energy needs. Such 'syncos' are essential to reduce the possibility of redirecting excess energy to the grid.

5. Surrender of excess energy to the grid

Surrender of surplus generated and undivided energy to the grid is a factor that affects the cost-effectiveness of the ECG, and its impact on the cost-effectiveness depends on the purchase price of the supplier. It is governed by the provisions of Articles 51.5 and 51.8. ZOIE. Since the final purchase price also depends on the ratio of consumed and delivered energy in the billing period, this system of calculating the price of delivered energy into the grid can be a significant incentive for individual final customers with their own production to be included in the ECG and increase the profitability of their own plant.

6. Costs of founding a community

The Decision on fees stipulates that for issuing a licence for performing energy activities, the applicant is obliged to pay the competent Agency (HERA) the cost of[10] from 995.42 €. This high value of compensation has a negative impact on the cost-effectiveness of the ECG. The amount of the fee is all the more strange because the legislator obliges the members of the EZG (association) to operate in accordance with the law governing the financial operations and accounting of non-profit organisations. By comparison, companies engaged in profitable energy activities such as the production of oil, gas and other forms of energy or the transport of energy, pay a fee for performing an energy activity in the value of 1,990.84 € or 1,493.13 €. Thus, the value of the remuneration for profitable energy activities is slightly higher than the remuneration paid by activities that are legally bound to non-profitability.

7. Relationship between grid prices for different categories of members and plant energy prices

Different categories of customers procure electricity from the grid at different unit prices. Final customers with their own production, on the other hand, are supplied with energy at unit prices from the installation through the installation of renewable energy plants. The economics of the plant and, consequently, of citizen energy communities, depends on the difference in prices from the network and the plant. A smaller difference, caused by low and often non-market prices from the network for certain categories of customers, will have an impact on reduced cost-effectiveness, reduced interest in investing in plants and reduced interest in joining the ECG. A smaller difference in combination with higher subsidies will affect the increased interest in investing in individual plants, but less interest in joining the ECG. On the other hand, in a situation of lower, non-market grid energy prices, allowing medium and large enterprises with higher grid purchase prices compared to population category purchase prices could compensate for the reduced interest in joining the ECG.

8. Exemption from income tax and value added tax

The exemption from payment of income tax and value added tax when procuring an installation is a stimulating factor in the economics of the ECG because the greater part of the revenues from distributed energy remains with the member of the ECG – a natural person. The higher residual revenue contributes to the higher profitability of the plant. The exemption of the purchase value of an installation from the obligation to pay value added tax also has a similar effect.

9. Subsidising the purchase price of electricity

Subsidizing the price of electricity for the category of households and other legal entities, i.e. creating circumstances of non-market electricity prices for one part of the population is another factor that strongly affects the economics of EZG. In combination with other factors (for example banning the participation of medium and large enterprises at least as passive members) it acts as a complete disincentive to create a market for citizen energy communities. Non-market, subsidised electricity prices contribute to abstaining citizens from investing in ECG. On the other hand, subsidizing the capital value of photovoltaic plants, after the abolition of the obligation to pay value added tax, is socially unacceptable because direct subsidies with VAT exemption, the profitability of already profitable investments further increases. With this system of subsidies, citizens who do not have enough disposable income or who do not have the technical ability to install a photovoltaic plant give part of their income to richer citizens to be even richer. Perhaps a fairer solution for all citizens would be an increase in grid energy prices, which could be an incentive to invest in renewable energy plants as well as an incentive to join the ECG with the permission that both medium-sized and large companies can become (passive) members of the ECG. In this way, all the members of the company and the ECG benefit from: citizens who do not participate in the production of renewable energy do not direct part of their income to citizens who will be even richer, citizens who have sufficient disposable income will have an interest in investing in plants and joining ECG, medium and large enterprises whose purchase price from the network is significantly higher than the prices for citizens will have an interest in taking energy at higher prices than the purchase prices for the household category, citizens who do not have the technical capabilities to install plants will be able to use the capacity of other members. Consequently, the purchase of renewable energy plants will not be subsidised by citizens with lower disposable income, but by medium-sized and large enterprises.

