Advancing Photovoltaic Transition: Exploring Policy Frameworks for Renewable Energy Communities

Abstract

In the decarbonization process, the solar energy sector will play a crucial role, representing one of the key technologies for reducing greenhouse gas emissions. In Italy, photovoltaics stands out as the fastest-growing energy sector, thanks to the combination of favorable climatic conditions, supportive policies, and a growing interest in renewable energy sources. In this context, renewable energy communities (RECs) emerge as potential strategic tools for promoting the development of photovoltaics nationally and at the European level. Therefore, this study aims to examine the policy and regulatory frameworks governing RECs in Europe and Italy, highlighting their impact on the establishment, operation, and evolution of these communities. Through a critical analysis of legislative documents at both the European and national levels, this research identifies the key factors shaping the growth and functionality of RECs, such as governance structures, economic incentives, and social inclusivity. This study underscores the dual influence of comprehensive regulation and a certain degree of flexibility in fostering RECs’ adaptability to diverse contexts. Additionally, it identifies existing challenges, including regional implementation disparities, legal ambiguities, and potential conflicts with other renewable energy policies. The findings contribute to the ongoing discourse on decentralized energy systems, providing insights for policymakers to refine frameworks and maximize RECs’ contributions to sustainable energy transitions.

1. Introduction

The urgency to address climate change has brought unprecedented attention to the energy sector, which accounts for 77% of greenhouse gas emissions in the European Union [1]. In this global race toward decarbonization, photovoltaic (PV) systems have emerged as a cornerstone technology, particularly in countries like Italy, where the transition to renewable energy is advancing rapidly. With 95% of the country’s 69 gigawatts (GW) of renewable energy derived from small- to medium-scale PV systems across residential, commercial, and industrial sectors [2], solar energy plays a pivotal role in the nation’s energy transformation.

Recent trends reinforce the growing significance of PV systems in Italy’s energy landscape. In the past year alone, 5.23 GW of new solar capacity has been installed, 38% of which consists of small-scale systems under 12 kW [3]. Despite this impressive progress, the current installed capacity remains insufficient to meet the ambitious decarbonization targets outlined in Italy’s National Integrated Energy and Climate Plan (PNIEC) [4]. Updated projections by the Ministry of Environment and Energy Security [5] emphasize the need to reach 131 GW of renewable energy capacity by 2030, with nearly 80 GW expected to come from wind and solar energy.

Within this framework, renewable energy communities (RECs) represent a transformative strategy to bridge this gap and hold significant potential to transform the energy system and facilitate the shift towards a decentralized energy model. By enabling local energy production, fostering community participation, and optimizing the deployment of small-scale PV systems, RECs contribute not only to reducing emissions but also to expanding renewable energy capacity. The PNIEC highlights the strategic importance of RECs, setting a target of 5 GW in additional solar capacity by 2027. These communities are thus positioned as a crucial mechanism for achieving Italy’s decarbonization goals while empowering citizens and promoting local development.

In line with a broader legislative debate on renewables, recent academic works have examined not only solar but also other sources of renewable energy—such as wind, biomass, and hydro—emphasizing the critical role of supportive policy and regulatory frameworks in fostering their widespread adoption [6,7,8]. Moreover, comparative analyses have shown that many of the legislative and policy challenges encountered in solar energy deployment are mirrored in these other sectors, confirming that robust governance measures and clear regulatory pathways are essential to scale up any form of decentralized renewable energy production [9,10].

Indeed, although RECs are designed to embrace a variety of renewable energy sources, a growing number of studies discuss how the Italian framework has primarily focused on the development and integration of PV technologies. This emphasis reflects the modularity, accessibility, and increasing cost-effectiveness of PV systems, which have established them—and continue to establish them—as a cornerstone of REC initiatives [11,12]. However, for this potential to be fully realized, a supportive and comprehensive policy and regulatory framework is essential, as it (1) provides the necessary legal recognition and protection for RECs, serving as a backbone for their stability and growth, and also because (2) different combinations of regulatory inputs can produce different outputs.

The policy and regulatory framework (intended as a comprehensive set of laws, regulations, policies, and procedures that govern and facilitate the functioning of a specific sector or activity) sets the rules of the game, establishing the institutional conditions under which these communities can thrive, ensuring their effective contribution to the energy transition. It can not only facilitate or inhibit the growth of RECs but also guide their development and implementation, shaping their characteristics and operational models that can move from one “border” to another, adapting from one context to another.

For instance, it can influence the governance structures and participatory models of RECs. It can mandate (or not) inclusive decision-making processes, ensuring that all members have a voice in the community’s operation. Additionally, regulatory measures can address (or not) the economic aspects of RECs, such as tariff structures, subsidies, and tax incentives. By providing financial benefits and reducing economic barriers, regulations can make it more attractive for individuals and organizations to participate.

In light of this, the primary objective of this paper is to critically analyze the existing policy and regulatory framework governing RECs in Europe and Italy, trying to identify its crucial aspects. Drawing from elements outlined in this doctrinal analysis, this study aims to provide initial insights that may contribute to addressing the fundamental approaches necessary for undertaking decentralized energy production initiatives.

In this context, the research questions guiding this investigation are as follows:

• What are the main aspects of the regulatory and legal framework affecting the establishment and operation of RECs in Europe and Italy?
• How do these aspects affect the establishment and operation of RECs?

On this subject, the topic is well defined since, to date, all the relevant legislative acts have been approved (despite several delays). This allows for a comprehensive and up-to-date analysis that will start from the European level and move towards the national level, with some references to the sub-national dimension, expanding the analysis and results from the previous literature [11,12,13]. This approach is essential as it allows for a holistic understanding of the multi-layered regulatory environment impacting RECs.

We begin with an exploration of the supranational framework because, in the European Union, according to the hierarchy of legal sources, European legislation takes precedence over national legislation [14]. Therefore, European directives provide the overarching guidelines and objectives that Member States are expected to follow, since, unlike other types of EU legal acts such as regulations and decisions, they are not directly applicable.

