The Possibility of Renewable Energy Development Through Prosumer Energy

The development of renewable energy is one of the areas affecting the achievement of environmental protection goals which, in turn, are to contribute to climate improvement and offset the effects of negative climate changes that have taken place over the last few decades. Supporting renewable forms of energy constitutes one of the European Union (EU) energy policy objectives presented expressis verbis in the Treaty on the Functioning of the European Union ⁽¹⁾. The treaty provisions on the development of renewable energy are supplemented by Directive (EU) 2018/2001 of the European Parliament and of the Council of December 11, 2018 on the Promotion of the Use of Energy from Renewable Sources ⁽²⁾, (i. e., the RED II directive) which, to a certain extent, was implemented into the national legal and regulatory framework based on the relevant regulations of the Act of 20 February 2015 on renewable energy sources ⁽³⁾.

The increased use of energy from renewable sources is an important element of the package offering measures necessary to reduce greenhouse gas emissions and meet the EU commitments under the Paris Agreement of 2015 on climate change adopted at the end of the 21st Conference of the Parties to the United Nations Framework Convention on Climate Change (the so-called ‘Paris Agreement’), and also to implement the EU climate and energy policy framework until 2030, including the EU binding target to reduce emissions by at least 40 per cent below 1990 levels by 2030. The EU 2030 binding renewable energy target and the member states’ contributions to that target, including their baseline shares in relation to their 2020 national targets, are of overriding importance to the EU energy and environment policy ⁽⁴⁾. More specifically, the EU 2030 energy and climate targets mean an EU-wide binding target of reducing intra-EU economy-wide greenhouse gas emissions by at least 40 per cent below 1990 levels by 2030, an EU-wide binding target of at least 32 per cent renewable energy share in the EU energy consumption in 2030, an EU-wide headline target for improving energy efficiency at the EU level of at least 32.5 per cent by 2030, and a 15 per cent electricity interconnection target for 2030 or any subsequent targets including, to the extent agreed by the European Council or the European Parliament and the Council for 2030 ⁽⁵⁾.The development of renewable energy, in addition to meeting climate goals, is also of fundamental importance for promoting the security of the energy supply, sustainable energy at affordable prices, technological development and innovation, as well as technological and industrial leadership, while ensuring environmental, social and health benefits ⁽⁶⁾. The above assumptions confirm that the development of renewable energy remains indispensable not only to achieve environmental and energy goals, but also to maintain energy security and uninterrupted energy supplies to consumers, and thus to make renewable energy independent of conventional energy. Recent events, such as the COVID-19 pandemic and the Russian armed invasion of Ukraine, including the related socio-economic consequences (also in the field of energy and gas supplies) show that the development of renewable energy should remain the priority of authorities worldwide.

Prosumer energy is an important element of the renewable energy market structure, which—prima facie—is identified with the production of renewable energy for individual needs ⁽⁷⁾. Therefore, in the simplest terms, this type of energy is associated with a consumer who produces renewable energy in order to use it and meet the household needs. Nevertheless, as it has already been mentioned, prosumer energy is an important link within the framework of renewable energy market, and the chances for its development (and thus a higher, than before, share of prosumer energy in the implementation of climate and environmental goals) have been recognized by the EU legislature, and, following it, also by the national legislature through adopting regulations aimed at the development of renewable energy. On some occasions the assessment of individual legal and regulatory framework is doubtful in the context of achieving the goal for prosumer energy development, however, such a statement does not affect the general context, evaluated ad hoc positively, in terms of the fact that the EU law and the national law have been changing over the last few years in terms of impact on the development of prosumer energy.

The purpose of this article is to assess legislative solutions regarding the possibility of prosumer energy contribution to the development of renewable energy in the overall energy balance, with the basic assumption that the role of prosumers in the process of transforming the entire energy system is significant. The analysis is focused on presenting legal definitions related to prosumer energy, because the development of this energy sector is possible primarily due to the introduced legal and regulatory framework, which results in generating electricity by prosumers. The need to define individual renewable energy prosumers, as well as collective renewable energy prosumers is connected with the ever-increasing importance of generating energy for individual needs. The development of basic framework allowing prosumers to generate, use, store and sell electricity without excessive burdens. In addition, the EU legislature recognized the problem related to the existing inequality in the position of people living in multi-apartment blocks and those residing in single-family houses ⁽⁸⁾, to be discussed later in the study. The considerations presented in this publication will also address the legal and regulatory framework which favours the development of prosumer energy by introducing mechanisms facilitating the initiation of renewable energy production ⁽⁹⁾.