4. MODEL AND IMPACT SIMULATION

The cost-effectiveness simulation was prepared by comparing four options: (i) a self-produced customer not included in ECG (Option 1), (ii) a group of self-produced customers included in ECG sharing 90% total pre-produced energy at prices equal to grid prices, while the remaining 10% delivers energy to the grid due to ECG inefficiency caused by low capacity (Option 2), (iii) a combination of active and passive members in which all excess generated energy over the consumption of active customers is distributed to passive members at grid energy prices for the household category (Option 3) and a self-generated group of customers who share the excess generated energy with passive members – entrepreneurs at a price of 30% higher than the purchase price of grid energy for the household category (Option 4).

Measuring economy[11] is implemented by an indicator of the financial rate of return of a project that includes savings and operating revenues and costs. Savings are represented by a form:

where: Si saving i-th possibilities, Efi the energy from the i-th facility; and GP annual energy consumption of the member. The financial rate of return of the project (investment) is given by the form:

where they are Ii the value of the investment of the i-th option, c the unit price of grid energy; k reduction coefficient of the price of energy from the grid in case of energy input to the grid, price of energy sharing between members, energy fed into the grid, energy taken from the grid, annual operating costs of i-th possibility, annual cost of membership to the ECG, financial rate of return of the project (investment) of the member, i Option 1 to 4 and j planning horizon (lifespan) of 25 years.

The simulation is based on the following assumptions:

Community members are in the system of balancing downloaded and committed energy with the grid (net-metering);
Community members invest in their own renewable energy plants;
The function of the ECG is to provide a service of energy sharing and control of energy flows;
EZG is a non-profit organisation and achieves non-profitability by equating operating expenses with membership fee income;
In the case of an installation producing less than its annual energy consumption, the member shall purchase the difference from the grid at legally regulated prices;
In the case of generating more energy from installations than the annual energy consumption, the member shall sell the surplus to the grid at legally regulated prices;
Members have different purchase prices of energy from the grid and find interest in agreeing the price at which energy sharing will be carried out.

The simulation explores circumstances that would encourage active community members to install higher-than-own-consumption capacity facilities and thus contribute to the achievement of the fundamental social objective of increasing renewable energy sources. The outcomes of these options are shown in Graph 1:

Chart 1: Dependence of FRRC on plant capacity in different organizational capabilities of EZG

Source: Simulations by the author.

Increasing the capacity of the ECG member's plant directly affects the financial rate of return until equalization of the plant's capacity in (annual) production[12] energy with (annual) consumption. This rule applies to all options shown. The financial rate of return of an individual member will depend on the parameters described above. Under option 2, when 90% distributes surplus energy between members (active and passive) at prices equal to the price of grid energy for the household category, and 10% energy fed into the grid at prices determined by regulations due to the inefficiency of small ECG, the increase in the capacity of the plants of active members over self-consumption will contribute to the reduction of the FRRC. A slightly higher FRRC can be expected if all excess energy is shared among ECG members at prices equal to the price of grid energy for household category (option 3), but in this case active members do not have an incentive to increase their production capacity because the FRRC does not increase with the increase in plant capacity over self-consumption. The only case in which active members could have an interest in increasing generation capacity above their own energy consumption is described by a curve under option 4 involving passive members – undertakings willing to value shared energy above the grid price – still less than their purchase price for grid energy. Under this option, passive members might also be interested in using the technical capacities of active members to install their renewable energy plant on their remaining free space capacities.

From the analysis of options presented above, it could be concluded that the presence of entrepreneurs, i.e. the category of electricity customers whose purchase prices are higher than the purchase prices of energy for the household category, is crucial for the ECG economy. In such a case, all members could have an interest in increasing renewable energy production capacity beyond their (annual) consumption. Under this option, the legal person EZG could, in view of the restrictions on profitability, operate in accordance with the law and the members of the EZG (active and passive) could pursue their interests by joining the ECG.

5. ENERGY SHARE TECHNOLOGY

The question of trust

The exchange of goods, including energy, in the case of the ECG implies the confidence of all actors in the validity of the transactions carried out. In this context, it is critical to establish platforms and measurement methods that will enable the monitoring of all activities in the ECG both accrual/statistical and in real time with regard to the types of services potentially provided by the ECG to users.

