PV Energy Communities in Residential Apartments: Technical Capacities and Economic Viability

Abstract

The Baltic countries are exploring diverse ways to achieve renewable energy objectives, with a particular emphasis on utilizing photovoltaic (PV) technologies in urban areas. Despite the northerly geographical location, PV energy has proven effective, particularly in individual households under the net metering scheme. Energy communities (EC) in urban areas have the potential to support sustainable energy transition by promoting local generation and increasing resilience. However, the broader adoption of rooftop PV systems faces numerous challenges, including technical limitations and legislative gaps. This study examines challenges encountered by community energy projects in residential apartments through a case study in the Latvian context. The paper provides a comparative analysis of PV community implementation scenarios across the three types of typical apartment buildings. The study demonstrates a number of fundamental obstacles that hamper the development of ECs in apartment buildings. The results indicate that the economic benefits of ECs largely depend on electricity market price, and that selection of optimal community design is the key aspect for minimizing investment risks amid market and legislative uncertainty. Results indicate that individual households may have limited motivation to form ECs under current policies. Finally, the insights provided help shape suggestions for future research.

1. Introduction

Due to its considerable hydropower resources, Latvia stands out as one of the European Union (EU) leaders in renewable electricity generation [1]. However, the potential of wind and solar electricity generation remains untapped due to unfavorable regulations, particularly related to supports for energy communities (ECs), as well as adverse societal attitudes [2,3]. A positive development occurred in August 2022 when the Latvian Energy Law [4] was amended, incorporating the definition and general operating principles of ECs. The regulation entered into force on 1 January 2023. Additional rules are being developed at the moment. It is expected that these will encourage the growth of solar and wind generation in Latvia.

The recent Energy Law [4] amendments in Latvia allow an EC to be an association, foundation, cooperative society, partnership, capital company, or another civil legal company where members or shareholders are united by similar economic, societal, or environmental goals. Members or shareholders of an EC may be natural persons, small and medium enterprises, local governments, and other public entities. Actively engaged in the production and consumption of renewable electricity for their own needs rather than profit, the community focuses on minimizing energy costs by obtaining energy from renewable energy sources (RES). Other common activities can include supply, exchange, selling, and storage of electricity along with the provision of different services such as demand response, electro-mobility, energy efficiency initiatives, and other related energy services [5,6]. Open and voluntary participation, prioritizing a citizen-centric and democratic approach, is a critical aspect that distinguishes ECs from other alternatives such as individual personal consumption and commercial projects [7]. Geographically, an EC can be envisioned as a city block or other geographical neighborhood where local energy solutions are provided.

Regardless of which configuration is adopted, ensuring fair participation and sharing of resources for all community members might be challenging, and energy-sharing mechanisms should be carefully evaluated to ensure savings [8], fair distribution of benefits [9], consumer participation [10], and social acceptance [11]. Furthermore, these shall be easy to understand, computationally feasible, and designed to incentivize members to act in a way that benefits the entire community [12]. While there is extensive literature on the peer-to-peer community business model, most ECs in Europe operate under virtual net metering [9], which is also the case for ECs in apartment buildings. While selecting the appropriate sharing mechanism depends on priorities—benefiting those who finance ECs, maximizing self-consumption, or supporting vulnerable consumers [9]—taking into account interests of residents-owners, landlords, tenants, and housing companies in apartment buildings remains a challenge [10].

Furthermore, in a broader context, there is a risk that other actors—such as local authorities [13], vulnerable households [13], outside consumers [14], and distribution system operators (DSOs) [14,15]—may face costs or other unintended negative consequences. The impact of electricity sharing on the distribution system depends on the operational scale, local energy management system, spatial configuration of communities, and interaction with grid constraints [15,16].

In Europe, experience with energy cooperatives has been growing since the 1970s [17]; for example, historical examples of energy cooperatives can be found in the rural mountain valleys in Spain and Italy [18,19]. However, their diverse organizational forms and operating principles [18], guided by national regulations, do not always clearly align with the broad scope and ambition of the Clean Energy Package, especially as EU countries are at different stages in transposing EU legislation, as seen in [20,21,22]. Furthermore, EU legislation provides a substantial room for Member States to design tailored definitions and support measures of ECs [23]. Thus, transposing it requires the consistent development of detailed national frameworks rather than simply copying generic EU regulations, as unclear national rules hinder the deployment of ECs [24]. These frameworks have to include a variety of aspects, including authorization procedures, incentives and new market activities [19].

