Why Did the EU Fail to Meet Its Target for Energy Communities?

The European Commission formally recognized energy communities as legal entities as part of the Clean Energy Package in 2019 and aimed to have at least one energy community in every municipality with a population of over 10,000 by 2025.

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Hugo Niesing first moved to the eastern docklands in Amsterdam, the Netherlands, after buying a houseboat in 1989. There were around eight other houseboats next to his, and whenever one of them turned their generator on, the others would come with a plug for a share of the electricity. “That was really an energy community before the term ‘energy community’ existed,” he told Earth.Org.

Energy communities are groups of citizens coming together to generate their own energy and participate in energy markets with the goal of providing environmental, economic or social benefits to local communities rather than generating profit.

In Amsterdam, Niesing has helped give rise to an energy community by connecting 500 households to one transformer, allowing them to share the energy generated by solar panels on their roofs. He works through his company Resourcefully, founded in 2008, and under the EU-funded RESCHOOL project, which aims to improve the way energy communities operate.

More on the topic: How Energy Communities Could Help Europe Reduce Energy Poverty

The European Commission formally recognized energy communities as legal entities as part of the Clean Energy Package in 2019. It also set a goal to have at least one energy community in every municipality with a population of over 10,000 by 2025.

But the new law wasn’t the only factor contributing to energy communities’ rise in Europe. Niesing and others in the field also cited geopolitical events such as the recent energy crisis sparked by Russia’s invasion of Ukraine in 2022 as having an impact. Nonetheless, as we await the 27-member bloc’s official report on progress towards the 2025 target, data gathered by EU auditors suggests the goal was missed. 

Difficult to Change an Incumbent System

That data reveals that the EU missed its target in part because changing an incumbent system is more challenging than we may think. Many in the industry have been following the same business model – generating electricity at a centralized location then distributing it – for a long time and are hesitant to change, said Johannes Vollmer, Senior Project Manager at European Renewable Energies Federation (EREF) and partner of RESCHOOL. “There’s still a strong lobby from some of the bigger companies who don’t acknowledge the many benefits energy communities can deliver,” he told Earth.Org.

Chris Vrettos, Senior Policy Advisor at the European Federation of Energy Cooperatives (REScoop), said another issue is that EU member states have failed to carry out an assessment on the barriers energy communities face and what can be done to ameliorate them. “It largely has to do with member states not having a fully put in place and enabling legal framework,” he said.

He added that it is quite common for a group of citizens to get together with the intention of creating an energy community and spend a lot of time working on an application, only for it to be rejected. “Many communities do not go ahead because they don’t find the space to connect to the grid,” he said. 

However, it is not all bad news: according to the EU’s 2025 State of the Energy Union report, more than 8,000 energy communities currently exist across EU member countries, each of which has a different approach to establishing these communities.

Take the RESCHOOL project, for example. Alongside the pilot in the eastern docklands of Amsterdam, there are three others in Sweden, Spain, and Greece. 

Stockholm, Sweden’s capital, to date has no supportive frameworks for energy communities. With no fitting legal structures designed for generating energy and participating in markets, energy communities are only able to operate as housing associations – the closest, yet unfitting, framework. “They don’t even have a legal form that is appropriate to what they’re doing,” said Vollmer. 

On the other hand, Spain and Italy have done quite well, he said. Incomes are higher and energy is relatively cheaper in Northern Europe, so the incentive to join an energy community may be lower. In Southern Europe, however, energy is more expensive relative to incomes, and the sun is a much more abundant resource all year round. 

When people living in the eastern docklands of Amsterdam were asked what motivated them to join an energy community, some said they wanted to enhance the sense of community in the local area, whereas others did it to reduce their carbon footprint. Most people simply wanted to participate in a new experiment and be part of something innovative. 

Although interest in energy communities has been growing for years, the reasons people are intrigued are often shifting, said Vrettos. In 2019, when the climate movement was particularly strong, people were interested in finding ways to reduce their emissions. During the 2022-2023 energy crisis, people looked for ways to lower their energy bills. More recently, the war in Iran has seen people wanting to be more in control over their energy. “The motivations can differ through time, also mirroring the Zeitgeist,” Vrettos said.

What the Future Holds

Tapping into these spikes in interest could be an effective strategy for spreading energy communities. In March, the EU published their Citizens Energy Package, a non-legislative document that contains communications and guidelines on how to boost energy communities – something Vrettos hopes can spark widespread interest in the idea. “The EU recognizes that direct participation of citizens in the energy system can be extremely beneficial for social acceptance and for affordability,” he said.

Despite the package offering communication improvements, money is a different question. Vrettos explained that the LIFE program – the EU’s funding instrument for the environment and climate action – has been a robust source of funding for energy communities of 7-8 million euros (US$8-9.2 million) per year, an invaluable resource in getting energy communities set up in places like Cyprus and Croatia. 

In July 2025, however, the EU announced the European Competitiveness Fund as part of the 2028-2034 budget, which will consolidate 14 individual funding instruments under one framework. As part of these changes, the LIFE program will be dissolved. The new budget contains no mention of energy communities. “It’s an absolute priority for us to raise awareness around this and demand that energy communities are actually supported in the next EU budget,” said Vrettos.

Money, Vollmer agrees, is an issue for energy communities. His work includes researching what kinds of business models can help make them self-sufficient, as many initiatives still rely on funding. Dozens of projects never even get off the ground due to a lack of money. “There’s a lot of good initiatives and a lot of good people working on projects, but they don’t really have the money,” Vollmer said.

In his vision for how energy communities could work in the future, he imagines the development of local supply chains. “If you have a community that is investing in solar panels and batteries, then you need people to run, to operate that,” he said.

Niesing also views money as a big issue holding energy communities back. The Netherlands has the most solar per capita in the EU, which he says is thanks to a strong policy framework and funding mechanisms by national and local governments. “We don’t have the most sun, but we had a strong policy which made it very attractive to invest in solar panels,” he said.

An assessment by the EU in 2016 found that energy communities could own up to 17% and 21% of installed wind and solar capacity respectively by 2030 if every municipality with over 10,000 residents had one. 

Whether by choice or not, Niesing believes energy communities will be the future: “If everybody at the same time is going to do electric cooking, electric heating, and charging [their] electric vehicle – it’s just too much for the grid.”