Prior to discussing the main purpose of this paper, it is worth addressing the general imperatives resulting from the EU legislation on prosumer energy, including the regulatory framework conducive to its development, or at least encourage various social groups to take up prosumer energy initiatives. As it results directly from the RED II directive: ‘due to the growing importance of generating renewable electricity for individual use, there is a need to define “individual renewable energy prosumers” as well as “collective renewable energy prosumers”’. It is also necessary to introduce a regulatory framework that would provide such renewable energy prosumers with the right to generate, use, store, and sell electricity without excessive burdens. Citizens living in apartments should, e.g., benefit from their consumer rights to the same extent as households in single-family homes. However, member states should be able to differentiate between individual renewable energy prosumers and collective renewable energy prosumers based on their different characteristics, to the extent that any differentiation is proportionate and duly justified ⁽¹⁰⁾. The EU legislature also emphasises, while exposing the importance of prosumer energy for the development of the renewable energy market, that renewable energy prosumers should not face discriminatory or disproportionate burdens or costs and should not be charged with unreasonable fees. Their contribution towards achieving the climate and energy target as well as the costs and benefits they bring into the entire energy system should be taken into account. Therefore, generally, member states should not impose charges on electricity generated and used by renewable energy prosumers at the same premises. Nevertheless, member states should be able to apply non-discriminatory and proportionate charges to such electricity where necessary to ensure financial sustainability of the electricity system in order to limit support to the objectively needed level and use their support schemes efficiently. At the same time, member states should ensure that renewable energy prosumers participate, in an appropriate and balanced manner, in the overall system for sharing the costs of electricity production, distribution, and consumption when electricity is fed into the grid ⁽¹¹⁾.

Pursuant to Art. 2(15) of the RED II directive: a renewable energy prosumer means a final customer operating within its premises located within confined boundaries or, where permitted by a member state, within other premises, who generates renewable electricity for its own consumption, and who may store or sell self-generated renewable electricity, provided that, for a non-household renewables prosumer, these activities do not constitute its primary commercial or professional activity. The RED II directive also provided, in addition to the above quoted definition of a renewable energy prosumer, a normative regulation defining (following recital 66 of the preamble to the RED II directive) a collective renewable energy prosumer, where, pursuant to Art. 2(15) of the RED II directive, collective renewable energy prosumers are a group of at least two jointly acting renewable energy prosumers, located in the same building or a multi-apartment block.

In addition to the regulations defining such concepts as a renewable energy prosumer and a collective renewable energy prosumer, the most important legal determinants, including the goals specified for the implementation of the RED II directive to the legal and regulatory framework of the member states (also Poland), are provided in Art. 21 of the RED II directive. Referring to the indicated provision, it is worth mentioning that the RED II directive introduces the following requirements for the member states in terms of prosumer energy: (a) Member states shall ensure that the renewable energy prosumers have the right to produce renewable energy, including for self-consumption, store and sell their surplus production of renewable electricity, including through renewable electricity purchase agreements, through electricity suppliers and through peer-to-peer trading, while not being subject to (regarding the electricity they get from the grid or that they feed into the grid) discriminatory or disproportionate procedures and charges as well as grid charges that do not reflect costs; as regards self-generated electricity from renewable sources remaining on their premises, discriminatory or disproportionate procedures and any charges; (b) Member states shall ensure that renewable energy prosumers have the right to install and operate electricity storage systems connected to installations generating renewable electricity for their own use without being subject to any double charges, including grid charges for stored electricity remaining on their premises; (c) Member states shall ensure that renewable energy prosumers are entitled to retain their rights and obligations as final customers; (d) Member states shall ensure that renewable energy prosumers are entitled to receive remuneration, including, where appropriate, from support schemes, for the self-generated renewable electricity they feed into the grid, reflecting the market value of that electricity and may take into account its long-term value for the grid, the environment, and society. In accordance with the intention of the EU legislature, member states may apply non-discriminatory and proportionate charges to renewable energy prosumers for self-generated renewable electricity remaining on their premises in the following case: if self-generated renewable electricity is effectively supported by support schemes, and only to the extent that the economic viability of the project and the incentive effect of such support remain unaffected.