Recently, it has been proposed to introduce a methodological framework to establish Digital Trust.[13] based on interoperability and open standards. Given the strong resonance and wide acceptance, it is possible to expect the rapid implementation of these or similar concepts in the energy sector, more specifically, the support of the ECG.

Studies on the perception of new technologies or policy changes often reveal that citizens are uncertain about their sources of information and do not trust stakeholders to act in a way that is acceptable to them.[14]. Case study on the Croatian island of the Union within the framework of the EU Horizon project insulae made it clear that without a transparent approach and education of all stakeholders, the establishment of an ECG would not be possible. The change of the consumption paradigm in which consumption follows production implies a significantly higher degree of confidence of all actors, but also automation of the management of energy flows.

In addition to this local level, the state level is also crucial, where sometimes decisions can be taken that are not fully in line with economic, social or development interests. Two sometimes divergent approaches can be found here. The first is the so-called liberal. It often presupposes self-regulation of the energy market – market participants, guided by their own interest, will contribute to the matching of energy supply and demand. The state will, in this case, protect the participants from monopolies. However, the reality of the market sometimes deviates from this assumption[15].

According to this approach, national states, acting within their own borders, can make political decisions that could prevent the rational and sustainable development of the energy system in the long term, while blocking the development of, for example, civic energy. Such a possibility may stem from the view that nuclear energy is an ecological source.

Given the uncertainties about which long-term objectives will be combined with short-term means and with this combination to mitigate the effects of the crisis, a decision to democratise energy flows, increase the resilience of local energy systems and create opportunities for a fairer distribution of the ‘energy cake’ can certainly be acceptable.

Because of the emphasis on individuals who take responsibility for the consequences of their behaviour and because of the considerable uncertainty about what the future holds, any public engagement policy must include an element of “trust” – public trust in technology, science, policy makers and business, really in each other.

Technological infrastructure components ECG

The establishment of transparent energy sharing within the ECG involves various technical aspects to ensure efficient production, distribution and use of energy resources. But contrary to the usual thinking that ends up on solar or wind power plants, it is not only about sharing, but perhaps more importantly, creating a whole range of new services that can synergistically have a great impact on the energy stability of the system at both local and national level.

In this context, it is important to distinguish the components and components of the ECG technology systems:

Energy production systems renewables are components such as solar photovoltaic (PV) installations, wind turbines, biomass boilers or generators, small hydropower plants or combinations thereof, depending on the resources available and the energy potential of the local environment. Such production components are mandatorily monitored and operated by platforms for real-time performance monitoring and optimisation of renewable energy systems. This may include SCADA (Supervisory Control and Data Acquisition) Systems or IoT (Internet of Things) remote monitoring and control devices. If the platforms are integrated with the national energy system or aggregator, there is an opportunity to generate additional revenues through participation in the electricity markets[16].

Energy storage solutions are components such as battery energy storage systems (such as lithium-ion batteries), pumped hydro storage, gravity energy storage, flywheel energy storage or thermal energy storage systems supported by battery management systems (BMS), energy management software (EMS) or distributed energy management systems (DEMS) to manage energy storage operations, optimise charging and discharging cycles and maintain system stability. It is estimated that the energy storage service will potentially be a significant source of revenue for the ECG[17].