Understanding the European framework will then allow us to understand whether its transposition in the Italian legislative framework reflects the objectives and principles outlined by the European Union, and how it addresses the specific needs and contexts of local RECs. Indeed, national visions must align with the needs of stakeholders at the national, regional, and local levels, complicating the process of creating a unified vision. At the same time, national policymakers are tasked with finding a balance between standardization and adaptability, ensuring that local communities have enough flexibility to customize projects according to their specific needs and preferences.

Overall, the findings of this paper contribute to the ongoing research on RECs, providing new insights into the regulatory and normative issues affecting the effective development of these communities.

The remainder of this paper is structured as follows: Section 2 outlines the materials and methods used in the analysis, detailing the data sources, research approach, and methodologies applied. Section 3 presents the discussion, critically analyzing the findings and their implications for REC development and policy evolution. Conclusions are then drawn in Section 4.

2. Materials and Methods

To achieve the aforementioned purpose, this paper employed a qualitative research methodology, including comprehensive desk research focusing on the collection and analysis of relevant regulatory documents, and incorporating both inductive and deductive reasoning.

The first step of the analysis was to identify all pertinent regulatory documents. This involved sourcing regulatory documents from various official databases, government websites, legal repositories, and academic sources. In particular, documents gathered included European Union directives, national laws, regulations, technical rules, and guidelines that shape the development and operation of RECs. Specifically, the main sources consulted were as follows:

• EUR-Lex (the official database of European Union law) for directives, regulations, and decisions.
• The Italian Official Gazette (Gazzetta Ufficiale della Repubblica Italiana) for national laws and legislative decrees.
• The Italian Regulatory Authority for Energy, Networks, and Environment (ARERA) and the Gestore dei Servizi Energetici (GSE) for guidelines, technical regulations, and incentive schemes.
• Ministerial websites (e.g., Ministry of Environment and Energy Security—MASE) for policy updates and implementation decrees.
• Academic databases such as Scopus and Google Scholar were consulted to cross-check findings with the existing literature on energy policy and community energy models.

Once collected and briefly contextualized, each document was critically analyzed to identify the key elements and main provisions that influence the development of RECs (other relevant materials were examined at this stage to contextualize the political landscape (e.g., the website of the European Federation of Renewable Energy Cooperatives (REScoop.eu)).

The following table (

Table 1. Overview of key European and national documents on RECs.

Level	Document Title	Document Type	Contribution
European Union	Directive (EU) 2018/2001 on the promotion of the use of energy from renewable sources (RED II)	Directive	Revises and updates RED I, introducing the concept of renewable energy communities.
European Union	Directive (EU) 2019/944 on common rules for the internal market for electricity	Directive	Establishes common rules for the internal market in electricity, including consumer rights.
European Union	Clean Energy for all Europeans Package (CEP)	Legislative Initiative	A comprehensive set of measures aimed at transitioning the EU to clean energy.
National—Italy	Italian Legislative Decree No. 162/2019 (Milleproroghe)	National Law	Introduces initial provisions for the development of renewable energy communities in Italy.
National—Italy	Ministerial Decree 4 July 2019	Ministerial Decree	Provides guidelines and incentives for the development of RECs.
National—Italy	Law 27 December 2019, n. 160 (Budget Law 2020)	National Law	Includes fiscal measures and incentives for the promotion of RECs.
National—Italy	Ministerial Decree 15 September 2020	Ministerial Decree	Establishes rules for the management and operation of energy communities.
National—Italy	Legislative Decree 8 November 2021, n. 199	National Law	Transposes RED II into national law, setting specific goals and measures for RECs in Italy.
National—Italy	Implementing Decree of the Ministry of Ecological Transition	Implementing Decree	Implements specific provisions related to renewable energy communities as per the national legislative framework.
National—Italy	Integrated Text on Distributed Self-Consumption (TIAD)	Regulation	Sets out the regulatory framework for the promotion and regulation of RECs in Italy by ARERA.
National—Italy	GSE Guidelines for Renewable Energy Communities	Technical Guidelines	Provides technical guidelines for the implementation and management of RECs.
Sub-National—Italy	Various regional provisions	Regional Regulations	Includes specific measures and incentives for RECs’ development, tailored to regional needs and contexts.

) provides a comprehensive overview of the key regulatory documents at both the European and national levels that have been considered in this paper.

3. Discussion

3.1. Analysis of European Framework

Since the push towards the liberalization of the energy sector, the influence of the European Union on the energy policies of its Member States has grown significantly. Energy became an officially shared competence between the States and the Union with the signing of the Lisbon Treaty in 2007 [15]. This treaty establishes that while Member States retain autonomy over the exploitation of their energy resources, the Union may intervene in a spirit of “solidarity” to ensure that the market functions efficiently and that supply from third countries is secured [16]. Over a long period of time, policy and normative frameworks in all of Europe had been designed to support an energy system based on centralized production using fossil fuels, in which citizens were passive consumers.

However, in November 2014, the European Commission led by Jean-Claude Juncker identified “A resilient energy union with a forward-looking climate change policy” as one of its top 10 priorities. Subsequently, in February 2015, the Commission launched the “European Energy Union Strategy” [17], which aimed to build an energy union that would provide EU consumers, both households and businesses, with secure, sustainable, competitive, and affordable energy. In this context, the word “citizen” started to be used regularly by the European Commission in line with the project of an EU Energy Union “with citizens at its core”. A significant outcome of this strategy was the presentation, by the European Commission on 30 November 2016, of a set of proposals known as the “Clean Energy for all Europeans Package” or “Clean Energy Package” (CEP) [18]. The objective of this elaborate package was to help define the Energy Union and to implement the commitments made by the EU under the Paris Agreement, which came into force in the same month.

