The challenge aims at uncovering hidden value generation opportunities for Renewable Energy Communities (RECs).
The solvers will need focus on either or both sides of this conundrum: improving the amount of shared energy and the final economic benefit to the community members.
CACERs (“Configurazioni di ’Autoconsumo per la Condivisione di Energia Rinnovabile”) are an Italian incentive scheme that promotes the diffusion of small scale, local renewable energy production. Private citizens and small medium enterprise (SMEs) can install one or more Renewable Energy Source (RES) plants to access these incentives by forming “Renewable Energy Communities”. This way, they can share the energy they produce and get more benefits than a normal RES investment.
For instance, if a Small Medium Enterprise (SME) installed solar panels, they would save money on their utility bill by consuming (or storing) the energy they produce during the day and obtain revenues from the sale of any extra energy produced they don't use (or store). By joining a Renewable Energy Community (REC), the SME would gain access to an additional source of income and generate positive externalities on the territory.
The energy sold to the grid can be "virtually shared" by the community members. Incentives will generate around 110€ per Mega-Watthour (MWh, the unit of measure for electricity) of shared electricity. Incentives are paid annually to the community by the regulator. Each community, within the boundaries set by the Law Decree, sets its own rules on how to distribute these incentives among its members.
While these incentives significantly enhance the economic returns of a solar PV investment, the individual benefit for community members is currently lower than ideal. The challenge prize opportunity is to devise innovative ways to better take advantage of the existing incentivization scheme. The proposed solution would optimize the generation and re-distribution of incentives for the community. Solvers must keep in mind how the incentivization concepts can be easily communicated to families and SMEs, as well as the legal constraints to successful implementation. Don’t forget that the members of the communities will be families and SMEs, which are not expert subjects of the energy market and have minimum financial literacy.
Remember that community members are people who decide to join a local community, and that will receive compensation for their contribution to overall incentive-money generation. This would be the only economic flux they would receive from the community. As opposed to previous drafts, the current Law Decree does not allow utility companies to discount the virtually shared energy from utility bills.
It is not necessary to have extensive experience in this field, and solvers that are not experts are encouraged to study the concepts presented in the following pages.
Proposed solutions may include social-impact accounting for initiatives financed with incentives money, innovative business models to integrate generation plant financing, operations and community benefits, technological improvements (in this case you’d likely need to be an expert of the field) or legal framework to ensure effective distribution of the benefits generated.
Guidelines
What CACERs and RECs are.
CACER is a broad term used to describe some configurations that can have access to the virtual energy sharing incentives scheme. CACER types differ among each other for their types of members or geographical constraints. The main 3 configurations are:
Collective virtual self-consumption configurations. These allow groups of SMEs’ and/or families’ PODs within the same building, i.e., a condominium or a shopping mall.
Individual virtual self-consumption configurations. These allow a single owner of many PODs within the same primary cabin to be grouped. For instance, a municipality that owns the PODs of all the schools in town can group the schools according to the different primary cabins.
Renewable energy communities (RECs). This type of configuration is the focus of this challenge. RECs allow SMEs and families, within the same primary cabin, to group under a new legal entity to share renewable energy locally produced and enjoy both the environmental and economic benefits generated.
RECs will be the only CACER type to be considered for this challenge. For simplicity we will assume that the only renewable energy source production plant that CACERs install are solar photovoltaic panels, as this is the case for most RES installations in Italy. However, remember that the law grants all types of RES plants access to the incentive scheme with no discrimination.
Virtual sharing of locally produced energy is the innovative feature of this incentives scheme. It opens the possibility of consuming renewable energy even to those people that, for any reason, cannot or do not want to invest in a generation plant. Members of RECs can play one of the following three roles:
Prosumer. The prosumer is a member which installs a PV plant on its roof (or on the ground) and physically connects the plant to its POD. The renewable energy produced, therefore, is first consumed by the prosumer, and the excess is injected into the grid. Their role is both to inject energy to be virtually shared and to contribute to the sharing. SMEs, families, nonprofits, and municipalities are typicalprosumers.
