Local Electricity Communities LEC: What Potential Do They Offer for Network Operators?
With the introduction of the new electricity law, Distribution System Operators (DSOs) are gearing up to meet the requirements of the new energy strategy with innovative solutions. Local Energy Communities (LECs) are emerging as a potential way to increase citizen involvement in the production and sale of their own energy. To recap: Switzerland is committed to reducing its greenhouse gas emissions by 50% by 2030 and achieving carbon neutrality by 2050. To meet these goals, the share of renewable energy in the energy mix must increase significantly.
In October, Softcom attended ENLIT Europe, the leading trade fair and key event for network operators, energy suppliers, solution providers, and municipalities. It was the perfect place to take the pulse of the energy market and identify the trends shaping the future of energy!
What Are Local Energy Communities?
Local Electricity Communities CEL, or local energy communities, bring together individuals or entities to collaborate in the local production, consumption, and management of renewable energies such as solar, wind, or biomass. These communities, set to be introduced in Switzerland from 2026, allow for the pooling of energy resources on a local scale, such as within a municipality, using innovative technologies like batteries, smart grids, and smart meters. Through participatory business models like collective self-consumption, direct sales, or crowdfunding, CELs promote the energy transition, reduce dependence on fossil fuels, and contribute to lowering CO2 emissions, while providing economic and ecological benefits to their members.
European Approaches to LECs: Diversity and Innovation
Although the law governing energy communities will only take effect in July 2024, the concept of LECs has been evolving in Europe for several years, particularly with the liberalization of energy markets. Experiences from pioneers presented at ENLIT show that there is no one-size-fits-all model for LECs. Approaches vary significantly across countries, adapting to each nation’s legal, economic, and cultural specifics.
- Austria: Over 30,000 local communities already exist here. They stand out with forward-thinking initiatives offering innovative models that differ significantly from what Switzerland is preparing. For example, energy can be shared within families, multiple grid operators can manage a single community simultaneously, and individuals can participate in several communities at once.
- Spain: Members of LECs enjoy exemptions from certain distribution fees and taxes when consuming energy within a limited radius (generally about 2 km) of the production site.
A Participatory Workshop on LECs
In late October 2024, Softcom’s Energies Tribe organized a participatory workshop with a panel of around ten representatives from the energy sector in Western Switzerland. This high-quality panel covered the entire LEC value chain: from customer service, LEC product management, and network operations to data management and digitalization.
The workshop addressed the user experiences of several stakeholders involved in LECs: energy supply companies (ESC), Distribution System Operators (DSOs), LEC managers, and potential members interested in joining.
What Investments Are Needed to Realize High-Performance LECs?
Investments aren’t just financial—they also involve developing expertise. A key focus was placed on building a robust digital foundation to orchestrate the digital ecosystem of energy providers, such as integration platforms and data platforms. The panel highlighted the multiplier effect these tools could have on user experience and the value creation potential of LECs.
Business models are crucial to the success of LECs. For those open to new members, finding an attractive balance is essential—enabling producers to make their investments profitable while offering consumers savings. However, as LECs can set their own tariffs, some pricing instability is anticipated. This could depend on factors such as tariff policies, storage solutions for extending local consumption periods, or consumption flexibility management.
Major Challenges for LECs in Switzerland
Despite their potential, several challenges hinder the adoption and efficiency of LECs:
- Administrative Complexity: Current procedures are often too cumbersome for average users and DSOs.
- Limited Financial Benefits: Energy savings do not always offset operational costs, especially for smaller communities.
- Data Management: Secure and efficient data infrastructure is essential. Managing energy flows, sharing real-time consumption and production data, and ensuring transparency pose significant technical and financial challenges for network operators.
- Variety of Business Models: The multitude of possible models makes comparing LECs difficult. Decision-support tools for choosing the best LEC would be highly valuable.
How to Maximize the Potential of LECs?
Digital solutions play a key role in simplifying, securing, and optimizing the operations of LECs. Tools like those offered by Softcom can provide significant value in several areas:
- Process Automation: Intuitive platforms enable LEC members to easily register, manage their data, and track their energy savings without dealing with cumbersome administrative tasks.
- Real-Time Data Analysis: Real-time data management tools allow for energy flow analysis and visualization, optimizing the balance between production and consumption within the community.
- Transparency and Trust: Digital applications increase transparency, allowing each member to see the impact of their energy contribution. This transparency builds user trust and encourages more responsible consumption practices.
- Demand Optimization and Forecasting: Predictive algorithms, based on historical consumption data analysis, can help LECs anticipate demand peaks and better balance energy production and consumption.
- LEC Calculator: A digital twin or simulator for an LEC could help model different business strategies or community compositions, allowing LEC managers to determine profitability strategies and potential members to evaluate their interest in joining. Softcom is actively working on this tool.
Who Benefits Most?
The introduction of LECs involves a significant administrative burden, most of which falls on DSOs. Softcom offers solutions to make these innovations accessible and secure. By leveraging technologies such as cloud computing and AI for demand forecasting, Softcom enables LECs to maximize their efficiency while reducing administrative and technical barriers.
The new energy law suggests that, given the decreasing feed-in tariffs, DSOs should transfer the valuation of surplus energy to producers, who will need to find new ways to make their investments profitable. The law also encourages the creation of LECs or virtual renewable energy pooling (RCP), which will require increasingly skilled professionals in this area.
Local Energy Communities offer more than an innovative energy solution. They actively contribute to the energy transition by strengthening ties between local producers and consumers and fostering a shared vision for the future of energy. With the support of powerful digital solutions like those from Softcom, LECs are well-positioned to succeed and become a cornerstone of Europe’s energy transformation.