There is strong evidence in the literature that availability of support schemes [18,19] and existing grid tariff structures [6,25] significantly influence the formation of EC. Other significant barriers to establishing ECs include high initial investment costs [26], difficulties in securing new connection contracts due to limited transformer capacity [26], high grid connection costs [27], challenges to access finance and raise sufficient capital [27], poor cooperation with local authorities [27], and difficulties in encouraging consumer engagement and adoption [27].

Therefore, in all EU member states, the improvement of regulation for various operating models and technological possibilities of energy communities remains relevant [22]. Experience from more advanced countries suggests that key areas for improving the EC ecosystem include increasing grid flexibility, facilitating market access for ECs, reforming tax policies to better reflect the value of flexibility, and promoting user diversity to enhance self-consumption and adaptability [28].

2. Background and Research Objectives

2.1. Experiences with PV Sharing in Residential Communities

Widespread adoption of distributed PV contributes to a sustainable energy system by potentially lowering EU energy system costs, reducing the need for distribution grid reinforcement primarily due to decreased demand peaks, and enhancing energy self-sufficiency across European regions [29]. In urban areas, community energy projects allow a much larger group of people to come together, primarily for installing solar panels in locations where a single individual might face limitations, for example, on the roof of an apartment building or other available surfaces, such as municipality buildings and parking lots.

The potential of rooftop PV systems is significant, as demonstrated by various studies. The methodology developed in [30] estimates that nearly 25% of the current EU electricity consumption could be supplied by rooftop PV systems. Furthermore, multiple studies confirm that large-scale community projects with PV sharing beyond building boundaries significantly contribute to widescale PV adoption in cities and thus to the sustainable energy transition by increasing profitability of implementing optimally sized PV systems [31], making policies like investment subsidies more efficient [32] and building trust in this novel concept [32]. Nevertheless, deployment of PV communities in residential apartments still significantly lags behind other residential deployment despite the potential of load aggregation and possible positive economic benefits for the members when they cooperate.

While there is extensive literature on PV systems, specific research focused on their implementation in residential apartments remains limited. Analysis of the available experiences highlights the technical complexity and regulatory constraints associated with implementing PV systems in such settings.

The authors of [33] investigated the financial viability of PV systems in two apartment buildings in Finland by analyzing hourly consumption data and incorporating simulated PV production with electricity market prices. The authors focused on the impact of transition to new virtual net-metering model, also known as the credit calculation model. In Finland, electricity metering in apartment buildings typically involves measuring the electricity consumption of each apartment with individual meters and measuring common consumption at a shared point of use, both provided by DSO. Since then, it has been possible to connect community PV array to a shared point of use for covering common needs. The virtual net-metering model allows for the distribution of the PV-produced electricity exceeding common consumption among the individual households based on a declared distribution ratio, whereas surplus electricity not consumed within the property can be sold at prevailing market price. The results of the study confirm the advantages of virtual net metering. Moreover, the study explores the situation when commercial metering is implemented through a single collective electricity contract. This allows customers to benefit from lower DSO fees. The authors conclude that new tariffs tailored to the specific needs of energy communities should be investigated.

The paper [34] discusses how Norway’s regulation works against energy communities in apartment dwellings, resulting in few multi-apartment buildings that produce their own electricity. Housing cooperatives, serving as legal entities for ECs, are co-owned by apartment owners, with decisions made through majority voting. The study highlights that the current policy mix for solar PV poses significant barriers for establishing ECs in residential apartments, preventing jointly acting self-consumers from net metering of their self-produced electricity and lacking dedicated support schemes.

The authors of [35] compare two self-consumption methods in apartment buildings in Italy: the Virtual Regulatory Model approved by the Italian regulator, and the Power Sharing model, which is not regulated in Italy. The PS model allows shared energy among end-users unidirectionally through the realization of a private grid (here, a DC grid). On the other hand, the MRV model necessitates that energy must flow through the public grid as virtual self-consumption. To support the Virtual Regulatory Model, Italian authorities have decided to provide economic rewards. The community representative distributes the reward (total remuneration) among the EC participants based on the EC’s internal regulations, usually considering monthly consumption. From an energy perspective, the PS model leads to slightly more energy to be shared between users by avoiding network and double inverter conversion losses. Economically, the Virtual Regulatory Model is better than PS only because it has the advantage of receiving a higher annual remuneration incentive. The long-term support for such incentives is not guaranteed.