Producer. The producer is a member who installs a PV plant on its roof (or on the ground) and injects the whole production into the grid, without consuming it for its own use. Their role is to inject energy to be virtually shared. Producers can either be SMEs, families, or utility companies (only in one case, more details in the following chapter).
Consumer. Consumers are members that are not physically connected to a RES plant. Their role is to contribute to the total amount of virtually shared energy. SMEs, families, nonprofits, and municipalities are typical consumers.
The figure depicts a typical REC and its members, the arrows represent energy fluxes. Remembering that the members of a REC need to be served by the same primary cabin, it is possible to further analyze the interaction between the members of the community. As mentioned above, Producers solely inject energy in the grid. The energy produced by Prosumers 1 and 2 is firstly used to serve their own load, then the excess production (if any) is injected into the grid. Notice that the arrow between the grid and the prosumers is bidirectional. This is because Prosumers draw energy from the grid when the panels are not producing (e.g., on rainy days or during the night). On the other hand, Consumers can only draw energy from the grid. When Consumers consume energy in the same moment that the other members are injecting energy into the grid, they generate incentive money.
Further emphasis shall be placed on the concept of “virtually shared energy”. To virtually share energy, prosumers and/or consumers need to be drawing energy from the grid in the same moment that a member of the community (another prosumer or producer) is injecting energy in the grid. Notice that prosumers can either be injecting to the grid (if their PV production exceeds their instantaneous load) or drawing from the grid (if their consumption exceeds production).
Proposed solutions need to be communicated to average families and SME owners. Communication with the different stakeholders is a very important aspect of the proposed solution. Solvers are encouraged to keep this in mind.
Economic values associated with RECs.
Following the figure presented above, economic values generated within RECs will be presented for each member of the community.
Producer. The producer will pay for the solar PV plant investment and receive periodical payments for the sale of the Renewable Energy produced and injected to the grid. In most cases, it will be the GSE (public authority for energy services) that purchases the electricity produced. The electricity injected is sold through the “Ritiro Dedicato” RID mechanism, and it pays a zonal variable hourly price. Producers have no load drawing from the grid; therefore, they do not pay a utility bill.
Prosumer. Similarly to producers, prosumers will pay for the PV plant investment and sell the excess energy they don’t consume to the GSE through the RID mechanism. Just like normal consumers, prosumers will pay a utility bill for their own consumption that is not covered by their PV panels energy production.
Consumer. Consumers pay normal utility bills. They do not directly benefit from the solar PV plant.
What are the benefits of being part of RECs? First, being part of a REC could only bring incremental improvements to the initial situation. There are little to no risks associated with participating in a REC. below are listed the benefits for each type of REC member:
Producer. In the case where producers are SMEs, families, or municipalities, they could claim a share of REC incentives to themselves, as they are producers that make their sold electricity available for sharing for the community. This share of incentives can significantly improve the financial performance of a solar PV plant investment. In fact, producers that claim part of the incentive’s money can increase their periodical cashflows, which would otherwise be just the sales revenues from RID. According to existing legislation, utility companies and Energy Services companies cannot be members of any type of CACER. However, there exists an exception. Utilities and ESCOs are allowed to act as “third party producers” (TPP) for a CACER. TPPs need to receive a mandate from a member of the community to build and operate a generation plant. TPPs will then offer the entire production (or just a part) of electricity to the community. TPPs can also act as “Community managers”. Community managers take care of administrative and bureaucratic work, in exchange for a payment which can be covered by the incentives generated by the community.
Prosumer. Prosumers can benefit in two ways from incentives. First, they could require a share of the incentives to cover part of the plant investment. In case they also contribute to the annual virtually shared energy, they could also claim an additional share of incentives.
Consumers. Consumers are responsible for generating the incentive money by consuming electricity in the same moments it is injected into the grid. However, their investment/effort to be part of the REC is null. Therefore, consumers can be considered as residual claimers on the of incentives money.
Consumers and Prosumers by contributing to virtually shared energy can claim their part of incentives money from the community. By doing so, they will receive periodical payments from the community manager. The money they receive can be “lowering” the final cost of utility bills. Remember, however, that there is no direct connection between utility bills and incentives money. The final clients will continue to pay their bills as if they were not members of a REC. It could be the case that a utility company offers discounts on the utility bill to its clients that also join a REC that the same utility manages, but this discount needs to be optional and not binding. The final clients need to maintain their rights of switching energy supplier whenever they want.