The CEP was a significant milestone and a game-changer for the energy sector also because, prior to it, some energy community initiatives existed but lacked formal recognition and a supportive framework. Indeed, two important Directives emerged in this scenario: Directive (EU) 2019/944 on the Internal Market for Electricity, which introduced the concept of citizen energy communities (CECs), and Directive (EU) 2018/2001 on Renewable Energy Sources, the so-called RED II [19,20]. In particular, the introduction of the latter within the CEP marks a pivotal shift by formally acknowledging the potential of RECs. (The Internal Electricity Market (IEM) Directive introduced the concept of citizen energy communities (CECs), which significantly promote a decentralized model and encourage citizen participation in the energy sector. However, unlike RECs, CECs are not exclusively based on renewable energy sources. RECs are restricted to producing energy solely from renewable sources, whereas CECs have the flexibility to generate electricity from various sources, including but not limited to renewables. This paper focuses specifically on RECs, as their exclusive reliance on renewable energy ensures that they contribute fully to both the decentralization of energy systems and the broader goals of the energy transition.) This Directive bridged the gap between academic discourse and practical implementation (i.e., what was in part already happening on the ground), signaling a step forward in the development of RECs such that, on this occasion, the President of REScoop, the European federation of citizen energy cooperatives, remarked the following on the dawn of RED II: “This is an extraordinary day for European citizen energy. Until yesterday they had no recognition in European energy policy. Now they have a set of tools to empower themselves and their communities to thrive in the energy transition (REScoop.eu, 2018)”.

Article 2.16 of the Directive defines what constitutes an REC. According to this article, an REC is a legal entity which (a) is based on open and voluntary participation, is autonomous, and is effectively controlled by shareholders or members that are located in the proximity of the renewable energy projects that are owned and developed by that legal entity; (b) includes as shareholders or members, natural persons, SMEs, or local authorities, including municipalities; and (c) has as its primary purpose the provision of environmental, economic, or social community benefits for its shareholders or members or for the local areas where it operates, rather than financial profits. (The textual interpretation of this paragraph contrasts with the proposals in the literature, which suggest that the primary purpose of energy communities is not, or rather, should not be solely to provide economic benefits but also to deliver environmental and social benefits).

From this definition, it is evident that RED II adopts a broad and flexible definition of RECs. For instance, neither the legal form nor the geographical constraints are explicitly specified in the Directive––although it is possible to infer interpretations as for its reference to “proximity”, which implies a growing recognition of the role of localism and decentralization in guiding the energy transition.

This flexibility is crucial as it allows the concept of RECs to be adapted and embedded within various national contexts across the EU. On the one hand, by not imposing a rigid framework, the Directive facilitates the establishment and growth of RECs in a manner that can be tailored to the specific legal, social, and economic environments of different Member States. On the other hand, the fact that its implementation at the political level remains the responsibility of the Member States may mean that where national policy is predominantly centralized, obstacles may arise with respect to the decentralization of energy, democratization, and energy justice. The scope for diverging national regimes is thus potentially very wide.

Indeed, the examination of the aforementioned provision would lead to the conclusion that, as of today, RECs can be composed in a “heterogeneous” manner, meaning they may include some or all of the entities indicated in the provisions, or in a “homogeneous” manner, meaning they may consist of only one category of entities in question (such as only SMEs). This also allows for the possibility of RECs that include, for example, only legal entities and no individuals among their members.

Moreover, unlike the Internal Market Electricity Directive, which on some occasions designates this participation as direct/active, the RED II Directive’s reference to “participation” occurs without further qualification. While this inclusive approach ensures that many different actors can be involved, promoting broad-based community engagement and ownership in various capacities, at the same time, not explicitly qualifying participation as active could prevent the members (e.g., citizens) from exerting a more significant and essential influence on the successful implementation and operation of the RECs.

The Directive prescribes that involvement in these communities can take the form of membership or shareholding. According to the author, two significant aspects are relevant regarding potential shareholding and membership in RECs as outlined by the Directive.

First, the formulation implies that large energy enterprises cannot have control over the REC, which must remain in the hands of individuals, SMEs, or local authorities, and their participation in the REC does not constitute the primary commercial or professional activity (Article 22(1) of RED II). By excluding large energy enterprises, whose main goal is often financial profit, the Directive aims to preserve the community-oriented nature of RECs, fostering local engagement and ensuring that the benefits of renewable energy projects are shared within the community.

The second aspect is the specific emphasis on accessibility for low-income and vulnerable households, explicitly mentioned in Article 22(4)(f) of RED II. This specification is significant for several reasons. Firstly, it highlights a commitment to inclusivity and social equity, ensuring that the benefits of renewable energy are not limited to more affluent or technically savvy individuals but are extended to those who are often marginalized in the energy transition process. In other words, this provision acknowledges the importance of addressing energy poverty and democratizing access to energy, providing these households’ groups with opportunities to reduce their energy costs, improve their energy security, and potentially gain additional social and economic benefits from their involvement in RECs. Indeed, there is a potential for RECs to provide training and capacity-building opportunities, empowering citizens to take control over energy use and become active participants in the energy transition.

While the Directive clearly states the importance of including low-income and vulnerable households, it does not provide specific guidelines or mechanisms for how to achieve this inclusion. This lack of detailed implementation strategies means that the onus falls on the Member States and individual REC initiatives to develop and adopt their own approaches to effectively engage and integrate these populations. The challenge remains to create practical, inclusive participation models that overcome barriers such as a lack of awareness, financial constraints, and technical knowledge. Therefore, while the Directive sets an important precedent for inclusivity, there is a need for further guidance and support to ensure that this principle is effectively translated into practice on the ground.

Finally, the Recitals of the Directive provide further insight into the content of the individual provisions. (A Recital is a piece of text at the beginning of EU acts that explains the underlying reasons for the following articles.) Specifically, Recital 71 of RED II mentions that RECs, in addition to being able to “act in their own name and be entitled to rights and obligations”, should enjoy full autonomy from their members and other traditional market actors. This is a crucial interpretative key when attempting to reconstruct the meaning and significance of energy communities as envisioned by the European Union. This passage highlights two aspects of particular relevance: Firstly, RECs are viewed analogously to other market actors. Secondly, in stating that RECs are market players on par with traditional actors, the EU emphasizes that RECs are not traditional actors themselves; they are distinct from all other entities that have operated in the energy sector up to now. The nature of RECs, as defined by the EU’s strategic vision, is innovative and community-centric: they should be integrated in the existing energy market while, at the same time, maintaining their unique characteristics.