The paper [36] analyses the profitability of using shared, nonsubsidized rooftop PV systems with and without storage in multiapartment buildings in Austria compared to those in Germany. The authors developed an optimization model for optimal dimensioning of PV systems and energy storage facilities considering different end user objectives, ranging from minimizing annual electricity costs to maximizing self-consumption. A multi-objective optimization model was developed for a relatively small apartment building consisting of ten residential units. Furthermore, the authors address the relation of tenants and landlords. The results show that the profitability of shared use of nonsubsidized PV systems strongly depends on the retail electricity price.

Our research aims to shed light on these issues, providing a clearer understanding of the challenges and opportunities for PV community energy projects in residential apartments.

2.2. Situation in Latvia

In Latvia, the total PV generation capacity in the distribution system reached 370 MW in March 2024, including 165 MW of microgeneration [37]. Approximately 95% of microgeneration is owned by private persons [37]. So, while solar PV technology has established itself as a widely adopted solution for individual households, the option of establishing ECs in Latvia is underused. In Latvia, 62.9% of households are apartments or flats in buildings with 10 or more dwellings [38]. At the same time, apartment buildings are only rarely equipped with PV systems.

Until 2024, individual prosumers in Latvia were permitted to use a net metering system for electricity accounting. Under the net metering system, the electricity supplier tracks the amount of electricity both transferred to and received from the power grid. When a household transfers electricity to the grid, the corresponding amount is credited to the next billing period. As of 1 May 2024, households with newly built solar panel systems can no longer participate in the former net metering system, while those already included in the system can continue to use it until the end of February 2029.

Amendments in the Electricity Market Law [39] mean that from 1 May 2024, the new net settlement system is available to both households and legal entities that produce electricity using RES and where the total permitted production capacity of electricity production equipment does not exceed 999.99 kW. In the net settlement system, both the amount of electricity produced by the active customer and transferred to the network, as well as received from the network, are expressed in monetary terms. If the total value of the electricity transferred to the network is greater than the value of the electricity received from the network, the difference in monetary terms can be used for electricity payments in other customer electricity connections, while the extra can be accumulated for future months’ payments.

The net settlement system is administered, and offers are made by electricity traders. According to [39], an electricity trader is a merchant the commercial activity of which is trade in electricity, including provision of the aggregator’s services. To join net settlement systems, the active customer has to sign a contract with an electricity trader. A significant advantage of the approach in Latvia is that prosumers can produce electricity in one place (summer house) and use it in another place (apartment) if all the customer’s accounts are serviced by one electricity trader and one system operator. This situation is quite likely, as the biggest Distribution System Operator (DSO) in Latvia (i.e., JSC “Sadales tīkls”) in 2022 was covering around 99% of the whole territory of the country [40].

2.3. Research Objectives

This study aimed to evaluate the establishment of PV communities in residential apartments in Latvia by answering the following research questions:

• What are the technical options and limitations in establishing PV communities in typical apartment buildings?
• What are the economic effects from consumers’ perspectives of changes in legislation, i.e., the transition from net metering to net settlement?
• How economically viable are PV communities in typical apartment buildings?
• How does electricity market price affect the economic benefits of PV communities in typical apartment buildings for the PV community members?

Our novel contribution is to shed light on the authentic situation in a typical metropolitan area in the Baltic region, where the city landscape incorporates a mix of old and new residential apartment houses, each type having a distinct electric connection scheme, management practice, and available roof space. Our research also aims to explore how these factors interact with policy changes, such as shifts in market models. The findings are useful for those who are estimating the economic viability of EC projects in residential apartments in Baltic countries and other countries that share similar urban realities as described in this paper.

3. Materials and Methods

We propose a case study approach and developed a set of scenarios for real-world configurations of apartment buildings in Latvia using regional tools and data. We describe three different multi-apartment building types and three scenarios for participation in an EC.

3.1. General Description of Case Studies

The Baltic States have made notable efforts in enhancing their building stock. In Latvia, 95% of apartment buildings were built before 1992 [41]. From 1944 until 1991, all three Baltic countries were part of the USSR, resulting in architecture based on standard designs. In cities, most buildings initially had five stories, later increasing to nine. However, there has been a positive trend towards the construction of newer, more energy-efficient apartment buildings and townhouses. Therefore, for this study, we have chosen three different multi-apartment building types: old, new, and townhouse, that capture the essence of the Baltic region’s architectural landscape. These three types reflect different energy efficiency levels, structural characteristics, and technical specifics of electricity connections relevant to EC integration. More details are presented in Figure 1.