It is important to clarify that CACER incentives and utility bills are two separate matters. A prosumer could save on its bill by consuming the energy it self-consumes; a consumer that is member of a CACER will on one side continue to pay its utility bills as usual, and on the other side receive the incentives money.
For the sake of this challenge, consider administrative costs with the public authority overseeing the CACER bureaucracy and taxes on incentives money to be neglectable. The back office operational costs of running a CACER, however, cannot be considered neglectable. In fact, the legislation establishes that the participation to a CACER for anybody needs to be not binding, implying that at any moment a prosumer / consumer / producer could decide to resign from the community and there shall be no obstacle.
Since primary cabins (the geographical perimeter of RECs) can cover up to an entire town, a REC could potentially include 1000+ members. Managing the free flow of joining and resigning members on 1000+ potential members can be a costly activity. Roughly, it is estimated to cost around 5%-10% of yearly generated incentives.
Relevant legislation and opportunities for a multiutility company.
To date, according to GSE data, there are 154 instances of shared energy that have been implemented in Italy, including renewable energy communities and collective self-consumption configurations.
The Italian normative landscape surrounding RECs (CER in Italian) is multifaceted and governed by several rules and regulations. Key legislative acts include the Renewable Energy Directive (RED II) and the Directive on Common Rules for the Internal Market for Electricity (IEM), both integral parts of the Clean Energy for All European Package (CEP). These directives lay the groundwork for the formation and operation of CERs, providing a legal framework for their establishment and operation within Italy (SENEC, 2024).
Italian legislation, including the Decree on Renewable Energy Communities 2024 completed the general framework. This decree defines the rules for gaining access to incentives, such as characteristics of a production plant and computation rules to determine “virtually shared energy”.
Additionally, the decree sets its objective to develop five gigawatts of renewable energy capacity by 2027, signaling a commitment to fostering community-driven sustainability initiatives across Italy (SENEC, 2024).
It is important to underline the social purpose of CACERs. This incentive scheme is specifically designed to make sure that the incentives money generated by the communities have a direct positive impact on the territory where communities are located. The 2024 Decree contains a provision that enforces this principle: for each percentage of virtually shared energy on the total energy injected in the grid by members, there exists a threshold value that divides the total incentives money into two wallets:
One wallet has no limitation on its application/destination.
The second necessarily needs to be either paid out to the members of the community that are NOT SMEs or to be reinvested in socially positive local initiatives.
Another fundamental regulatory characteristic for CACER’s business model development is the fact that CACERs need to implement a democratic governance structure and shall allow its members to join and leave freely. Of course, in the case of RECs that have shared CAPEX or that are based on crowdfunding, joining, and leaving may require to settle their share of investment. Other than closing their financial position with the community, there shall be no other obstacle to joining/leaving a community. A third normative requirement that is particularly relevant to multiutilities is that members of a configuration need to maintain their “final clients rights”, therefore they cannot be forced to change their energy purchase contracts or be bounded to one specific offer to be member of a CACER.
Any CACER will receive incentives for 20 years starting from the day when the production plant is activated.
Examining exemplary cases of CACERs implementation in Italy provides valuable insights into the potential and impact of community-driven energy initiatives. For instance, Magliano Alpi's "Energy City Hall" is the pioneer of Italian CACERs, exemplifying successful collaboration between local government and academia. Inaugurated in 2020, this CER comprises photovoltaic installations spanning public buildings like the town hall, library, gymnasium, and schools, as well as private entities including households, professionals, and artisans. Through collaboration with the Energy Center of the Politecnico di Torino, Magliano Alpi showcases the power of community-driven energy solutions to drive sustainability and foster local engagement (CER Magliano Alpi, 2024).
In this landscape, A2A could play several roles. A2A could act as an enabler for the development of diffused energy production. With its solar PV business, it could take care of installation and maintenance of the hardware and leave the management of the community to its members. Additionally, it could be possible for A2A to act as a “third-party producer” and take on the role of “community manager” (Referente in Italian) responsible for the management of the configurations.