The content of the RED II directive addresses specific requirements resulting from the regulations referring to collective prosumers of renewable energy. The basic assumption of a collective prosumer concept created at the EU level is to ‘transfer’ all the benefits of an individual prosumer to a collective one. The message of the EU legislature in this regard leaves no doubt: ‘Member States shall ensure that renewable energy prosumers located in the same building, including in a multi-apartment block, have the right to undertake joint activities [...] and can make arrangements related to sharing the renewable energy produced at their premises, without prejudice to network charges and other relevant fees and taxes applicable to each renewable energy prosumer and the collective renewable energy prosumers. Any such differentiation must be proportionate and duly justified’ ⁽¹²⁾. Therefore, the intention of the EU legislature is to grant collective prosumers the same rights as individual prosumers, while – in particularly justified cases – member states will be able to differentiate between individual prosumers and group prosumers, whereby, as follows from the RED II directive, the differentiation must be proportionate and duly justified. In addition, it must be recognized that the regulations introducing the institution of a collective prosumer are focused on further development of renewable energy generation in the prosumer system and are primarily aimed at those entities that do not have sufficient space to build their (independent) renewable energy generation source (installation). Having read the RED II directive, one might even conclude that within the framework of a collective prosumer, the generation of renewable energy will take place particularly in multi-apartment blocks (e.g., by cooperatives and homeowner associations), or in office buildings and residential estates, while the basic assumption of the functioning system is the joint operation of the renewable energy source installation by prosumers. The development of prosumer energy in the form of civic cooperatives permitted and made possible based on the respective legal and regulatory framework also offers renewable energy communities the opportunity to contribute towards increasing energy efficiency at the household level and supports counteracting energy poverty by both reducing consumption and lowering supply prices. Member states should make an appropriate use of this opportunity by, e.g., assessing the possibility for allowing the participation of households that might otherwise not be able to participate, including vulnerable consumers and tenants ⁽¹³⁾.

The above definitions, as well as the rationale for their introduction, should, however, be analysed through the prism of the general manner underlying their preparation. The EU legislature repeatedly indicates that the final wording of support mechanisms, including definitions, remains the responsibility of member states implementing the EU imperatives. Therefore, it can be indicated that the EU regulations only shape a certain pattern of legal solutions necessary because no previous actions have been undertaken by member states in this regard ⁽¹⁴⁾. Pursuant to the wording of the indicated provisions presented in the RED II directive and also as a result of the earlier EU legislative initiatives, the Polish legislature defined the concept of a prosumer and distinguished it accordingly, where, as further research will show, great emphasis was placed on the development of prosumer energy by introducing not only legal solutions for the collective prosumers of renewable energy, but also for the so-called virtual prosumers.

The first normative definition of a prosumer appeared in the Polish legal framework in 2016 ⁽¹⁵⁾. According to the original definition, a prosumer is ‘a final customer purchasing electricity under a comprehensive agreement, generating electricity only from renewable energy sources in a micro-installation for its own consumption, not related to business activity regulated by the Act of July 2, 2004 on freedom of economic activity […]’ ⁽¹⁶⁾.The presented definition clearly indicated the nature of a prosumer, i.e. the generated energy was used to meet their own needs. It is also worth noting that the construction of the discussed definition, in its original wording, indicated primarily a special type of electricity purchase, i.e., based on a comprehensive agreement. It has been highlighted in the source literature that such a definition not only put electricity generation in second place, but also imposed a rigid operating framework on potential prosumers, conditioning their qualifications on a specific type of agreement ⁽¹⁷⁾.

Due to the changes of an economic and technical nature on the prosumer market ⁽¹⁸⁾, and taking into account the need to comply with the obligation to implement the EU RED II directive ⁽¹⁹⁾, the national legal framework in the field of prosumer energy has changed over the last few years. Not only has the very definition of a prosumer changed, but also new, previously non-normative, prosumer regulations appeared in the national legislation, reflecting the EU concept of prosumer energy, which is addressed below.