Moreover, in terms of economic analysis, we considered varying involvement levels for all building types in the EC, assuming an equal level of participation per apartment. Three participation levels were chosen to reflect varying degrees of consumer engagement, ranging from low adoption to full participation:

• Scenario 1 corresponds to the participation of 25% of the units;
• Scenario 2 corresponds to the participation of 50% of the units;
• Scenario 3 corresponds to 100% when all units invest in the PV system.

3.2. RES Connection Options and Technical Limitations in Typical Apartment Buildings

This section analyzes potential solutions for distributing the renewable electricity produced by the community among its members. The selected approach significantly depends on community design, including both technical capabilities and business considerations.

Case 1: The first case study explores the situation in old apartment buildings. The situation in this kind of building is not as favorable as in the other apartment building types. The main issue is that the electricity meters for each apartment are installed in the stairwells or apartments. It is not possible to connect the community RES generation to its individual members’ apartment units because the existing power supply riser scheme with branches is already fully used. Under the current legislation, the RES connection is only possible via a commercial meter (a commercial meter complies with commercial billing standards and is installed and owned by the DSO), and only if this meter is installed in the main switchboard, close to the border of the building unit and service with the DSO. The connection scheme is shown in Figure 2.

Case 2: The second case study is based on new apartment buildings. Currently, a popular technical solution for electricity supply includes having one common commercial electricity meter at the entrance of the building and a common engineering network behind this electricity meter with distinct ownership boundaries. This means that each apartment pays for their consumed electricity to the building manager, not to the electricity trader, including payment for connection. While this solution allows the building manager to obtain the most favorable tariff for the entire group of consumers, the main drawback is the individual consumer’s control of payment. If someone fails to pay for the consumed electricity, the manager divides the difference between all other consumers in the building.

At the boundary of the property, there is a common point of connection and commercial accounting where the supplied energy is recorded. According to the recorded electricity consumption, the electricity trader issues an invoice to the building manager, who, in turn, issues individual invoices for each apartment using control (non-commercial) meter readings. The connection scheme is shown in Figure 3.

Case 3: The third case explores the installation of PV panels on townhouses. Each apartment has its own separate metering for billing purposes, installed in the common multi-apartment accounting section. This technical solution is very favorable for connecting RES to each apartment individually. In addition, the EC can install its own RES by connecting it to the common load electricity meter, significantly reducing bills for electricity consumed in common areas (elevator, lighting, pumping stations, etc.). The connection scheme for townhouses is shown in Figure 4.

3.3. Consumption Profiles

An electricity consumption or load profile is the pattern or expected electricity usage for a customer segment of the electricity supply market at some specified time resolution, such as kW per half-hour. Understanding the load profile helps system operators to anticipate demand, as well as to design and manage the electrical network. There are many approaches to generating reference or standard load profiles [41]. For this study, load profile with one-hour resolution was taken from an anonymized dataset provided by the Latvian DSO [42]. The load profiles for one month can be seen in Figure 5.

Moreover, for Case 3 (Townhouse), an additional auxiliary load profile called “Common electricity” was considered. In these types of buildings, the space heating is provided by a ground source heat pump and a boiler for water heating. Those common costs are shared among the residents of the townhouse. Heating costs for the apartments are distributed proportionally based on the size of each apartment, while the costs for heating water are calculated according to hot water consumption. For the calculations, we used average load, i.e., divided the total common load by the number of apartments.

3.4. Generation Profiles

Generation profiles were obtained from on-line service described in [8], which helps to calculate possible installed power of PV system size and the expected energy generation based on the address. The service is provided by the company “Enefit” [43], the subsidiary of the main Estonian Energy Provider “Eesti Energia”. The Enefit server is linked with the Estonian Land Board to take data on the building and available roof space. A 3D model is provided to propose the installation surface taking into account the direction of PV panels, which are south-oriented. Based on the selection, the service calculates estimates of the possible number of panels, capacity, annual generation, installation costs, and payback period. This allows a high-quality estimate of the PV production in Latvia. Researchers have found that other tools such as PV-GIS based on reanalysis models may over-estimate PV production in countries at northerly latitudes [44].