ECG microgrid infrastructure is a component whose main function is the division of energy within the community. The microgrid enables localised energy production, distribution and consumption, increasing resilience and reducing ECG's dependence on centralised network infrastructure. It can be virtual (in the case of small energy communities whose members are directly connected to the distributor's network) and then consists exclusively of components that enable the acquisition and processing of metering data through smart meters. The second variant is a ‘real’ microgrid consisting of converters, transformers, switchyards and distribution lines to create a localised network infrastructure (usually within larger industrial zones, large campuses, islands or remote settlements). Mandatory includes SCADA systems, distributed energy management platforms or microgrid controllers to optimize and coordinate network operation in real time. The Analytical and Measurement Infrastructure (AMI) for real-time monitoring of energy consumption patterns enables timely decision-making. The development of such microgrids generally increases the resilience of the energy system and can therefore be a potential source of revenue[18] for EZG. In this context, a new potential EZG service is also emerging – reactive energy compensation. Reactive power, often referred to simply as “reactive energy”, is an integral part of electricity that oscillates between source and load without performing any useful work. Unlike active power (measured in watts), which is responsible for performing useful work in devices such as heaters, bulbs or electric motors, reactive power (measured in volt amps reactive, VAR) does not directly contribute to these tasks, but is necessary to maintain the voltage level and ensure the stability of the electrical network. In electrical systems of alternating current (AC) reactive power occurs due to the phase difference between the waveforms of voltage and current. Reactive power is required to establish and maintain electromagnetic fields in inductive (e.g. motors, transformers) and capacitive (e.g. capacitor) devices. The impact of reactive power in the ECG microgrid can be significant and is primarily related to local voltage stability and power quality. Proper reactive power management ensures voltage stability, so there is an opportunity for microgrids in which solar power plants with modern inverters predominate to participate in reactive energy compensation processes at both local and higher levels. In summary, while reactive power alone does not contribute to useful work, its monitoring and management are key to maintaining voltage stability, improving energy quality, ensuring efficient operation of community microgrids and generating additional revenue on this basis.

Energy trading platforms (Peer-to-Peer) within the framework of the ECG, which allow residents and businesses within the community to buy, sell or exchange surplus energy directly with each other. Blockchain or other decentralized technologies are commonly used to facilitate secure and transparent energy transactions while maintaining privacy and data integrity. They consist of a secure communication network (such as Ethernet, Wi-Fi or mobile networks) to connect platforms where smart contracts have been implemented to automate energy trading agreements and ensure secure and transparent transactions[19].

Network interconnection and the regulation ensures the interconnection of the ECG network with the wider electricity network (optional – can be considered when connecting isolated microgrids). In this case, network connection control systems are also installed to manage network interactions, frequency control and island operations.

Energy sharing

The concept of ‘sharing’ of energy should be clarified from the outset. Within the ECG there is no physical energy sharing (except in some special cases of isolated communities), in other words the excess energy produced by one ECG member is always fed into the distributor's network, and the other ECG member always takes energy from the distributor's network. Therefore, energy sharing is exclusively an accounting category and boils down to the netting of committed and consumed energy of all ECG members. Typically, this calculation is the responsibility of the distributor to whom the ECG only has to provide the so-called sharing key. The sharing key may be static and shall be provided in advance — where the distribution of ‘surplus’ energy is fixed or dynamic where, at the end of the billing period, all data on real production and consumption between the members of the community are provided to the ECG operator and the terms of distribution are determined.

In the previous context, the key element of trust is the establishment of a metering infrastructure based on smart meters, and a platform for the collection and processing of metering data, which, in addition to the function of reporting ECG members, will also have the function of providing metering data to the local distributor, and in cases of larger communities, possibly billing consumption and invoicing. In a further perspective, the platform can also be part of the already mentioned Peer-to-Peer systems for energy trading and connection to aggregation services. In accordance with the Electricity Market Act, unverified near real-time consumption data should be available to the final customer at no additional cost, through a standardised interface or through remote access. In order to avoid additional costs and possible different interpretations of measurement results, it is recommended to use standardised smart meters from a local distributor to which communication devices are connected via a P1 interface, i.e. Mbus protocol, depending on the manufacturer and type of advanced meter. Communication devices are intended exclusively for communication with the user interface of the meter, and data is sent from the meter to the device and further to the EZG platform where their processing and visualization is performed. In other words, the whole process is completely automated and takes place autonomously without the need for external intervention by the operator.

It is therefore completely incomprehensible to require (thus technically, the economic authors have already commented in the previous chapter) a regulator to hire “workers who perform tasks in the energy activity of organizing a citizen energy community” because it is really not clear what this person should do.

Open Networks and Transactional Systems

Open transaction network[20], in the broadest sense, refers to a network system where nodes – which may be computers, individuals or organisations – can freely join and interact without a centralised control body. This decentralised approach allows for a dynamic exchange of information and resources. Open networks are characterised by their horizontal connectivity, which facilitates unlimited and non-hierarchical interactions between nodes. It is this characteristic that distinguishes open networks in which equal and open communication prevails, from the centralised control mechanisms present in most today's platforms in the energy sector. Open transaction networks often use widely accepted protocols and standards such as Beckn protocols[21], which ensures that different nodes can communicate and collaborate seamlessly. This interoperability is essential for the collaborative potential and operational resilience of open networks.