3.2. Analysis of National and Sub-National Frameworks

Italy’s national policy and regulatory framework for RECs is based on several key legislative and policy measures that align with the European directives, particularly the RED II Directive. Indeed, even if energy communities were mentioned for the first time in the Italian regulatory framework in 2017, in the Italian Energy Strategy [21], and, afterward, in 2018, within the PNIEC [4], those schemes still contained no policies in direct support of those communities. It was only at the end of 2019 and the beginning of 2020, after the European directives (RED II and IEM) were enforced, that the Italian government started moving in the right direction for enabling full REC deployment. Building on a proposal put forward by Legambiente and Italia Solare (https://www.legambiente.it/comunicati-stampa/dl-milleprorogheapprovato-emendamento-su-comunita-energetiche (accessed on 17 December 2024)), Article 42-bis of the Italian Legislative Decree No. 162/2019, known as the “Milleproroghe”, laid the initial groundwork by introducing preliminary provisions for the establishment of RECs. This trial phase was further supported by the approval of Legge n.8/2020, which came into force in 2020 [22], characterized by intrinsic transience since it does not constitute the outlook of the formal implementation of RED II. Nonetheless, it created a context to start with the initial establishment of the first RECs in Italy (it is under this transitional regulation that the first Italian REC was established in the municipality of Magliano Alpi (Piedmont region) in December 2020), which formally transposed RED II by approving the Legislative Decree n.199/2021 [23].

This regulatory framework was refined by associated acts (secondary sources) from the ARERA (Italian Regulatory Authority for Energy, Networks, and Environment), and the GSE (Gestore dei Servizi Energetici S.p.A., Rome, Italy) (national regulators, alongside national legislators, have taken on a very significant role in the regulatory configuration and monitoring of the activities of the aforementioned communities, with the task of removing unjustified obstacles and limitations to their development) further updated it following the implementation of the MASE (Ministry of Environment and Energy Security) Decree n. 414/2023 (also known as the CACER Decree), which was expected by June 2022, but only approved in December 2023 and published in January 2024 [4], after one public consultation.

The timeline of RED II’s implementation is illustrated in Figure 1.

In some respects, the Italian legislation is a faithful reproduction of the Directive’s finalistic and programmatic nature but lacks specific references. In particular, regarding the exact requirements for RECs’ legal entity, the European legislation does not provide specific details, intentionally leaving this aspect to the discretion of individual Member States. What emerges from a combined reading of the various relevant regulations is that an REC must be a collective legal entity. Therefore, it will be a participatory entity, with or without a legal personality, but it must necessarily possess legal subjectivity, meaning the capacity to hold legal rights and obligations independently of the individual members or entities that comprise it. Consequently, it should have its own organization and governing bodies. Initially, during the transitional phase, the regulatory intervention by ARERA [24] adopted a highly restrictive stance, indicating that only non-profit entities could qualify as RECs. However, Italy subsequently adopted a more open approach, mirroring the high-level European approach. Indeed, the finalized national legislation simply refers to a “private legal entity”, without delving into the granular details necessary to provide clear and actionable guidance. In the absence of explicit legislative direction, the prevailing trend, several months after the legislative decree came into force, has been to exclude the corporate schemes under Title V of Book V of the Civil Code (partnerships or corporations), where profit distribution is a defining characteristic according to Article 2247. (This approach contrasts with other European countries, such as France, which have considered these corporate structures compatible with RECs.) Thus, unlike other jurisdictions that have also opted for these opportunities, the prevailing idea in Italy is that RECs should not be entities that prioritize profit. Certain legal forms have been identified as compatible with the European guidelines, but this aspect has sparked and continues to fuel debate. The discussion revolves around the analysis of each REC model, comparing the possible structures and examining the advantages and limitations of each. Indeed, in the context of RECs, the choice of legal form significantly influences their governance and operational efficiency. The associative form, for example, would offer flexibility and low operational costs, making it ideal for small-sized RECs, while fostering democratic participation through member assemblies (to date, this is the most commonly used legal form for RECs in Italy). However, it provides limited legal protection for members, especially in the case of unrecognized associations. The cooperative form, characterized by the “open door” principle and democratic governance, would be particularly suitable for larger and more complex RECs, enabling robust member involvement and cooperation between public and private actors. Despite its advantages, cooperatives tend to have higher setup and operational costs, which may be challenging for smaller initiatives. Finally, the foundational form, particularly foundations of participation, would ensure greater autonomy and centralized decision-making, making it appropriate for medium-sized RECs that require financial stability. However, this structure also entails higher setup and operational costs, which may not be feasible for smaller communities. Additionally, RECs have the possibility of obtaining the status of a third-sector entity/social enterprise, due to the recognition of energy production and sharing as activities of general interest, as outlined in Legislative Decree No. 199 of November 8, 2021. This would allow RECs to benefit from additional tax advantages. This legal complexity, along with the various caveats that need to be considered (such as when a public entity is included as a member of the REC), might create a perception of uncertainty given the range of different implications.

In contrast to the issue of the legal form of RECs, in other aspects, the Italian regulation is more detailed and reinforces certain European perspectives by introducing some restrictions or, conversely, some expansions, or, where necessary, it establishes an enabling framework, providing the specific mechanisms and structures required for effective implementation of RECs.

Undoubtedly, one of the most critical measures has been the implementation of an incentive model dedicated exclusively to RECs that provides the economic sustainability necessary for their structuring and long-term growth.

Indeed, while RED II emphasizes and promotes the establishment of incentive schemes for RECs, it stops short of specifying a detailed incentive system. In contrast, Italy has taken a pioneering role in this area, developing and implementing its own comprehensive incentive system for RECs through national legislation. In doing so, Italy has distinguished itself from the approach of most Member States that have not established a true incentive model for RECs [25].