The total yearly production data have to be downscaled and spread to a one-hour time resolution to accurately link production with electricity market prices. A generation curve with one-hour step for each PV system was obtained using real measured generated energy E₆₀₀ for PV installation of 600 kW in Riga and annual generated power, where P_i is the electricity power (MW) in hour i with hourly time steps δt over the year:

$$E_{600}={\sum }_{i=1}^{8760}{P}_i\Delta t=711.447 \mathrm{M}\mathrm{W}\mathrm{h}$$

(1)

For each of the n building types, we calculated ratio k_n based on the predicted yearly generation E_SCn estimated by Enefit’s tool [43] and the measured generation of a 600 kW PV system E₆₀₀

$$k_n={\displaystyle \raisebox{1ex}{$E_{SCn}$}\!\left/ \!\raisebox{-1ex}{$E_{600} $}\right.}; \forall n=1,2,3$$

(2)

and accordingly, the total yearly energy generation for each building type:

$$E_n={\sum }_{i=1}^{8760}{k}_n{P}_i\Delta t ;\forall n=1,2,3$$

(3)

Since solar irradiation levels in Estonia and Latvia are very similar [45], we assume that this method of defining generation profiles is a reasonable approach for the study case for Latvia. The main parameters for selected types of buildings and their PV systems are presented in

Table 1. Main parameters for the identified cases.

	Case 1: Old Building	Case 2: New Building	Case 3: Townhouse
Apartment number	144	120	12
Number of PV panels	223	90	134
Capacity of PV panels, kW	101.46	40.95	60.97
Capacity per apartment, kW	0.7	0.35	5.08
Estimated yearly consumption, MWh	181.9	297.8	70.5
Estimated yearly generation, MWh	85.73	34.68	52.78
Installation costs, EUR	70,200.00	31,300.00	43,900.00

.

3.5. Methodology for Economic Analysis

First, we estimated annual energy balance and costs per EC member. At the end of each month, the energy balance (E_i) in month i is calculated as follows:

$$E_i={Pg}_i-{Pl}_i+E_{i-1} \forall i=1,\dots ,12$$

(4)

where

• Pg_i—active power generated during i-th month;
• Pl_i—active power consumed during i-th month.

Connection to the grid incurs a fixed payment per month, which depends on the nominal current of the main fuse [46]. There are two variable cost components: electricity consumed is charged at 2023 Nord Pool hourly electricity market price with no adjustment made, and DSO tariffs are charged for every kWh [39]. Revenue is accrued by selling excess electricity at a 2023 Nord Pool hourly electricity market price with no adjustment made [46].

Further considerations include costs for installation, costs for connection to the grid, and the total variable costs described above for period of 15 years. Depending on the scenario, those costs are equally shared between the number of ECs members. Moreover, in Scenario SC 3.25, the participating customers need to increase a main fuse from 16 A to 32 A, and those costs are also included in the installation costs.

We estimated the EC members’ benefits compered to baseline scenarios without PV and Net Present Value (NPV) for 15 years of service, and NPV is calculated as follows:

$$NPV={\sum }_{t=1}^{15}{\displaystyle \frac{{CF}_t}{{\left(1+r\right)}^t}}-Inital Investment$$

(5)

where

• ${CF}_t$—cash flow in the year t, i.e., consumer benefits compared to no PV scenario;
• t—year;
• r—discount rate.

Information on the discount rate was taken from the Ministry of Finance of Latvia for planning of energy related projects, and corresponded to 9.79% [47].

We considered 15 years as a reasonable timeframe as it represents a more practical period for financial planning, as technological advancements and market conditions are likely to shift, making log-term projections less reliable. Since PV system performance degradation occurs over time, focusing on the first 15 years offers a clearer picture of benefits during the most productive years. However, we acknowledge that PV systems might continue operation and offer benefits for EC members beyond this period.

To analyze the impact of electricity prices, we estimated cumulative annual costs, cumulative 15-year service costs, and NPV for all scenarios, additionally considering 2021 and 2022 Nord Pool prices. For simplicity, we applied the 2021 and 2022 prices uniformly over the entire 15-year period.

4. Results

Our study provides comprehensive insights into the technical and economic limitations of establishing ECs in typical apartment buildings. These findings are detailed and discussed in the following subsections answering our research questions.

4.1. Technical Options for Establishing ECs in Typical Residential Apartments

Establishing a PV community is much more complicated in Cases 1 (Old building) than Case 2 (New building). In Case 1, the only way to have a PV array connection that does not require significant network updates is by connecting the RES to commercial metering for the common load. In Case 2, it is possible to connect the RES to the main busbars of low-voltage switchgear after the main commercial meter. In Case 2, typically community members agree on the distribution and settlement of RES, extending the already existing mutual settlement system. When initiating the PV project, members of the EC must collectively agree on how to distribute the produced electricity. The building manager gathers information for monthly billing, considering the amount of electricity produced and consumed.

