An energy community makes self-consumption of solar electricity profitable. Selling surplus electricity to the grid is the last option. There are differences in the ways of distributing the surplus.

I am driven by a strong interest and enthusiasm to promote solar energy communities in Finland, as I believe they play a key role in the journey towards more sustainable and self-sufficient energy production. With this blog post, I hope to share information and help readers understand how to get the best economic benefit from solar electricity and how energy communities make it profitable for everyone.

It is primarily worth using the own production of an energy community’s solar power plant, because it is economically much more profitable than selling surplus electricity to the grid. The reason for this difference lies in the pricing and taxation of electricity. When an energy community consumes the electricity it produces itself, it avoids three significant costs that are associated with electricity purchased from the grid (see Figure 1):

  • Electricity transmission fee: This is a fee for transmitting electricity in the grid. No transmission fee is paid for electricity produced and consumed by oneself.
  • Electricity tax: The selling price of electricity includes electricity tax, which is not paid for electricity consumed by oneself.
  • Energy fee: This is a fee charged by the electricity seller for the electricity itself.

Figure 1. Parts related to the purchase of electricity vs. the sale of own electricity production.

 

When surplus electricity is sold back to the grid, the compensation received is usually significantly lower than the purchase price of the electricity. The sales price is often based on the market price (e.g. spot price), and the electricity company’s margin is often deducted from it. This means that you will never get the same price for the electricity you sell as you would pay if you bought it back from the grid. Therefore, the greatest financial benefit is always obtained by maximizing the consumption of your own production on site.

Previously, housing associations have only been able to use the electricity produced by solar panels for property electricity, such as lighting or elevators. Thanks to an energy community, production can also be distributed to apartments and other premises, which significantly increases the share of self-use.

With the help of an energy community, the panel system can be sized larger so that there is enough electricity for the needs of the residents. There is less overproduction in relation to total consumption, because production and consumption are balanced across the entire community.

Establishing an energy community can bring a significantly faster payback period and a higher return on the solar panel investment.

The distribution methods for surplus electricity production SMA (Single Metering Account) and SMB (Shared Metering Block) are two different ways of distributing the solar electricity produced but not used in an energy community. In both models, the electricity is first used for the property’s own general consumption, after which the surplus is distributed among the community members. The main difference between these two models is who sells the surplus electricity to the electricity grid and who receives the financial benefit from it. (see Figure 2).

Figure 2. Illustration of SMA and SMB distribution methods in energy communities.

In the SMA distribution method, the owner or representative of the energy community sells all surplus electricity under one contract. The seller is a housing association or energy association, and a single contract is made with the selected electricity seller. The income from surplus electricity is paid to the housing association or the association. The association distributes the income to its members, for example by deducting it from the maintenance fee or rent, or it can use the income for some other common purpose. In the case of SMA, management is simple, because only one sales agreement and one invoicing policy are needed. Members do not need their own electricity sales agreements for the surplus.

In the SMB distribution method, each member of the energy association sells the surplus electricity allocated to their share separately. Each member must make their own agreement with the electricity seller of their choice for the sale of the surplus electricity. Income from surplus electricity is paid directly in accordance with each member’s electricity sales agreement. Income is not shared among the association. In the case of SMB, management is more complicated, because each member must have their own sales agreement. Members must take care of their own agreements and review their own electricity bills. The choice of electricity sellers can vary, making the overall outcome of the community more difficult to predict.

Table 1 below illustrates the differences between SMA and SMB distribution methods.

Table 1. SMA and SMB distribution

Which is better? The choice depends on the goals of the energy community and the wishes of the members. SMA is an administratively lighter and simpler solution, which is well suited to communities that want to keep things as simple as possible. The SMB model, on the other hand, gives members more freedom and direct benefit from the surplus, but requires more effort from each participant.

This blog is part of the StartSun project, which focuses on promoting solar energy communities in Finland and other Baltic countries. Green Net Finland (GNF) is one of the project partners.

Blog author: Evilina Lutfi. StartSun project project manager (GNF’s share). Translation and visuals: Riikka Ojala. StartSun Information Manager (GNF’s share)

More information about the project: https://gnf.fi/fi/gnf/startsun-start-ups-for-solar-energy-communities/