Italy’s incentive system emerged during the transitional phase, characterized by provisional measures and pilot projects, and has since been updated to a permanent regulatory framework. Under this system, applicable nationwide, the energy that is remunerated through the incentive is the “energy shared” by the REC. Despite its misleading name, “shared energy” is not actually shared or traded among an REC’s members, but simply computed as the smallest between the aggregate grid injections of the REC’s producers and prosumers, and the aggregate net withdrawals of its members (in other words, what is shared is not the energy itself but the incentives). This calculation is “virtual” and conducted on an hourly basis, ensuring precise measurement and fair compensation for the energy exchanged within the REC for a guaranteed period of 20 years, starting from the commercial start date of the system (excluding any shutdowns caused by force majeure or carried out to implement non-incentivized enhancement and upgrading). These economic benefits not only increase the sustainability of investments in energy plants but, more importantly, serve as a key tool to enhance community acceptance and foster continuous improvements in consumption behaviors within the community. The incentives are allocated to the REC itself, with revenues that can be reinvested in social projects, used to cover the management and implementation costs of the REC, or redistributed among members in accordance with the REC’s bylaws. Indeed, the Italian Revenue Agency (Agenzia delle Entrate) has clarified that the distribution of these incentives does not qualify as a distribution of profits, as these incentives are not considered “financial profits” [26].

The tariff, called TIP, is structured into two parts, specifically a fixed and a variable amount, whose values vary according to the power capacity of the renewable plants employed, measured in kWe (kWe stands for kilowatt electrical, a unit of measurement that indicates the amount of electrical power being produced or consumed). Therefore, for practical and clarity reasons, the tariff has been divided into the following three ranges (see

Table 2. Premium tariff amounts considering the power capacity.

Premium Tariff
Power Capacity (kWe)	Fixed Part (€/MWh)	Variable Part (€/MWh)	Maximum (€/MWh)
<200	80	Maximum between 0 and the difference between 180 and zonal price. Threshold 40.	120
from 200 to 600	70		110
>600	60		100

Source: author’s elaboration on GSE source.

).

As shown above, the fixed part of the tariff progressively decreases with the rise in the power capacity, while concerning the variable part, it may correspond to a value of up to 40 EUR/MWh. Consequently, the Decree has set the maximum amount of the incentive that each cluster may be entitled to obtain. Moreover, in the outline of the ministerial decree, a correction of the tariff for photovoltaic plants is foreseen to take into account the different levels of sunshine that characterize the regions of Italy: for Central and Southern Italy, the proposed correction factor is equal to + 4 EUR/MWh, while for the regions of Northern Italy, the proposed correction factor is equal to 10 EUR/MWh. The task of providing the incentives outlined by the regulations has been entrusted to the GSE, which has established in its technical guidelines that the procedure in question must be completed “within 90 days from the request” by the REC for the incentive service.

The critical analysis of this virtual incentive system has allowed us to identify several key aspects potentially impacting the operational dynamics of RECs and their characteristics. Surely, one of the key advantages of the virtual model is that it does not require the multiplication of new physical networks since it utilizes the existing public grid. This eliminates the need for additional infrastructure investments, such as new connection points or direct links between production and consumption sites, thus reducing entry and operational costs for participants. By lowering barriers to entry, this system becomes more easily accessible to a wider range of participants, including those who cannot install their own PV system but can participate in the REC as simple consumers. Moreover, since it is a virtual model, the contractual rules that bind end users to their suppliers remain unchanged, thereby allowing the freedom to choose the most convenient offer, even if they are members of an REC.

This approach also introduces significant flexibility into the system, where communities can adapt and evolve over time without the burden of sunk costs in infrastructure. Indeed, producers and consumers within a given REC can, in the future, decide to switch to another REC without being locked into long-term commitments. This “open door” principle aligns with RED II, promoting adaptability and ease of participation.

A potential downside of the incentive system concerns its interaction with the renewable energy support schemes hastily established by national and regional governments over the past four years. According to the ministerial decree that established the incentive system related to RECs, new renewable energy plants receiving grants exceeding 40% of the investment cost may join RECs, but they are not entitled to any incentive for the “shared energy”. However, following the COVID-19 crisis, the national government introduced the “Superbonus 110%”, an incentive for building renovations that provides a tax rebate of up to 110% of the investment cost, and set up a series of grants for companies investing in renewables through the National Recovery and Resilience Plan. As a result, a potential owner of a new renewable generation plant might find themselves choosing between these grants and tax rebates, which provide quick refunds based on investment costs, and the uncertain outcome of the REC incentive, which depends on the hourly production and consumption profile of a community of producers, prosumers, and consumers. Consequently, support schemes favoring individual investment could overshadow the incentives set up for RECs.

An additional consideration can be made regarding the regulation that introduces a tariff correction for photovoltaic plants based on the levels of solar irradiation in different regions. Indeed, while this measure understandably represents an attempt to balance the geographical and climatic differences in solar production potential, it may not adequately consider other factors that influence the development of small-scale photovoltaic systems, particularly in Southern Italy. Northern Italy enjoys a more robust economic and industrial base, favorable regional policies, and higher population density––all of which have facilitated the broader adoption of small-scale renewable energy installations [27]. In contrast, despite its climatic advantage, Southern Italy may face significant obstacles in the development of such systems, including lower investment capacity, reduced industrial and residential density, and a less dynamic economic environment [2]. As a result, the simple application of a correction factor based on solar irradiation might not be sufficient to equally promote the development of small-scale photovoltaics and consequently the formation of RECs in Southern Italy, which is characterized by specific economic and infrastructural challenges.

Finally, the variable part of the incentive could be counterproductive, as it introduces additional uncertainty into a mechanism already considered highly uncertain due to factors such as the variability in renewable energy production, the dependence on fluctuating energy sharing among members, the unpredictability of long-term financial returns, and the issue of taxation related to the incentive, which, as of today, has not yet been fully clarified.

Alongside the incentive system that certainly shapes the way Italian RECs work, there are other features of Italy’s legislative approach that could have implications for the form that RECs will take and for their development.

Indeed, regarding other aspects mentioned by the European directive that required further clarification, the Italian legislation has sometimes interpreted the guidelines in a restrictive manner, and at other times in a more permissive way.

Some of the technical rules established by the GSE [28], such as those regarding the participation of businesses, should be interpreted as providing clarifications on possible configurations, addressing several key aspects.