Optimal conditions for the project would occur if all community members contribute an equal amount of investment to the RES project and all own apartments of the same size. The PV generation should primarily cover common load (elevators, water and hitting pumps, lighting systems inside and outside, automatic gates, ramp hitting, security systems, etc.). The remaining surplus can be divided proportionally among community members, reducing their monthly bills. Also, any excess electricity produced and not immediately consumed can be sold to a trader, reducing monthly bills for the revenues obtained. The amount of sold electricity fixed for every hour and its accumulation, expressed in monetary terms, is credited to the next billing period (the billing period is one month) within the total period 12 calendar months.

The most convenient way to distribute the benefits of the community project is to materialize the value of the produced energy within a month and distribute this value among the project involved members in proportions they have agreed upon. One more plus is that one should pay the DSO only for electricity consumption through the common metering. This means that the produced RES energy can be distributed between EC members without additional payment, using the electrical networks inside the building.

In Case 3 (Townhouse), the technical solution with individual commercial metering and direct connection to individual metering is technically the simplest and most beneficial method for establishing the EC.

Before implementing the project, community members must agree on the principles of the distribution of the generated electricity. An option is to distribute the PV-generated electricity according to the level of financial contribution of each member. However, EC members who consume a neighbor’s excess PV generation use the DSO metering system and must pay a DSO tariff [46].

Having described RES connection options and technical limitations for the identified case studies, we next assessed the feasibility of ECs in residential apartments considering the effects of legislation shift and evaluated the economic viability of such settings.

4.2. Evaluating the Impact of Transitioning from Net Metering to Net Settlement System

First, the energy balance per EC member was calculated for all scenarios based on the consumption and generation profiles described in Section 3.3 and Section 3.4. The graphs for the scenarios in Cases 1 to 3 are illustrated in Figure 6, Figure 7 and Figure 8, respectively.

It is evident that in Cases 1 and 2, when each participant contributes only a small share of generation (up to 2 kW), they do not accumulate a surplus of kilowatt-hours (kWh). Only for Scenario SC 1.25 did the results indicate that with 25% participation of residents, the annual balance per EC member is positive at 961 kWh. Similarly, minor positive annual energy balance is observed in Scenario SC 3.50. In Scenario SC 3.25, there is a significant energy surplus.

Next, we calculated the annual costs based on the 2023 Nord Pool hourly electricity market price with no adjustments made for all building types in three scenarios with PV and an additional baseline scenario without PV, as presented in Figure 9, Figure 10 and Figure 11.

In scenarios SC 1.25 and SC 3.50, community members with a small positive energy balance do not fully offset their electricity bills and continue to experience costs. This situation can be explained by electricity price time of day variations. There are two highest price peaks in the morning and evening, where PV production is lower and community members might be forced to buy electricity at a higher price than they previously sold. With more generation and fewer participants as in Scenario SC 3.25, switching from net metering to a net settlement system results in negative annual costs, meaning the EC can generate profit. However, there is a legislative uncertainty on this matter: on the one hand, ECs are not allowed to make profit, and on the other hand, they are allowed to reinvest the excess funds on improving energy efficiency [4]. The exact mechanism for this, however, has not yet been clearly defined.

4.3. Evaluating the Economic Viability of ECs in Typical Apartment Buildings

To access the economic viability of ECs in residential apartments for each scenario, we calculated payments for electricity based on 2023 Nord Pool prices and potential income from generation over a 15-year period, including initial PV installation costs and payment for main fuses upgrade if necessary. The results are presented in Figure 12, Figure 13 and Figure 14.

Figure 14 for Case 3 (Townhouse) incorporates two lines for 25% participation. SC 3.25 depicts the situation when profits from selling excess electricity are disregarded and cumulative costs are equal to the initial investment. In this situation, the total 15-year costs are nearly the same as in the baseline no-PV scenario, with a payback period exceeding 15 years, making it an unviable investment. The second line, titled SC 3.25 (profit), depicts a situation where the excess monetary value is used in some way to benefit the community member. However, identifying a suitable way to allocate this benefit that satisfies all EC members can be quite challenging. Legal uncertainty complicates this process even more. This clearly highlights the importance of selecting an optimal EC configuration that enables savings on electricity bills without generating profit.

Table 2. Economic feasibility analysis.