The community manager is the subject that is delegated by the configurations to carry out all sorts of administrative procedures, collection of information and responsible for communicating with the GSE. Such a role is time-consuming and complicated, involving many steps and the submission of several technical documents. A service that large energy communities are eager to pay for.
Proposed solutions shall remain within the legal framework and compliant with the social mission of the incentives scheme.
Computing Economic Values.
The energy that is produced by the RES plant can either be consumed instantly by the POD to which the plant is connected to (self-consumption) or injected into the grid. This simultaneous consumption is defined as “physical self-consumption” and can be thought of as avoided costs for the prosumer. Excess energy is injected into the grid, and its dispatching is left to the GSE.
The easiest and most common way to dispatch injected energy is through the RID service offered by the GSE. The price paid by the GSE for injected energy is set equal to the hourly zonal price for electricity for the same market zone (note that the Italian electricity market is split into 7 zones, each of which sets its own hourly price). In addition, for plants under 100kWp that receive incentives there is the possibility to adhere to the “PMG” scheme, which sets a floor to the zonal price at 40€/MWh. Adhering to PMG allows PV plants operators to make sure that their selling price never falls below the floor price.
Incentives are computed based on “virtually shared” energy: the minimum between energy injected in the grid and member consumption on an hourly basis. For each hour, the GSE will match the consumption of POD member of the community and the injected energy from the plant. Every month the GSE will pay an estimate incentives money amount, and it will adjust the payment according to actual measures of virtually shared energy. Moreover, the GSE will provide the community manager with detailed proof on computation of total energy injected, matched consumption and individual POD contribution to the total shared energy. These measures are useful for the community manager for when it’ll need to redistribute the incentives money.
Intuitively, members can boost incentives generation by shifting their loads to hours when the plants member of the configuration is producing. Incentives are maximized when injected energy is fully shared.
Incentives are made of two components:
The first component is the hourly incentivizing tariff “Tariffa Premio Incentivante” TIP. It sets the €/MWh price to be applied to the MWhs shared per hour of the year. It depends on the size of each plant, Pz the spot price of electricity on the zonal day ahead market and geographical location of the configuration. The computation is described in the figure below. Please note that the TIPbase component can vary depending on Pz, but to simplify the case Pz is assumed to not rise above a high enough level which makes TIPbase change (this is a super solid assumption).
The second component is the “shared-energy valuation”. It compensates the members for the positive effect that their local virtual self-consumption has on the national grid. In fact, by consuming energy that only required transportation along the local distribution grid the members relieve some stress on the national transportation system. The compensation amounts to 10,57 €/MWh for all CACERs. ACCs receive an additional 0,65€/MWh.
It is important to specify that the legislator has included a provision for determining a minimum amount of money which needs to be invested in socially positive initiatives. In fact, a minimum proportion of the year-end total of the incentivizing tariff (the first component) needs to be either distributed to the members of the configurations which are not SMEs or invested in socially positive impact initiatives. The computation of this minimum proportion is described by the formula:
Therefore, of the total year-end incentives, at least a “lower limit %” needs to be enjoyed by entities different from SMEs. This rule is applied only when SMEs are members of a configuration. For instance, if the community virtually shares 60% of the yearly electricity injected in the grid, 5% of the total yearly incentives’ money needs to be invested in socially positive initiatives or to be paid out to community members that are not SMEs. More details on the application of this lower limit % can be found in the practical case.
In conclusion, it remains up to the CACER to determine how and which economic benefits to split among members. These policies must be specified in the governing documents of the configuration and are subject to GSE inspection to verify the requirements mentioned above.
The solver’s role.
Solvers will need to find an innovative way to either:
Increase the amount of shared energy (i.e., employing BESS and programmable smart appliances)
Increase the final pro capita value that each member gets from the community. For instance, a possible solution is that the benefit is not paid out in cash, but that it is invested in some sort of local initiative which can bring more value to the single member instead of cash. A criticality of this solution is that it may not seem appealing to every member. It needs to be supported by an effective and well-designed communication campaign.
