On the 4th of April, CWaPE, the energy regulator of Wallonia (Belgium), organised a seminar on collective self-consumption with the support of NEON. The event followed the adoption of the Clean Energy Package, which defines the new rules that will govern the EU electricity market in the years to come. This package aims to put the consumer and the citizen at the centre of the energy transition by legally recognising a number of new actors including “active customers”, “renewables self-consumers” and “jointly acting renewables self-consumers” as well as “citizen energy communities” and “renewable energy communities” and giving them a set of rights.
While the new rules are a big step forward, they are just a start, and will now need to be implemented by EU member states. Discussions on the exact significance of the package and how to adapt it to the national legal and regulatory frameworks have already started, but most often revolve around issues linked to licencing, grid tariffs and other regulatory and technical questions. Much less has been said about the relationship between the “classical” and well-known rights of energy consumers, such as contractual rights, the right to switch, the right to choose one’s supplier, etc. and the right to (collectively) self-consume.
The discussion co-organised by NEON and CWaPE tried to fill this gap by looking at the rights of consumers that wish to engage in a citizens or renewable energy community to participate in the activity of renewables self-consumption, or produce and share their energy with other prosumers. The present article summarises the discussions and lessons learned and looks into the future of consumer rights in “collective self-consumption”.
Citizens and renewable energy communities: a supplier like any other?
Under the new EU rules, customers will have the right to act as active customers (understood to be a “final customer or a group of jointly acting final customers” acting through contractual arrangements) and have the right to consume, store and sell self-generated electricity and participate in flexibility or energy efficiency schemes. In addition, the text provides a legal recognition for citizens getting together to form “citizens” and “renewable” energy communities. Those communities are legal entities that engage in electricity generation, distribution, aggregation, storage, and other services, and which provide additional environmental, economic or social community benefits for its members or the local areas where the community operates.
Citizens energy communities are mostly cooperatives, and thus companies, albeit with a specific ownership structure, governance model and aim, which is to provide services to the members and re-inject the profits into the community. In this sense, citizens energy communities represent a distinct type of market actor. As explained by Josh Roberts from REScoop.eu, any market actor can set up a model to facilitate individual renewables self-consumption or collective self-consumption. Only when collective self-consumption is performed through a legal entity that complies with the eligibility criteria under the new EU rules would it be considered an energy community.
From a consumer rights perspective, citizens joining a citizens energy community act as consumers signing a supply contract and as investors when they buy a given number of shares.
Participation in a citizens energy community is open and voluntary and shareholders or members are allowed to leave it under the same conditions than customers that have a supply contract with a “classical” commercial supplier. Members of a citizens energy community do not lose their rights as customers, which include the right to have several contracts with different energy service providers, the right to a detailed supply contract, the right to accurate billing information, the right to switch supplier or the right to get help from a certified ADR body if something goes wrong. What is more, those rights are also extended to companies –not only citizens– that join a renewable energy cooperative.
Therefore, in terms of consumer rights, citizens and renewable energy communities are pretty similar to the more “traditional” suppliers. However, unlike other suppliers, citizens need to buy at least one share to be member of a community. While this may be a barrier to access for some households, solutions exist. As explained by Rescoop.eu President Dirk Vansintjan, some cooperatives offer the possibility to buy the share over a long period through the regular energy bills and other cooperatives are studying the possibility to create “social funds” through contributions from members. Also, unlike other traditional suppliers, they are non-commercial in nature and their goal is to provide larger benefits to its members or the area they serve, from investments in local infrastructure to financing energy efficiency renovations, as decided by the members of the community.
Finally, some differences exist when it comes to shareholders wanting to exit the community and get back their shares. While the new EU law says that anyone should be allowed to leave whenever they want, the directive does not specify the time-frame. Indeed, “national legislation usually regulates the withdrawal from a cooperative because shareholders suddenly leaving can cause financial problems, and thus the delays need to be longer than for switching supplier”, explains Josh Roberts from Rescoop.eu. Some EU Member States, such as Luxembourg, have thus set minimum delays for exiting the community as a shareholder and getting back one’s investment.
Jointly acting prosumers: a Pandora’s box of disputes?
Looking at active customers acting jointly outside a citizens or renewable energy community, things are less clear. First of all, the legal form that those exchanges should take is far from obvious: is it just an “informal” exchange, without any contract, or is it done through a third party platform that takes care of the “paperwork”? Are prosumers subscribing to an aggregator acting collectively? Second, who exactly are the parties involved, and what are their responsibilities and liabilities? Is there a contract with the distribution system operator (DSO) for using the distribution network? What if the third party software that is used to exchange energy does not work? What if the platform sold me a contract that is “faulty”?
Truly enough, for most people, those are still theoretical questions, as (collective) self-consumption is not yet possible or incentivised in most EU countries. This, however, should quickly change, in part thanks to the implementation of Clean Energy Package.
Some countries have already started to provide a legal framework for energy sharing. This is the case of Germany, which adopted a legal framework to allow for the supply of energy by landlords to their tenants around two years ago. Under that scheme, tenants sign a normal electricity supply contract with the landlord (who needs to register as supplier) and all corresponding consumer protection provisions apply, explains Holger Schneidewindt, energy lawyer and policy advisor for a German consumer organisation. However, the scheme has so far only seen a limited take-up, mostly due to its administrative complexity.
