Renewable energy communities for sustainable cities: Economic insights into subsidies, market dynamics and benefits distribution

Abstract

Renewable energy communities (RECs) present a compelling pathway to achieving a just energy transition, particularly in regions such as Europe. Within this context, Italy stands out as a leader in REC development due to its favorable incentive policies, which support widespread adoption. The advancement of RECs requires robust quantitative analyses to illustrate the equitable distribution of economic benefits between prosumers and consumers. This paper presents an economic evaluation of photovoltaic (PV) systems within residential RECs, contributing to the development of sustainable and green urban environments. Using the discounted cash flow method with net present value (NPV) as the primary indicator, the research evaluates various scenarios influenced by subsidies and market dynamics. The findings reveal that PV-based RECs represent highly profitable investments characterized by low economic risk. The NPVs per kW range from €2042–5148 in low-market scenarios and €3347–8195 in high-market scenarios. For RECs comprising four prosumers, the distribution of benefits varies between 15 and 35 %. Additionally, the study introduces two innovative profit-sharing models among renewable self-consumers (RSCs). The first model incentivizes energy-conscious consumption by offering lower trading prices within the REC, while the second model prioritizes energy equity by providing greater support to lower-income households. Both models result in an 18–30 % reduction that encourages prosumer participation, irrespective of individual consumption patterns. Furthermore, the inclusion of consumers alters the distribution of benefits, reinforcing the role played by RECs in fostering socially inclusive energy systems. Ultimately, the economic viability of PV systems within RECs underscores their critical role in advancing energy-sustainable urban development. By simultaneously enhancing environmental resilience and promoting social equity, RECs may serve as a foundational element in the transition towards a greener and more equitable energy future. • PV plants within RECs have high returns and low levels of risk • Two innovative Profit Distribution Models are proposed in this study • These models promote energy-efficient behaviors and address income inequality • Sustainable cities can be enhanced by the presence of renewable energy plants • The development of RECs is a vital tool for SDGs 7 and 11

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