A combination of the previous proposals to increase the final benefit for the single member and for the community.
Solvers are free to devise any investment strategy, payout policy or peculiar statute structure for the community, as long as it remains compliant with the relevant legislation and that it can be effectively communicated to the members of the community (it is okay if you suggest not to pay out and invest in a public playground space, but it is not okay if you invest in some exotic financial product with a profile risk that is totally incompatible with the spirit of CACERs).
Success Criteria
Below are described some general characteristics of the proposed solution that will be taken into consideration while evaluating the submitted ideas.
Sustainable Value Generation
The value generated by CACERs shall be redistributed to its members pursuing the social mission of these configurations, according to legislation. Below are listed some prerequisites for the development of CACERs:
Investments in hardware shall be borne by the community as a whole and benefit the entire configuration. Investments at household level shall not prevent the participation of the members that cannot afford such upfront costs at the time of constitution. For instance, if the community needs to install a battery, it shall be financed either by the prosumer (for its sole benefit) or by the entire community (to increase incentives). Moreover, it shall not be the case that, to participate, each single member is required to invest in smart appliances, and if they do, they shall see their share of incentives grow accordingly.
Leveraging existing technology to maximize incentives generation (i.e., batteries or smart appliances).
The RES plant to be employed shall be suitable for the specific setting/environment and respect the environmental requirements provided. For instance, you cannot install a wind turbine in Milano downtown.
If the solvers are competent with the matter, they can also provide a solution based on the legal form that RECs need to implement to generate savings and ease of operations.
This success criteria accounts for 50% of the final evaluation score.
Coherent communication strategy
The identified solution needs to be communicated in such a way that stakeholders welcome the innovation.
The identified solution shall cater to the needs of the several types of members (families, SMEs, Public Administrations and nonprofits).
It shall be clear how the solution could have a positive impact at community level. i.e., support local schools, favor integration, public spaces maintenance…
It must be clear that the identified solution does not adversely affect environmental or social objectives while supporting CACERs sustainable objectives.
This success criteria accounts for 25% of the final evaluation score.
Simple adoption and scalability
Solution should offer flexibility and scalability to accommodate varying RES dimension capacities and configurations, allowing for easy adaptation and adoption to different community sizes and energy demand.
This success criteria accounts for 25% of the final evaluation score.
How do I win?
Deliverable
A brief teaser presentation (5-10 slides) presenting the overall strategy (business model, technology employed, communication strategy). The presentation shall explain the mechanism in a simple manner, highlighting the innovative side of the proposed solution.
A detailed report (maximum 10 pages) expanding what has been presented. The report shall contain:
Description of the solution
Detailed explanation of the economic flows of the solution
Advantages and disadvantages for the various stakeholders involved
Description of the communication strategy to the RECs members.
If deemed necessary, submit a spreadsheet or tables showing how the proposed solution works economically, clearly showing the cash flows from one source to the other. Include an appropriate sensitivity analysis on the main sources of risk of your proposed solution.
To be eligible for an award, the submission shall include:
A business case showing how the solution includes remuneration for all stakeholder’s vs the benchmark presented above.
Presentation outlining in 5- 10 slides the Business Model, advantage and satisfaction of success criteria described above.
Brief description of how the proposed solution complies with Italian legislation on CACERs.
Description of the effort demanded by A2A for the implementation of the proposed solution.
General rules to be eligible for an award:
Satisfy the Judging Scorecard requirements.
Thoughtfully address the Submission Form questions.
Be scored higher than your competitors!
Prize
Winners
Award
Total
1st Prize
$19,000
$19,000
Runners Up (up to 2 winners)
$5,000
$10,000
Categorical Prizes:
$500
$1,000
Best “Coherent Communication Strategy”
Best “Simple adoption and scalability”
Total Prize Purse
$30,000
A2A may contact potential winners, before winner selection/announcement, to discuss their solution.
Based on the quality of the submissions, A2A may choose to reallocate the individual awards. In the unlikely case of no Winner and/or Runners Up, A2A reserves the right to withhold the Prize amount.
Rules
Participation Eligibility:
The challenge is open to all adult individuals, private teams, public teams, and collegiate teams. Teams may originate from any country. Submissions must be made in English. All challenge-related communication will be in English.