For instance, as stated above, the RED II Directive provided that private companies may only participate as small and medium-sized enterprises and only if their participation in the REC does not constitute their primary business activity. However, none of the relevant articles in RED II that pertain to RECs ever mention the belonging of private undertakings to specific commercial or industrial sectors as an eligibility criterion. The technical rules of the GSE, on the other hand, likely to avoid the scenario described above, imposed further restrictions, stipulating that private enterprises within RECs should not possess the ATECO codes 35.11.00 or 31.14.00 (production and sale of energy). In fact, if private energy undertakings populated and invested in a multitude of RECs, it would be more difficult to put financial profits before the pursuit of environmental, economic, and social community benefits.

However, the same GSE rules also introduced the opportunity for energy sector companies to join an REC as third-party producers. In other words, renewable energy source (RES) producers located within the network portion forming the REC may have the energy produced from their assets included in the computation of the shared energy, even though they may not be members of the REC due to their primary commercial or professional activity. In addition, also regarding the management options of RECs, the GSE rules have specified that management can be carried out either by a member of the REC or by third parties, allowing these external entities to serve as referents for the administration and operational oversight of the REC. While this provision allows third-party energy producers to contribute to the REC’s energy sharing without being direct members of the community, it also raises concerns that these entities, operating outside the regulatory perimeter of the REC, might exploit REC members such as small local authorities and citizens. Furthermore, outsourcing production could legitimize citizens’ non-participation as prosumers (in Denmark, for example, to prevent this risk, at least 20% of the plant must be owned by the REC). This dual effect highlights a potential vulnerability within the system, where the intended collaborative benefits could be overshadowed by the interests of external commercial actors. This aspect can indeed be emphasized by the fact that the internal redistribution of the economic benefits among REC members is not governed by specific rules; rather, it is left to the discretion of the members themselves. Third-party actors might demand a share of the incentive generated in exchange for their support. This could lead to a situation where these external entities influence the distribution process, possibly requesting their share by defining the algorithm for redistribution in the REC’s statute, thus further diluting the collaborative nature of the community.

Another notable specification introduced by the GSE rules is the 55% sharing threshold for energy within RECs. Indeed, the GSE’s technical rules specify not only that the statutes of RECs must include a social objective but also that they must stipulate that any surplus tariff premiums (specifically, 55%) are to be allocated only to consumers other than businesses and used for social purposes. It is easy to interpret the purpose of this requirement as ensuring that RECs maintain their core objectives of generating environmental, economic, and social benefits. Indeed, while the environmental benefits are straightforward, as the shared energy is produced from renewable sources, and the economic benefits arise from savings on energy bills through self-consumption and incentive systems, the social benefits are not automatically guaranteed. However, the GSE does not define what constitutes social purposes. On the one hand, this could lead to ambiguity: the rule as set could give the impression of relying on people’s good judgment rather than being regulated with clearly defined boundaries. On the other hand, this flexibility can be advantageous, enabling RECs to tailor their social contributions to the specific contexts and requirements of their communities.

Continuing with the critical analysis of the Italian regulatory framework, it is imperative to consider additional aspects to fully understand the development trajectory of RECs.

For example, the Italian legislation, compared to the European directive, has expanded the range of entities that can participate in RECs. In addition to individuals, small and medium-sized enterprises (in the GSE operational rules, a small enterprise is defined as a company with fewer than 50 employees and an annual turnover or annual balance sheet total not exceeding EUR 10 million; a medium-sized enterprise is defined as a company with fewer than 250 employees and an annual turnover not exceeding EUR 50 million, or an annual balance sheet total not exceeding EUR 43 million), and local authorities as specified by the European regulation, Italy has included other legal entities, research institutions, religious institutions, third-sector enterprises, and environmental protection agencies, as well as local administrations identified in the list of public administrations published by the Italian Institute of Statistics (ISTAT). (The same regulation, however, excludes central public administrations from participating in RECs as members or shareholders. This provision aims to prevent potential conflicts of interest and ensure effective governance focused on community benefits. The participation of such actors, as well as that of large corporations, would, in fact, conflict with the regulatory definitions and the goals of decentralization and local participation.) On the one hand, this decision reflects the desire to promote a more participatory and widespread energy transition across the territory. On the other hand, this increase in participation potential also introduces further complexity in both business models and forms of community governance. Moreover, although Legislative Decree 199/2021 states that participation in RECs is open to all consumers, including low-income or vulnerable households, no specific mechanisms are provided to effectively achieve this goal. This broad approach, similar to the RED II Directive, establishes the framework for inclusivity but lacks targeted measures that could ensure genuine accessibility and participation for those in socio-economic difficulty. Key barriers could include the lack of financial incentives tailored to low-income households, limited awareness, and administrative complexity. To address these challenges, targeted policies such as subsidized membership fees, priority access to financial support, and dedicated outreach programs could enhance accessibility. Moreover, regional initiatives that allocate specific funding for vulnerable households—such as those implemented in some Italian regions—could serve as a model for broader national strategies. Additionally, integrating social energy policies with broader welfare programs could help address energy poverty while strengthening community participation in RECs.