According to the current definition, a renewable energy prosumer is a final customer who produces electricity exclusively from renewable energy sources in a micro-installation for its own needs, provided that in the case of a final customer, who is not an electricity consumer in a household, this is not the subject of predominant economic activity defined in accordance with the regulations issued on the basis of Art. 40 sec. 2 of the Act of 29 June 1995 on public statistics (Journal of Laws of 2022, items 459 and 830) ⁽²⁰⁾. The crucial change regarding the concept of a prosumer consisted in expanding the groups of entities that plan to obtain the status of a prosumer. In the original version (i.e. in the period from 1 July 2016 to 28 August 2019), an entity interested in prosumerism could obtain such a status only through entering into a comprehensive agreement with an energy company ⁽²¹⁾. In the updated version, the legislature decided to remove the condition of concluding a specific agreement with an energy company, which significantly opens the prosumer market allowing the interested entities to conclude other agreements, e.g., electricity sales agreements ⁽²²⁾. It should also be clearly emphasized that the change in the normative wording of the definition referring to a prosumer resulted in the legislature granting the right for conducting prosumer activity to those entrepreneurs who operate their own micro-installations.

Despite the legislative changes relating to the prosumer concept in Polish law ⁽²³⁾, it is certain that the legal concept of a prosumer is consistent with the common understanding of this term, identified with an entity that generates energy for its own consumption. The very word ‘prosumer’ – formed by combining the two words ‘producer’ and ‘consumer’ – expresses the idea of an electricity consumer not only being a customer, but also entering the electricity production market as a ‘micro-generator’ ⁽²⁴⁾. It is also worth emphasizing that the concept of a prosumer (both in the historical and current definition) is equated with two other conceptual categories that have their normative meanings, namely, with the final customer and with the producer ⁽²⁵⁾ (‘prosumer is the final customer who produces [...]’) ⁽²⁶⁾. The final customer is ‘a customer ⁽²⁷⁾ purchasing fuels or energy for their own use; own use does not include electricity purchased for its storage or consumption for the purposes of generation, transmission or distribution of electricity and gaseous fuels purchased for their consumption for the purposes of transmission, distribution, storage of gaseous fuels, natural gas liquefaction or regasification of liquefied natural gas ⁽²⁸⁾’. Based on the above, it should be concluded that the meaning of the term ‘own needs’ is significant for the status of a prosumer. It has been defined by the legislature in a negative way by providing in Art. 3(13a) of the Energy Law, that this consumption is not considered the purchase of electricity for its consumption for the purposes of generation ⁽²⁹⁾, transmission ⁽³⁰⁾, or distribution ⁽³¹⁾ of this energy. Performing the activities enumerated by the legislature does not allow for the assignment of the status of a prosumer ⁽³²⁾.

As is evident from the comments made in the field of EU regulations referring to a prosumer, the EU legislation introduces a prosumer system aimed at joint generation of electricity by natural persons; hence it encourages the EU member states to implement mechanisms improving electricity generation in a prosumer cooperative. Poland, fulfilling its obligation to implement the EU law into its national legal framework, has introduced a definition of a collective prosumer of renewable energy (regulations effective 1 April 2022). Pursuant to Article 2(27c) of the Renewable Energy Sources Act, a collective renewable energy prosumer is a final customer who produces electricity exclusively from renewable energy sources for its own needs in a micro-installation or a small installation connected to the electricity distribution network via the internal electrical installation of a multi-apartment block in which this customer’s electricity consumption point is located, provided that in the case of a final customer who is not a consumer of electricity in a household, this production is not the subject of predominant economic activity defined in accordance with the regulations issued pursuant to Art. 40(2) of the Act of June 29, 1995 on public statistics ⁽³³⁾. The idea of prosumer energy in the variant of ‘collective prosumer of renewable energy’ is to serve the construction and operation of renewable energy source installations in multi-apartment blocks.