No specific qualifications or expertise in the field of photovoltaics is required. Prize organizers encourage outside individuals and non-expert teams as well to compete and propose new solutions.
To be eligible to compete, you must comply with all the terms of the challenge as defined in the Challenge-Specific Agreement
Registration and Submissions:
Submissions must be made online (only), via upload to the HeroX.com website, on or before 09:00 GMT+2 on 2024-09-27. All uploads must be in PDF format. No late submissions will be accepted.
This challenge allows multiple submissions per individual/team. Should you have multiple entries to submit to this challenge, they will be considered separately. Whether or not multiple entries from the same individual or team may be chosen for a prize is up to the discretion of the Challenge Sponsor. You are not required to submit multiple entries, if that option is available.
Intellectual Property Rights:
As detailed in the Challenge-Specific Agreement – Competitors, Innovator will retain all intellectual property rights to their technology. Should the innovator win an award, the Sponsor will require the Innovator to share a license to the intellectual property contained in the Submission. This allows both the Innovator and Sponsor to independently use the intellectual property for their own use.
Awarding of the Prize:
The Individual Submitter or Team Captain is automatically designated as the Recipient of the prize monies. The Individual’s or Captain’s name must also match the Authorized Person on the receiving Bank Account. No changes are permitted to the prize Recipient after the Submission Deadline date. If you wish to change who would receive the prize monies, those changes must be completed prior to the Submission Deadline. View our Knowledge Base article here for how to change Team Captains.
Additional Information
By participating in the challenge, each competitor agrees to adhere to the HeroX Intellectual Integrity Policy and promises to submit only their original idea. Any indication of "copying" amongst competitors is grounds for disqualification.
All applications will go through a process of due diligence; any application found to be misrepresentative, plagiarized, or sharing an idea that is not their own will be automatically disqualified.
All ineligible applicants will be automatically removed from the competition with no recourse or reimbursement.
No purchase or payment of any kind is necessary to enter or win the competition.
And just like that, it’s over! Thank you to all of you who sent in submissions. We can’t wait to finally see what you’ve been working so hard on.
Crowdsourcing would be nothing without the crowd — that’s you! Thank you for being an indispensable part of this process, and using your brainpower for the greater good.
Congratulations on completing your submission. This is not an easy process, and you deserve a pat on the back for your hard work and dedication. Thank you!
You now have less than a day left to submit your A2A Energy Community Economic Equilibrium Challengeentry. Now’s the time to make final changes and send it off!
Please remember that the deadline is September 27, 2024 at 11:00 pm CET Time, 5:00pm ET Time. We don’t accept any late submissions, so do your best to get it in ahead of time.
We can’t wait to see what you’ve come up with! Best of luck.
The time has almost come! You now have two days left to finish your A2A Energy Community Economic Equilibrium Challenge submission. The final project is due on September 27, 2024 at 11:00pm CET Time, 5:00pm ET Time.
We don’t accept any late submissions, so now is the time to make sure that everything is good to go. Double check file formats and make sure that all of your project components are easily accessible.
We are more than happy to answer your last-minute questions about the submission process. Post a question in the forum or leave a comment on this post, and we will be in touch with you.
We can’t wait to see the final projects. Good luck!
This is your one week warning! The final submission deadline is September 27, 2024 at 11:00pm CET Time (Central Europe Time), 5:00pm ET Time (New York). No late submissions will be accepted, so make sure to give yourself plenty of buffer time.
If there’s anything you’re unsure about, there is still time to ask for help. Post on the discussion forum or leave a comment on this post. We’ll keep an eye out for your questions.
We can’t wait to see what you’ve been working on. Best of luck finishing up your submissions!
This is your official reminder that you have two weeks left to submit your A2A Energy Community Economic Equilibrium Challenge solution!
Please remember that we don’t accept any late submissions. It’s a good idea to get 75% of your project done a full week before it’s due to allow time for troubleshooting.
Now is also the time to ask questions and seek help. To ask a question, post on the discussion forum or comment directly on this post. We’re looking forward to hearing from you!