Finally, since RED II did not provide an exhaustive definition to size the geographical proximity that must characterize RECs, Italy, like other Member States, had room to elaborate its own methodologies and criteria to quantitatively and univocally set the boundaries of geographical proximity. Initially, the legislation emphasized geographical closeness, but it gradually expanded its scope. In the early stages, the temporary legislation defined RECs based on their proximity to secondary electrical substations, also called low-voltage substations (in dense urban settings, two sides of the same street may be behind different transformers). This was then expanded through current legislation to include the primary electrical substations or medium-voltage substations (e.g., about 3–4 municipalities or 2–3 neighborhoods of a large city) [23]. Similarly, the characteristics of the plants, which were initially limited to a maximum power of 200 kW during the transitional phase, were modified, establishing a higher maximum capacity of 1 MW for each plant installed [24]. (This expansion is particularly relevant when considering RECs based on systems other than photovoltaics, since other renewables usually involve larger power plants.) The plants of the RECs, which small and medium-sized agricultural enterprises participate in and exclusively control, can have a capacity greater than 1 MW. These adjustments allow for greater scalability and capacity within RECs, supporting more substantial and impactful renewable energy initiatives. For instance, since in Italy there are about 2000 primary substations and about 430,000 secondary substations, approving, for the purposes of participation in RECs, the connection of consumer units and facilities to the same primary substation means significantly expanding the number of users who can participate in RECs. In this regard, the GSE has made efforts to simplify administrative procedures that aim to make REC participation more accessible through an interactive map of primary substations available on its official website. This map, created using cartographic data provided by 25 national distributors, allows users to locate the specific conventional areas served by primary substations across the country. This tool empowers citizens, businesses, and public administrations to actively participate in the decarbonization of energy consumption by providing easy access to relevant information, such as the unique area code, the reference distributor, municipal boundaries, and the list of municipalities within each area. Furthermore, the GSE has recently clarified that it is possible to establish an REC operating at a national level, provided that the requirement of connection to the same primary substation is met to access incentives. In other words, it is possible to form a national legal entity that manages one or more configurations of primary substations across the country, with energy sharing calculated based on these configurations. These legislative provisions carry significant implications that affect both the opportunities and challenges for RECs in Italy. On the one hand, small-scale projects allow for the creation of place-based communities, which are considered a means of strengthening social ties, norms, trust, and a shared sense of purpose among inhabitants. This, in turn, promotes the energy transition at the grassroots level through citizen empowerment and the dissemination of renewable energy technologies. Moreover, the local anchoring of energy projects can offer advantages such as promoting a fair distribution of local benefits within the territory where the installations are located. On the other hand, expanding the boundaries of the REC at the national level could be a step towards simplifying management and creation costs for RECs. For example, the boundaries of primary substations do not coincide with either municipal or regional borders. There may be instances where a single municipality is served by multiple primary substations, as well as cases where a single primary substation serves multiple municipalities, potentially spanning different regions. Expanding RECs to the national level could help address these kinds of situations. Moreover, another critical point is that relatively small communities may struggle to attract the necessary investments and financing for their projects. This is especially true considering that increasing the plant size to 1 MW not only enables the “diversification” of the technologies underlying renewable energy production but also increases the magnitude of the investments required to implement the project. In this sense, the potential for generating energy within a specific community could be limited, posing challenges in terms of cost-effectiveness and economies of scale.

In this regard, it is important to highlight that the National Recovery and Resilience Plan (PNRR) includes a key measure designed to help overcome these obstacles. This measure falls under the “Green Revolution and Ecological Transition” mission, specifically in the component focused on Renewable Energy, Hydrogen, Networks, and Sustainable Mobility (M2C2.1), and it represents one of the Plan’s main investments and has been given strong priority. It allocates substantial capital funding (EUR 2.2 billion) for new renewable energy installations that join RECs in municipalities with fewer than 5000 inhabitants with the aim to install at least 2000 MW of new electricity generation capacity. The investment incentives are designed to vary depending on the size of the renewable energy installations. For smaller systems with a capacity of up to 20 kW, the funding is set at EUR 1500 per kW. As the installation size increases, the incentive slightly decreases, with EUR 1200 per kW provided for systems between 20 kW and 200 kW, and EUR 1100 per kW for those between 200 kW and 600 kW. For larger installations, up to 1000 kW, the incentive is EUR 1050 per kW. The request can be submitted by the beneficiary until March 31, 2025, subject to the prior depletion of available resources. The GSE provides the benefit, dividing it into several installments, based on the progress of the work. The first installment is paid upon completion of 30% of the work. The final payment, amounting to 10%, is provided upon submission of the final reimbursement request, certifying the completion of the projects. (For both measures—the incentives for shared energy and the PNRR capital contribution provided—the REC Decree introduces the possibility of voluntarily requesting the GSE to carry out preliminary eligibility verification of projects that sector operators intend to request incentives for.)

This initiative offers a valuable opportunity for development and revitalization in rural and depopulated areas, where the social benefits of RECs are particularly important. Additionally, the lack of funding (and expertise (according to the European Investment Bank, 69% of municipalities in Europe report a lack of expertise in environmental and climate assessments as an obstacle (European Investment Bank (EIB) Municipality Survey 2022))) for setting up RECs often represents a major obstacle for small local governments. Italy is a country of small municipalities, with those having fewer than 5000 residents accounting for 70% of the total (with 25.5% of municipalities having fewer than 1000 residents) [29]. However, it is worth noting that similar challenges exist in other municipalities not covered by this measure. Furthermore, the cost ceilings defined by this policy were established before the energy crisis and the Russian–Ukrainian conflict, meaning they may now be lower than current market prices, potentially making the funding less effective in today’s economic context. Moreover, upon examining this measure more closely, a crucial aspect emerges: the request for access to these funds does not necessarily have to be submitted by a small municipality but can be made by any entity, including private ones, that has developed a renewable energy plant within an REC located in a small municipality. This detail presents some significant risks. Specifically, the fact that the funds are allocated to the plants rather than directly to the small municipalities themselves means that, in practice, anyone—including large corporations and utility or energy players—can access the funding, provided the plants are located in the relevant areas.

While this openness might seem advantageous as it could attract capital and expertise to develop the necessary infrastructure, it also presents the real risk of a similar “drift” to what occurred in Spain. In that context, over 50% of public funds for renewable energy were monopolized by large corporations and multinational energy companies [30]. This resulted in a concentration of resources in the hands of a few dominant players, distorting the original goals of the support measures, which were instead aimed at benefiting small local communities and promoting citizen participation in the energy transition process.

If a similar situation were to occur in Italy, large corporations could end up securing the majority of the available funds. Such a scenario could jeopardize the very essence of the REC model, which is based on the active and direct participation of citizens and small local administrations in the management and control of energy production.

Furthermore, this concentration of resources could undermine the spirit of the European directive on RECs by obscuring the specific needs of small municipalities, which require funding for infrastructure that addresses urgent issues such as reducing energy poverty and achieving energy self-sufficiency.

