LCA driven solar compensation mechanism for Renewable Energy Communities: the Italian case
Graphical abstract
Introduction
This paper addresses the problem of designing a sustainable policy to promote photovoltaic (PV) and energy storage systems installed in Renewable Energy Communities (RECs) by proposing a novel approach for solar compensation applied to an Italian case study. RECs are defined by the European Union Renewable Energy Directive (RED II) [1], which is part of the European Commission's Clean Energy Package [2], as non-commercial entities whose purpose is providing environmental, economic and social benefits. They are composed of a group of users investing in energy production technologies from renewable sources and storage systems, whose costs are shared among the community members; this is particularly useful because such technologies can have high investment costs [3]. Moreover, RECs allow to face energy poverty issues [2] affecting many areas of the World, including some parts of Italy [4,5]. Some of the most commonly deployed technologies in RECs are PV modules for the energy production and battery energy storage systems (BESSs) to store the PV energy surplus. For instance, a REC has been recently installed in Crevillent (Spain) where about 70 households deployed 125 kW of PV and a 200 kWh BESS [6].
RECs belong to the category of behind the meter installations and several types of economic benefits, named incentives, can be used to promote their deployment. Some European countries like Germany and Denmark have already designed an energy policy framework for RECs [2]; differently, in Italy a specific policy is still under evaluation [7]. Notably, coherently with the RED II principles [1], the Italian Energy Authority [8] is working on the development of a bonus (that could be formalized soon) promoting the self-consumption (SC) of the energy shared by RECs members [8]. Nevertheless the following incentives for PV systems are already available [9]:
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Net metering: users can get a reimbursement calculated as the product between the exchanged energy (namely the lower value between the electricity imports and exports) and a reference remuneration; moreover electricity can be sold to the utility at market value. In Italy this mechanism is known as “Scambio sul posto” and the reference remuneration is approximately equal to 70% of the energy cost [10]. Currently, this incentive applies for PV installations whose size is lower than 500 kW [9].
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Feed-in tariffs (FITs): the electricity exported to the grid can be sold by providing a guaranteed, above-market price for producers [11]. Currently in Italy, according to a mechanism known as “Ritiro dedicato”, the minimum price guaranteed is generally lower than the price set by the market, and therefore electricity is commonly sold at market value [9].
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Tax deductions: users can get a reimbursement for the cost of PV installations or other residential interventions increasing the energy efficiency of a building. In Italy such incentive reimburses a percentage between 50% and 110% of installation costs depending on the type of intervention [12].
Different economic tools like bidding systems [13], Green Certificates [14,15] and Renewable Portfolio Standards [16] are instead applied to power plants, but they are out of the scopes of this paper.
Another way to indirectly promote renewable energy systems is adopting carbon taxes that penalize the massive consumption of fossil resources. Carbon taxes obligate energy producers from fossil resources to pay a fee for the amount of carbon dioxide released to the atmosphere. The mechanism of carbon taxes is carefully described in a report published by the Organisation for Economic Co-operation and Development (OECD) [17]. Nevertheless, this report underlines that most of the OECD countries have not adopted an adequate carbon taxes policy, especially in some strategic sectors like electricity production; indeed, in Italy carbon dioxide emissions are taxed at 15.4 EUR/tonCO2, whereas in USA it is not taxed at all [17]. Differently, Northern European countries have taxed carbon dioxide emissions at a higher rate; some examples are Denmark (104.57 EUR/tonCO2), Sweden (193.08 EUR/tonCO2), Norway (1344.38 EUR/tonCO2) and Iceland (4168.18 EUR/tonCO2). Moreover, carbon taxes only affect the carbon dioxide direct emissions from electricity production through fossil resources, whereas the life cycle greenhouse gases (GHGs) emission of renewable energy technologies is not considered as a negative externality.
All these incentives and economic tools are thought to promote rapid adoption of renewable energy technologies because they are generally considered as sustainable for the environment. Nevertheless, excessive incentives may lead to over-investments in PV as demonstrated by Poponi et al. [18] analyzing Italian FITs in the last decade. Furthermore, all energy systems, including RECs, determine some environmental impacts over their life cycle. Therefore, if incentives or tariffs do not consider the full environmental performances of RECs, they might provide wrong economic signals and lead to an inadequate deployment of PV from an environmental perspective [19]. For these reasons, the current incentives have some limitations dealing with their environmental compatibility. In order to address such an issue, this paper aims to achieve three targets regarding incentives for PV adoption by RECs:
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Incentives should be directly correlated with RECs sustainability: most of policy strategies aim to push as more users as possible to purchase PV systems assuming that the more is the renewable capacity, the lower are the environmental impacts.