In addition, as of 2 July 2024, the definition of a renewable energy virtual prosumer will take effect in Polish legal framework. Pursuant to Art. 2(27b) of the Renewable Energy Sources Act: a virtual prosumer of renewable energy is a final customer who produces electricity exclusively from renewable energy sources for his own needs in a renewable energy source installation connected to the electricity distribution network in a different location than the place of electricity supply to this customer which, at the same time, is not connected to the electricity distribution network through the internal electrical installation of a multi-apartment block, provided that in the case of a final customer who is not a consumer of electricity in a household, this production is not the subject of predominant economic activity defined in accordance with the regulations issued pursuant to Art. 40(2) of the Act of June 29, 1995 on public statistics ⁽³⁴⁾. The idea of prosumer energy in the variant of ‘virtual prosumer of renewable energy’ is based on the concept of assigning a certain portion of the production from a remote renewable energy installation to a given point of consumption. A key aspect of the definition of a virtual prosumer of renewable energy is the possibility of producing electricity in a location other than the point of electricity consumption, as well as producing this energy at an installation other than a micro-installation. A new type of prosumer was created to enable further development of the prosumer market, opening it up to individuals or entities that do not have the technical capacity to locate a renewable energy source installation at their place of residence (in the case of final customers in a household) and the place of running a business (in the case of other than final customers in a household). The creation of a new type of prosumer by means of a new definition, which allows omitting the existing technical barriers resulting from the original definition of a prosumer ⁽³⁵⁾, may contribute to a significant opening of the prosumer market ⁽³⁶⁾. This concept is justified by the fact that in creating the definition of a virtual prosumer, the legislature did not refer it to the type of installation where the energy is produced. Thus, it may be an installation having the capacity significantly higher than a micro- or small installation, due to the potential multiplicity of shares purchased in it. However, it should be indicated that the construction of the definition does not rule out a situation when an entity puts up an installation on a property far from its residence or registered office without the participation of others. Moreover, in such a situation, the entity is not limited by the type of installation, which offers a privileged position against an ordinary prosumer of renewable energy who must produce electricity in a micro-installation ⁽³⁷⁾.

The concepts of a ‘collective prosumer’ as well as a ‘virtual prosumer’ are intended to expand the potential pool of prosumers, with a particular focus on residents of multi-apartment blocks, whose number (as of 2021) was estimated at approximately 42–45 per cent. Similarly, as in the case of a virtual prosumer, the legislature has also changed the type of renewable energy installation, with regard to a collective prosumer, which can constitute a qualifying criterion to be considered a prosumer, from a micro-installation to a micro-installation or small installation ⁽³⁸⁾.

In addition to the definition scope, which, as the above discussion shows, is conducive to the development of prosumer energy in Poland, it is worth pointing to other legal frameworks, outside the scope of support schemes ⁽³⁹⁾ based on which prosumer energy has a chance to develop. To begin with, according to the wording of Article 3 of the Law on Renewable Energy Sources, a licence or even an entry in the register of regulated activities is not required for prosumers to produce energy from renewable energy sources. At first, it should be highlighted that pursuant to the wording of Art. 3 of the Renewable Energy Sources Act, a licence or even an entry in the register of regulated activities is not required for a prosumer to produce energy from renewable energy sources. According to the said provision: ‘”undertaking and performing business activity in the field of electricity production from renewable energy sources requires obtaining a licence under the terms and conditions set forth in the Energy Law, with the exception of electricity production: 1) in a micro-installation, 2) in a small installation, 3) exclusively from agricultural biogas, including cogeneration within the meaning of Art. 3(33) of the Energy Law, 4) exclusively from bioliquids” ⁽⁴⁰⁾. Due to the expanded possibilities of production, within the framework of prosumer energy, by collective prosumers (the possibility of production in a micro-installation and a small installation) and virtual prosumers (the possibility of production in any installation), the situations are possible where energy producers will be obliged to make an entry in the register of regulated activity (in the case of production in a small installation by collective prosumers) or a licence (in the case of virtual prosumers producing in an installation that is neither a micro-installation nor a small installation); however, it should be emphasised that these are the basic rationing forms of the electricity sector, so they should not be approached as the legal and regulatory framework hindering the development of prosumer energy. It is also worth pointing out that no fee is charged for connecting micro-installations to the grid ⁽⁴¹⁾. In addition, the connection of each renewable energy sources (RES) installation to the grid is a priority ⁽⁴²⁾.

Member states shall jointly ensure that in 2030 the share of energy from renewable sources in the EU’s gross final energy consumption presents the level of at least 32 per cent. The Commission shall evaluate this target with a view to submit a legislative proposal by 2023 to increase this target if the costs of renewable energy production continue to decline significantly, if this is necessary to meet the EU’s international decarbonisation commitments, or if such an increase is justified by a significant reduction in the EU’s energy consumption ⁽⁴³⁾.

The analysis of the normative definitions of a prosumer carried out in the work allows to conclude that both EU and national legislatures have adopted solutions conducive to the development of prosumer energy. The review of these definitions also allows for a positive assessment of the legal possibilities to increase the production of renewable energy through prosumer energy. The evolution of the change in the Polish definition of a prosumer should be assessed positively. The prospect of developing renewable energy through prosumer energy is also visible in the activities of collective and virtual prosumers.