Bottom-up energy transitions: Managing the rise of energy communities in Latin America

While energy communities offer an opportunity to enhance energy democracy and expand access to clean and reliable electricity, their deployment needs to be carefully overseen by energy planners and policymakers, to ensure smooth co-ordination with existing regulation and the seamless operation of the central system. Comprehensive and dedicated policy frameworks are needed to support the development of energy communities, and there are a number of aspects that policymakers can consider to facilitate the process:

Conflicts and voids in regulatory frameworks need to be addressed: Most of the countries across the region have developed regulation for decentralised on-grid and off-grid energy generation. Although this represents an important starting point, such regulations fail in addressing the specificities of energy communities. To ensure an orderly expansion of energy communities, it is crucial to establish minimum standards that these initiatives must observe, including technical requirements for the equipment used and rights and responsibilities of users. Regulatory frameworks should clearly define the forms of ownership and the administrative obligations of these communities as service providers, covering aspects such as billing, financial management, technology adoption, regulatory compliance, transparency, and accountability. Furthermore, these frameworks should outline the distribution of benefits, ensuring that initiatives primarily benefit disadvantaged populations, targeting vulnerable populations. Finally, guidelines for democratic community collaboration should be included to foster inclusive and participatory decision-making processes.

Lessons could be garnered from Colombia, which stands out as the first country in the region to have enacted a regulation for energy communities. The decree defines the legal nature of the associations, outlines their objectives within the Colombian electricity system, details the types of activities they can carry out, and establishes a regulatory body. Additionally, the decree charts the financial resource management for these projects, providing a comprehensive framework for the development of energy communities.

The projects need to be financially sustainable: In Latin America, energy communities often aim to close the energy access gap in rural areas or to improve service provision in deprived urban regions. This differs to their use in developed economies, where the focus might be more on enhancing energy resilience and sustainability, intrinsically targeting different types of users. In light of this, regulators must define the appropriate financing schemes to ensure citizens are able to afford and can reap the benefits of such initiatives without placing undue burdens on public funds. Pinpointing the suitable compensation method for on grid solutions (net-metering, feed-in-tariffs, or other remuneration methods) and defining appropriate subsidies for electricity and equipment, for example, can ensure the projects are benefiting targeted groups. Government-led procurement schemes can also facilitate more affordable prices for system components and enable economies of scale. Furthermore, mechanisms to finance the capital expenditures (CAPEX) should potentially involve a mix of public and private funding, to safeguard the long-term sustainability and scalability of energy communities. Public expenditure on these programmes should be assessed within the specific regional context, balancing the need for economic efficiency with social equity.

Operational guidelines need to be lucid: While many communities are eager to take on these initiatives, it is essential to address the operational challenges they may face, such as lack of technical expertise, financial mismanagement, and logistics of ongoing maintenance requirements. Clearly defining roles and laying out a financial plan is crucial for their long-term success of energy communities. E-tools and digitalisation play a vital role in enhancing the efficiency and traceability of these projects. By leveraging digital technologies, communities can improve the monitoring and management of their energy systems, ensuring reliable operation and facilitating transparent reporting and accountability.

Training and education to build strong communities: Energy communities stand out within distributed energy generation schemes for their participatory component, where training and education are important elements that can encourage further community engagement. Local training programmes about the regulatory frameworks and business models for distributed generation, as well as system maintenance, are excellent ways to promote a communities' involvement in projects. Vulnerable groups in particular benefit from these economic and professional training opportunities, tackling self-employment and underemployment issues head-on.

International co-operation to exchange experiences: Collaborative learning can contribute to better understanding the role that energy communities can have in the region. Currently, there are independent grassroot efforts forming energy communities throughout LAC, opening the possibility to foster spaces to exchange best practices. Building on positive characteristics and learning from past mistakes can fast-track the process to building a replicable energy community model. International co-operation is also a stepping stone to make the electricity grid more resilient in the long run.