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Incentives should be defined through a granular evaluation: as PV energy production is variable as well as the energy mix sustainability, policymakers should define incentives on hourly basis as function of PV environmental benefits to the grid in time.
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Incentives should be adaptive to the changes that new installations apply to the grid energy mix sustainability.
In other words, it is important to design a new energy policy framework whose aim is not increasing renewable energies installed power but pursuing the sustainability of the national energy systems. In this perspective, as RECs are expected to reach a large diffusion in all countries, promoting them with adequate incentives represents a great opportunity towards a sustainable energy transition. More specifically, the problem addressed in this paper consists on including environmental impact analyses in a FITs design model through a mathematical correlation with a life cycle assessment (LCA). This problem is solved by defining a three-steps methodology that includes RECs economic Optimal Design, LCA and the FITs cost allocation. As the economic Optimal Design, that is the first step, requires as an input the FITs, that are assessed in the last step, the approach has to be iterative.
This paper is structured as following: Section 2 contains the literature background of the proposed study; in Section 3 the methodology is detailed; in Section 4 the readers can find the case study description; Section 5 contains the results description and discussion and Section 6 contains the conclusions and suggestions for future works.
Section snippets
Literature review
This section summarizes the background literature that contributed to this study and it underlines the substantial differences between the proposed model and the models discussed by previous scholars.
This study grounds on an existing algorithm, named Distributed Energy Resources Customer Adoption Model (DER-CAM) [20], that allows to design PV systems by minimizing the costs for their energy users. DER-CAM has been used in literature to forecast the deployment of behind the meter PV and storage
Methodology
In this section, the methodology used to evaluate new FITs for RECs is described. This approach assumes economic rationality in RECs’ adoption of technologies: the size and utilization of PV and storage devices are determined in order to minimize the annualized costs of energy from the RECs perspective. We define their PV and storage investments based on an economic rational model [25], which calculates the optimal investments taking into account technology costs as well as specific RECs data,
Case study
This section describes the characterization of RECs and collects all the data necessary to apply the methodology. As demonstrated by the equations in the previous section, the proposed model is constructed in a general and objective way. Nevertheless, to guarantee the results reliability, the Case Study must be tailored for the Italian conditions. For instance, Italy has an elongated territory that covers a wide range of latitudes and thus of solar radiation values and load profiles. Therefore,
Results and discussion
In this section, the main outcomes of the analysis are collected and discussed. Although the results are calculated and presented sequentially in this section, they are all interdependent and comprise an equilibrium between three aspects:
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RECs components size and energy management;
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RECs environmental performances;
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Proposed FITs that allocate the environmental benefits to costs.
In order to highlight the effectiveness of the proposed incentives, results are also calculated using the current FITs as
Conclusions
This paper proposes a novel design approach for new FITs rewarding RECs members of their environmental benefits. The proposed design framework allows to consider the life cycle carbon dioxide emitted and avoided by RECs depending on time and on the changes of the energy mix. The outcomes resulting from this approach are i) the optimal RECs components size and energy management, evaluated through economic optimization; ii) the environmental performances of RECs and of the energy mix, assessed
CRediT author statement
Federico Rossi: Conceptualization, Methodology, Software, Investigation, Writing - Original Draft. Miguel Heleno: Conceptualization, Methodology, Software, Writing - Review & Editing, Supervision. Riccardo Basosi: Writing - Review & Editing, Supervision. Adalgisa Sinicropi: Writing - Review & Editing, Super∖vision.
Declaration of competing interest
The authors declare that they have no known competing financial interests or personal relationships that could have appeared to influence the work reported in this paper.
Acknowledgements
F.R.,A.S. and R.B. acknowledge MIUR Grant - Department of Excellence 2018-2022. F.R. is grateful for the Ph.D. grant within the “Progetto Pegaso” funded by Regione Toscana.
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2022, EnergyCitation Excerpt :“Net zero” ECs, i.e., fed by renewables and having a null balance of the emissions in the whole life-cycle, can achieve relevant primary energy savings compared to conventional systems exploiting fossil fuels [20]. Feed-in tariff mechanisms that reward the members of RECs for their avoided CO2 emissions could lead to important reductions of power system emissions [21]. ECs could also promote the rural electrification planning [22] and a wider access to renewables for vulnerable energy users [23].