ANALYSIS - The business case for collective self-consumption solar systems in Spain through the lense of Iberdrola's first installation in Madrid

The European Commission's legislative package “Clean Energy for all Europeans” sought to place the consumer at the heart of the energy transition. Thus, the recast renewable energy directive (RED II) and the recast electricity market directive (EMD) introduced a framework for “renewable energy communities” (REC) and “citizen energy communities” (CEC), effectively aimed at empowering smaller actors in the energy market to play a more important role in driving the EU’s transition to a clean-energy economy.

LEGAL CONCEPT

Spain was among the first movers to partially implement article 21 of RED II with the Royal Decree RD244/2019, published last April.

The latter essentially permitted shared self-consumption where more than one consumer is associated with the same production facility, provided that the connection between the production facility and the point of consumption is either:

a) an internal (home) network or direct line;

b) a low voltage network derived from the same substation;

c) the facilities and the substation are less than 500 meters apart or

d) located in the same property registry according to their first 14 digits.

In collective renewable self-consumption projects under RD244/2019, the production of one single installation is shared among the associated consumers/prosumers according to a ratio defined by them and communicated to the distribution company in charge of the energy readings. Normally this ratio will be equal to each customer investment in the facility, but this is not a rule. The only rule is that the ratios must add up 100%. The distribution company collects the reading of the installation and, on an hourly basis, allocates the part of production belonging to each customer/prosumer and makes the hourly balance between consumption and production, Pablo Pirles, responsible for Global Smart Solar at Iberdrola explained to Renewables Now.

"Apart from the Royal Decree itself, this has been made possible by the near full rollout of smart meters in Spain in recent years", he added.

BUSINESS MODEL AND ROI

Besides citizen cooperatives, collective self-consumption can also be a great opportunity for electric utilities since the latter can offer more competitive electricity retailing models, where the customer can receive locally-produced renewable energy and in a more economical way.

Just last month, Iberdrola proudly announced the installation of its first collective self-consumption solar system for residents in Madrid.

The company said it had already started delivering the 20 kW installation, made up of 60 photovoltaic solar panels, which will be placed on the roof of a residential building in the Retiro district.

Pablo Pirles noted: “There is an increasing demand from the public and from businesses for cleaner and smarter energy supplies. In cities especially, shared residential projects are going to become much more common, and we see significant potential for many more projects".

"We think this is also a very convenient option for medium and small businesses. In fact, two of the collective self-consumers of Iberdrola’s first community installation are small businesses".

According to Iberdrola, there are two key ingredients to making collective self-consumption solar systems a good option for small businesses:

(a) sharing an installation reduces the cost per kilowatt-hour,

(b) a lot of small businesses have daylight consumption which maximizes PV self-consumption.

Also, a further benefit for small businesses associated with PV self-consumption is the environmental and social commitment shown to their customers through this kind of investment.

IN FIGURES

Since the numbers speak best, here is a sample calculation for the payback period of a 20 kW PV system in Spain.

The cost per kilowatt for a small single self-consumption installation in Spain can range from 2,000 to 3,000 €/kW. For a community investment of 20kW, the cost can be around 1,000 €/kW. This implies a payback period of 3 to 5 years for the collective prosumers, according to Iberdrola.

A good balance between consumption and PV production is key to shortening the payback period for the investment as much as possible.

"Normally, the allocated production to each neighbor is lower in a collective installation than in an individual one and therefore the self-consumed energy ratio is higher. The surpluses injected to the grid are lower, which is good for payback since the saving of a self-consumed kWh is higher than the saving of a kWh produced and injected into the grid", Pablo Pirles explained.

"Also, the PV installation could be combined with a specific electrical tariff designed for a prosumer profile. In order to maximize the prosumers benefit Iberdrola has developed “Plan Solar”, a tariff with reduced prices after sunset. The saving periods change 4 times per year to account for the different seasons.

Various tax benefits that apply depending on the local governments and municipalities rules could further increase the return on the investment.

Choose your newsletter by Renewables Now. Join for free!