Scenario	Initial Investment per EC Member, EUR	Cumulative 15-Year Costs per EC Member, EUR	Potential Benefit per EC Member Compared with No PV Scenario, EUR	NPV, EUR
SC 1 no PV	0	4743.48	-	-
SC 1.25	1950.00	3669.11	1074.36	−397.87
SC 1.50	975.00	4206.30	537.18	−198.94
SC 1.100	487.50	4474.89	268.59	−99.47
SC 2 no PV	0	7074.00	-	-
SC 2.25	1043.33	6649.20	424.80	−289.88
SC 2.50	521.67	6861.59	212.41	−144.94
SC 2.100	260.83	6967.79	106.21	−72.47
SC 3 no PV	0	14,901.39	-	-
SC 3.25	15,313.17	15,313.17	−411.78	−7665.65
SC 3.25 (profit)	15,313.17	7871.04	7030.35	−3846.28
SC 3.50	7996.51	11,726.13	3175.26	−2263.06
SC 3.100	4338.17	13,653.68	1247.71	−1471.45

summarizes the key findings of our analysis and also includes data on the calculated NPV. Potential benefit per member represents savings on electricity bill. SC 3.100 is the most beneficial scenario based on the NPV assessment, whereas SC 2.5 represents the worst option.

4.4. Sensitivity Analysis—How Electricity Market Price Affects the Economic Benefits

Our final research question asks how electricity market price affects the economic benefits of PV communities in typical apartment buildings for the PV community members. For example, if we consider prices from the year 2022, which was famous for its abnormal prices in Nord Pool in Baltic countries (for Latvia, the maximum price was recorded as 4000 EUR/MWh, while the average price was 226.91 EUR/MWh), we can observe very different results. In such scenarios, the prospects for EC members appear much more favorable. Firstly, we calculated annual costs for all scenarios based on 2021 and 2022 Nord Pool prices, similar to the method described earlier for 2023.

Then, we evaluated the total costs over the 15-year period considering initial investments. Notably, the final results for cost calculations after 15 years of service of installed PV systems vary significantly for the year 2022 (see Appendix A Figure A1, Figure A2 and Figure A3). As for the payback period, it is significantly reduced if the electricity price is high as it was in 2022. This trend is true for all scenarios.

Table A1. The effect of electricity price on the economic performance of PV communities.

	Year (Average Price, EUR/MWh)	2021 (88.77 EUR)	2022 (226.91 EUR)	2023, (93.89 EUR)
Scenario
The total costs per EC memeber after 15 years, EUR
SC 1.25		3709.35	1950.00	3669.11
SC 1.25 profit		-	678.70	-
SC 1.50		4180.16	4203.18	4206.30
SC 1.100		4415.56	5965.92	4474.89
SC 2 no PV		7057.13	12,074.54	7074.00
SC 2.25		6696.79	8748.52	6649.20
SC 2.50		6876.96	10,411.53	6861.59
SC 2.100		6967.04	11,243.03	6967.79
SC 3 no PV		14,301.47	31,270.96	14,901.39
SC 3.25		15,313.17	15,313.17	15,313.17
SC 3.25 profit		8251.86	−19,913.58	7871.04
SC 3.50		11,616.59	7996.51	11,726.13
SC 3.50 profit		-	6018.61	-
SC 3.100		13,298.95	18,984.70	13,653.68
The potential benefit per member compared with no PV scenario, EUR
SC 1.25		941.61	5778.66	1073.89
SC 1.25 profit		-	7050.96	-
SC 1.50		470.80	3525.48	537.18
SC 1.100		235.40	1762.74	269.59
SC 2.25		360.34	3326.02	424.80
SC 2.50		180.17	1663.01	212.41
SC 2.100		90.09	831.51	106.21
SC 3.25		−1011.70	15,957.79	−411.78
SC 3.25 profit		6049.61	51,184.53	7030.35
SC 3.50		2684.88	23,274.38	3175.26
SC 3.50 profit		-	25,252.34	-
SC 3.100		1002.52	12,286.26	1247.71
NPV, EUR
SC 1.25		−466.00	2016.41	−397.87
SC 1.25 profit		-	2669.37	-
SC 1.50		−233.00	1334.68	−198.94
SC 1.100		−116.50	667.34	−99.47
SC 2.25		−322.95	1199.05	−289.88
SC 2.50		−161.48	599.53	−144.94
SC 2.100		−80.74	299.76	−72.47
SC 3.25		−7973.53	735.35	−7665.65
SC 3.25 profit		−4349.61	18,814.02	−3846.28
SC 3.50		−2514.73	8052.02	−2263.06
SC 3.50 profit		-	9067.09	-
SC 3.100		−1597.28	4193.62	−1471.45