Finally, another aspect to consider, indirectly linked to the availability of resources for local administrations, concerns the credibility of local representatives. In areas where local governments enjoy a good reputation and public trust is high, RECs can represent a genuine opportunity for development. However, in regions where trust in public institutions is lower, difficulties may arise in ensuring that the funds are used effectively and transparently to meet local energy needs.

In a way that could be described as “complementary” to the national policy landscape, various regional measures have been implemented to address this gap (

Table 3. Regional laws.

Region/Autonomous Province	Regulation	Financial Allocation of Regulation	Public Funding Programs	Private Funding Programs
Abruzzo	LR 8/2022	40,000	-	-
Basilicata	LR 12/2022	300,000	-	-
Bolzano	-	-	-	-
Calabria	LR 25/2020	-	-	-
Campania	LR 38/2020	100,000	1,000,000	-
Emilia-Romagna	LR 5/2022	350,000	2,000,000	-
Friuli Venezia Giulia	-	-	14,200,000	-
Lazio	LR 1/2020	1,850,000	1,000,000	-
Liguria	LR 13/2020	-	-	-
Lombardy	LR 2/2022	22,300,000	-	689,674
Marche	LR 10/2021	20,000	3,000,000	-
Molise	-	-	4,000,000	-
Piedmont	LR 12/2018	50,000	-	789,000
Apulia	LR 45/2019	200,000	-	-
Sardinia	LR 15/2022	4,000,000	-	-
Sicily	-	-	3,835,338	-
Tuscany	LR 42/2022	200,000	-	-
Trento	LP 20/2012	-	5,000,000	-
Umbria	-	-	-	-
Aosta Valley	-	-	-	-
Veneto	LR 16/2022	600,000	-	-

Source: author’s elaboration on Legambiente source (2024).

). Among these, one of the most effective initiatives is the provision of economic resources to facilitate the formation of RECs. Notably, some Italian regional policymakers have even anticipated national legislation by enacting regional laws to promote RECs within their jurisdictions. The situation varies across regions; for instance, the Lazio region has allocated about EUR 1 million to financing technical–economic feasibility studies for RECs, providing financial contributions ranging from EUR 6000 to EUR 13,000 per REC. Similarly, the Lombardy region has dedicated about EUR 20 million to supporting the establishment of energy communities. Other regions, such as Piedmont and Puglia, have enacted regional laws and established permanent technical committees to facilitate data collection on energy consumption reduction and identify strategies for more efficient power network management [31,32]. Equally interesting are those forms of support and promotion characterized by a higher degree of “innovativeness”, such as the possibility of granting specific incentives to RECs with a strong social focus [33], or the establishment of dedicated “eco-quality labels” aimed at ensuring the traceability of energy and the environmental quality of the installations, both from a structural perspective and in terms of landscape impact [34]. However, since many of the regional calls, such as those referred to, were published in advance of the implementation of decrees on RECs, the risk is that, in some cases, resources have been spent without a clear frame of reference. Moreover, implementation has been uneven across different regions. Indeed, while some have embraced proactive financial and technical support mechanisms, others have lacked the necessary infrastructure or political commitment to advance REC initiatives at the same pace.

However, these challenges are not unique to Italy. In Spain, for example, regional governments have taken different approaches to REC development, with some actively supporting them through financial incentives and others lacking dedicated policies, creating disparities in implementation [35]. In Germany, where cooperative energy models are well established, regulatory fragmentation between federal and state levels has led to inconsistencies in REC governance and support schemes [36]. Similarly, in France, variations in local administrative procedures have influenced the effectiveness and accessibility of RECs across different regions [37].

4. Conclusions

The present analysis, following a policy-driven approach, does not aim to provide a comprehensive overview of all European, national, and sub-national regulations and policies related to RECs. Instead, it has identified key factors that likely impact the future development of RECs, focusing on a subset of elements that directly influence the nature of RECs and their possible models. Indeed, to fully grasp these dynamics, it is crucial to consider the broader legislative context in which they emerge. In this context, while the publication of the RED II Directive and its subsequent incorporation into national legislation represent a positive milestone, it is important to recognize that the final version of the legislation reflects a challenging compromise between the demands of the European cooperative movement and the significant influence of the fossil fuel industry lobby. Employing a critical perspective, this paper provides some alarm signals to consider when analyzing and adopting decentralized energy production initiatives.

However, as RECs continue to emerge as vital players in the energy transition, ongoing research and policy refinement will be essential to address the remaining challenges, ensure inclusivity, and fully realize the social, economic, and environmental benefits these communities can offer. To maximize the adaptability and sustainability of RECs in Italy while balancing local and national energy goals, several key measures should be prioritized: (1) streamlining administrative procedures to reduce bureaucratic complexity; (2) enhancing financial support mechanisms, especially for small-scale and community-led initiatives; (3) strengthening regional coordination to mitigate disparities in REC development; and (4) ensuring long-term policy stability to attract investment and foster scalability. Additionally, fostering greater collaboration between national and regional policymakers, as well as between RECs and private investors, could further enhance the long-term viability of these initiatives. These measures are crucial for ensuring that RECs contribute effectively to Italy’s energy transition while maintaining their community-oriented nature.

Moreover, it is essential to recognize that while public policy employs three large categories of instruments––regulatory instruments, economic and financial instruments, and soft instruments––this paper has focused on regulatory and economic tools. It has not delved into soft instruments such as information dissemination. These soft instruments, which are diverse and generally rely on persuasion and mutual information exchange among actors, are increasingly significant. Though they often complement regulatory and economic measures, they can independently influence the development of RECs. In this regard, RED II itself, in Article 18, par. 6, requires Member States to develop suitable information, awareness-raising, guidance, or training programs “in order to inform citizens of how to exercise their rights as active customers, and of the benefits and practicalities, including technical and financial aspects, of developing and using energy from renewable sources, including by renewable self-consumption or in the framework of renewable energy communities”. Future research should, therefore, consider these soft instruments to provide a more comprehensive understanding of their potential impact on the growth and sustainability of RECs. By integrating these aspects, policymakers can not only better support the evolution of RECs, ensuring that they contribute effectively to a sustainable and inclusive energy future, but also influence their creation dynamics and the models themselves.