Other initiatives come from the private sector and largely involve peer-to-peer trading. The so-called “sharing economy” has seen a boom in recent years with the development of platforms such as AirBnB, BlaBla car or Uber, which allow individuals to share goods and services. Some similar platforms already exist in the energy sector, and are expected to develop fast. Here, according to Holger Schneidewindt, consumers may face data protection and contractual issues. The consumer representative’s warning is supported by a study by the European Commission, which found that there was a significant lack of clarity when it comes to the liability of platforms that do more than only list providers or offers. This business model is already applied by some platforms in the energy sector, which not only list producers but also register them as suppliers or offer other kinds of additional services such as standard contracts to be used by the supplier and the customer. This legal gap will need to be urgently addressed with the development of that new kind of business model.
Contractual relationships performed through or linked to a platform are mostly governed by general civil law, something that may not be enough to protect consumers in essential services sectors such as energy. The EU has recently adopted rules that will increase the transparency of platforms whose business model is merely based on listing, but EU rules do not (yet?) address contractual issues between platforms and consumers.
Current technology, such as blockchain, could potentially allow any group of individuals to exchange energy without the intermediation of a commercial platform. Nevertheless, the absence of a company does not simplify things. The contractual side of blockchain, which is used by many pilot projects for peer-to-peer trading, is an area were much more research is needed. This is also confirmed by the international renewable energy agency IRENA. Prosumers using blockchain to exchange energy could potentially chose between no contract, “smart contracts” that can be self-executed when specific conditions are met or create a decentralised autonomous organisation (DAO). Again, none of those contractual forms is foreseen or considered in the present EU consumer law. Some researchers have already pointed out the need to extend consumer law safeguards to consumer-to-consumer (C2C) transactions, but much work still remains to be done.
Dispute resolution: the missing link?
As illustrated in this article, while the issue of consumer rights seems quite straight-forward when it comes to citizen energy communities, it is much less clear when we look at active customers acting jointly outside a well-known and defined entity such as a cooperative. This lack of clarity also extends to redress and dispute resolution. Redress and alternative dispute resolution are quite straight-forward when it comes to a customer-supplier relationship, which would be the case of disputes involving citizens or renewable energy cooperatives and landlord-tenant contracts, but things get blurry as soon as the contractual relationship involves other players.
Collective-self-consumption contracts often do not only entail the supply of energy, but also other services in what is often called “bundled offers”. Many companies already provide physical infrastructure such as PV panels or batteries that are installed at the customers’ premises. In many cases, the installation and liabilities are transferred to a third company (installer, producer, etc.) without the client-prosumer being fully aware of it. In addition, the access to redress within one of those “bundled offers” is far from easy, as most dispute-resolution systems have a limited scope and cannot deal with installation problems that are not strictly related to energy supply.
When it comes to peer-to-peer exchange through platforms the situation is even less clear. The Commission study on platforms already pointed out that there is a lack of access to redress for peer consumers and peer providers. The study found that while over half of consumers (55%) had at least one problem with peer platforms over the past year, “bringing the case to the civil courts” was generally the only mechanism available to obtain redress in case of disputes between a customer and a platform or in C2C disputes. Litigation can be both lengthy and costly, and actually leads to low levels of redress whenever the value is the dispute itself is low. A similar conclusion was reached by IRENA, which found that the “regulatory environment for blockchain remains uncertain”, and that the “procedure for handling disputes, wrongdoings and transaction reversals is inconsistent” are also “legally uncertain”.
The lack of redress is a direct consequence of the lack of contractual clarity and the lack of consumer rights that are clear and known to consumers. But it is also linked to a legal framework that will soon be out-of-date. While the new Article 26 of the recently-approved Market Design Directive requests ADR bodies to cooperate to solve disputes involving bundled offers, many member states have only an ADR landscape that is in its infancy, with some sectors not covered at all and a lack of global oversight and coordination. In addition, the directive regulating alternative dispute-resolution for consumer complaints (Directive 2013/11 on ADR) only applies when there is a contract between a trader and a consumer, logically excluding C2C disputes. C2C disputes would still be covered by the mediation directive, although that directive only applies to cross-border disputes, is very general and blatantly lacks any benchmark for quality standards.
The current international debate on energy tells us that we need to get ready for a future of prosumption and energy sharing. It is understandable that no-one wants to put dispute-resolution at the centre of the debate. Nevertheless, contractual issues and potential disputes will need to be addressed together with the development of new forms of consumption and exchange. The market and the new EU regulatory framework open the door to new possibilities, but also to new risks for consumers. Those risks need to be considered and addressed if we want the biggest number of people getting involved. Focusing on dispute resolution from a consumer point of view will force stakeholders to look at the nitty-gritty within the “hype”. Dispute resolution could therefore be the missing link between those new possibilities and their effective implementation, which will only be possible with a real prosumer-rights framework.
NEON would like to thank Josh Roberts from Rescoop.eu and Holger
Schneidewindt, Energy Law & Policy Consultant at German Consumer Association North-Rhine Westphalia, for their advice and input.