in Appendix A summarizes the key findings of our analysis for three years (2021, 2022, 2023) characterized by different electricity market price levels. It offers a clear comparison of ECs’ financial performance in terms of costs, benefits, and overall profitability. Generally, higher electricity prices are the key factor for the economic viability of ECs. However, selecting the optimal configuration of community in uncertain market and legislative conditions is crucial. For instance, according to our NPV calculations, scenarios SC 3.25, SC 3.50, and SC 3.100 could be attractive and profitable under certain conditions, such as high electricity prices and the ability to utilize excess profits. Meanwhile, scenarios SC 1.100 and SC 2.100 are less profitable in high-electricity-price situations but present lower risk in the situations with low prices. It should also be noted that the evaluation of economic performance is sensitive to selected discount rates.

5. Discussion and Conclusions

ECs have untapped potential to lead energy system transformation from a fossil-based centralized model to a sustainable citizen-centered renewable-based decentralized system. Therefore, ensuring the economic viability of PV communities is crucial, as it directly influences consumer participation and social acceptance [7,48]. This study offers specific insights into the technical and economic challenges of implementing PV communities in residential apartments, focusing on the particular barriers that hinder successful EC deployment in Latvia. The findings provide practical applications in the field and foundations for future research.

In response to research question 1, what the technical options and limitations in establishing PV communities in typical apartment buildings are, we observed a number of technical constraints that make establishing ECs and calculation of benefits from PV generation challenging in both old and new apartment buildings. In contrast, in townhouses, the electrical scheme is well-suited for PV connection, requiring only an upgrade to the main fuse. Each EC member in a Townhouse is directly connected to their own portion of the PV system, making accounting straightforward and transparent.

Regarding research question 2, what the economic effects from consumers’ perspectives of changes in legislation are, we note that the transition to a net settlement system allows prosumers to formally unite as EC, while a net metering system can be used only by natural persons until the end of February 2029. Our analysis revealed that the transition to net settlement system can negatively affect prosumer potential benefits.

In an attempt to evaluate the economic viability of PV communities in residential apartment buildings, through research question 3 on how economically viable PV communities in typical apartment buildings are, we found that the typical payback period is around 10 years in all scenarios considering 2023-year electricity prices, and the benefits, such as reductions in electricity bills, are relatively small. NPV calculations reveal significant uncertainty regarding the long-term profitability of ECs in residential apartments. This provides limited motivation for residents to organize themselves into ECs unless targeted incentives are in place. This emphasizes the need for stable policy frameworks that can mitigate market price uncertainty and promote investment in shared PV over long-term planning horizons.

Focusing on research question 4, how electricity market price affects the economic benefits of PV communities in typical apartment buildings for the PV community members, our results confirmed that the log-term viability of PV communities heavily depends on electricity market prices. Similar findings have been indicated by other authors, highlighting that fluctuating market conditions significantly influence the economic viability of ECs [36]. Then, the payback periods mostly depend on electricity market prices rather than on the EC participation scenario. Meanwhile, there is substantial evidence that selecting the optimal configuration is key to minimizing risks caused by price variations. Our findings indicated that determining the optimal size of the community, when members achieve benefit in electricity cost savings but do not make a profit, is important for ensuring overall profitability of investment in circumstances with uncertainty regarding utilizing excess profits.

In summary, townhouses are the most suited apartment type for PV connection and energy communities. The net settlement rule is less favorable for prosumers and ECs so may act as a discouraging factor, as may wariness about energy price volatility and policy supports over the EC planning horizon.

The research has its limitations that need to be acknowledged. Firstly, the authors considered electricity consumption for common load only in Case 3 (Townhouse). In Case 1 (Old building) and Case 2 (New building), common electricity consumption was not included when defining consumption profiles. However, this does not significantly affect the results. Another limitation is that maintenance costs and PV panel degradation are not included in the analysis, which might slightly affect the results. However, this impact is minimal since the analysis only covers a 15-year period, which is well within the typical productive lifespan of PV panels.

This study is highly relevant for the development of ECs in residential apartments, primarily in Latvia. However, the results can be useful for other regions with similar urban realities.

Based on this study, the following recommendations for future work can be made:

• Designing practical strategies for selecting the optimal configuration of ECs;
• Estimating the contribution of taxes, levies, and grid tariffs on the profitability of ECs and design of tailored tariff schemes;
• Exploring consumer motivations for participating in energy communities (ECs) driven by environmental concerns rather than financial gain.