Open networks are characterised by a set of different features that together foster a collaborative, efficient and inclusive environment and thus become essential for the development of transaction platforms within the ECG. Within the framework of the North Adriatic Energy Community, technological testing of OTM through Beckn-sandbox pointing to the great prospects and potential of development for the ECG platforms. The aim is to establish mechanisms for the control of energy flows (production and consumption), their measurement and collection by the stakeholders involved. But unfortunately, this is another example where the latest technologies are available, but HR legislation is catastrophicly lagging behind, so we currently do not have an operational EZG, let alone that rules have been defined that should be incorporated into OTN infrastructure. It remains hoped that the mentioned and other researches on which various institutions and associations are working will help legislators in adopting better laws and ordinances.

Source: World Economic Forum - Centre for Trustworthy Technology[22].

The central feature of the open network lies in its facilitation of improved cooperation. This is achieved through a decentralized structure, where each node or participant can contribute, collaborate, and even break away without the need for central control by an authority. Such a setting in itself supports a more participatory approach, allowing for a diverse range of contributions and interactions. Furthermore, open networks are characterized by their scalability and adaptability. They are designed to handle an increasing number of nodes and connections efficiently without a significant loss of performance. This scalability ensures that open networks can accommodate a wide range of applications, from small projects to large, complex systems.

Transparency is a central principle that permeates open networks. Transparency in operations and protocols fosters trust among users and stakeholders, which is essential for the effective functioning of the open network. Finally, open networks often show a certain degree of self-organization and emerging behavior. They can adapt and reconfigure in response to changes in their environment or in the behavior of their nodes, leading to innovative solutions and their organic growth.

6. CONCLUSIONS

From the analysis carried out and the results of the simulation it follows that the current legislative and institutional framework for energy communities in the Republic of Croatia is significantly disincentive to more frequent establishment of ECG. The high fees for issuing authorisations for energy activities and the ban on including medium-sized and large enterprises at least as passive members of the community result in a rational decision by the owner of the renewable energy plant to produce energy for its own needs using its own plant and with a reservation regarding its inclusion in the ECG. Also, such a customer with its own production will install a capacity plant up to the amount of its own consumption. There will be no interest in increasing capacity because higher capacity, counting on the revenues from the feed-in, will not generate greater financial benefits.

The analysis has shown that there are no significant technological barriers to the establishment of platforms that will enable the operational work of EZG, and new initiatives such as digital trust or open transaction networks guarantee that such platforms will be credible, reliable and affordable for end users.

The only organizational form of the ECG that is rational to organize is the ECG in order to protect against the risk of energy poverty, in which public bodies are targeted to achieve a negative financial impact by providing energy at lower purchase prices than the price of energy from the grid.

Therefore, it is a recommendation for policy makers regulating the establishment and operation of the ECG to allow the inclusion of medium-sized and large enterprises that could achieve with household citizens win-win state of play maximising the objective of EU public policies - increasing renewable energy sources.

[1] ClientEarth (2022) Enforcing the rights of energy communities – Overview of judicial and non-judicial mechanisms at EU and national levels, October. (https://www.clientearth.org/latest/documents/enforcing-the-rights-of-energy-communities-overview-of-judicial-and-non-judicial-mechanisms-at-eu-and-national-levels/)

[2] NN 111/21, 83/23

[3] NN 138/21, 83/23

[4] NN 44/22

[5] NN 100/22

[6] NN 38/22

[7] NN 74/14, 70/17, 98/19, 151/22

[8] NN 34/11, 125/13, 76/14, 114/18, 98/19

[9] NN 121/14, 114/22

[10] 7,500 kn / 7.5345 kn/€ = 995.42 €.

[11] The term “investment economy” should not be confused here with the indicator “economy coefficient”.

[12] The production parameter is more acceptable than the power of the plant because it also includes insolation in a certain area.