I. Introduction
European Union (EU) legislation increasingly emphasises the division of energy sector entities into two categories. On the one hand, these are ‘traditional energy undertakings prioritising profit-making’, as defined in the provisions of Directive 2019/944 of 5 June 2019 on common rules for the internal market in electricity (‘Directive 2019/944’) 1. On the other hand, these are entities whose energy generation activities are not profit-oriented and which can be categorised as local energy, distributed energy, decentralised energy, citizen energy, or community energy entities. The existence of so many terms that can be used to describe this segment of the energy industry as an alternative to traditional energy companies shows that it is very difficult to find a universal term that, in its very wording, would capture the essence of the phenomenon in question 2.
In the second of these energy areas, in turn, it is possible to identify ‘renewables self-consumers’, as defined in the provisions of Directive 2018/2001 of 11 December 2018 on the promotion of the use of energy from renewable sources (‘Directive 2018/2001’) 3 and ‘energy communities’, which are divided into ‘citizen energy communities’ (CECs) and ‘renewable energy communities’ (RECs). Energy communities are not entirely new to the energy sector. In Europe, the activities of such entities (mostly taking the form of cooperatives) are already highly developed 4. What is new, however, is the definition in EU legislation of a common legal framework for all energy communities operating across the EU.
II. Rules for the Establishment and Operation of Energy Communities Specified in EU Law
The rules for the establishment and operation of CECs are set out in Directive 2019/944. A CEC is a legal entity in which participation is voluntary and open to all categories of entities. Its organisational and legal form is to be determined by national law. It may, for example, take the form of a cooperative, an association, a partnership, a non-profit organisation or a small or medium-sized enterprise. However, the entity must be able to act, exercise rights, and be subject to obligations (recital 44 of Directive 2019/944) in its own name. A CEC must be effectively controlled by members or shareholders who are natural persons, local authorities (including municipalities), or small enterprises. A CEC is also characterised by the specific objectives to be served by its activities. Its main objective is not financial gain, but environmental benefits as well as economic or social benefits for its members or for the local areas in which it operates. These activities may include the generation of energy (both from renewable and traditional sources), as well as its distribution, supply, consumption, aggregation, and storage. A CEC may also provide energy efficiency services, electric vehicle charging, and other energy services to its members or shareholders (Article 2(11) of Directive 2019/944). Detailed rules on membership in a CEC and performance of its activities, including cooperation with energy (distribution or transmission) system operators and the management of its own distribution networks, are regulated by Article 16 of Directive 2019/944 5.
The EU legislator has separately defined rules for the creation and operation of RECs. These are regulated in the provisions of Directive 2018/2001. An REC is a legal entity whose organisational form is to be determined by national law. Participation in this entity is to be, similarly to CECs, voluntary and open to all categories of entities. An REC is to act in its own name, exercise its own rights, and be subject to obligations. Its shareholders or members may only be natural persons, local authorities (including municipalities) and small and medium-sized enterprises (‘SMEs’). A CEC must be independent of its individual members or shareholders and, in particular, of the traditional market participants who participate in it or who collaborate with it through joint investments (recital 71 of Directive 2018/2001). Effective control of an REC can only be exercised by those shareholders or members who are located in close proximity to the renewable energy projects owned and developed by it. The aim of RECs’ activities is not so much to seek financial gain, but to bring environmental, economic, or social benefits to its shareholders, members, or the local areas in which it operates. These activities are to be focused around ‘‘renewable energy projects’. Article 22(2) of Directive 2018/2001 clarifies that this refers to the production, consumption, storage, sale, and also distribution, within a given REC, of renewable energy produced by the generating units it owns. The wording of Article 22(4)(e) of the said Directive (in its final part) makes it possible to consider that the scope of REC’s activities may also include energy distribution.
III. Current Provisions of Polish Law on Energy Communities
In the situation where the provisions of EU law, contained in two separate directives, distinguish two types of energy communities, the question arises as to how these provisions should be implemented (transposed) into national law. It can be said that there is a structural similarity between the acts of EU and Polish energy law. In the system of EU law, there is a separate legal act on renewable energy (Directive 2018/2001) and a separate legal act that sets out the general rules for undertaking and carrying out activities in the field of electricity (Directive 2019/944). In an analogous manner, the Polish legislator, in a separate legal act, has included regulations on renewable energy (the Renewable Energy Sources Act, the ‘RES Act’ 6) and, in a separate act, regulations setting out the general rules for undertaking and carrying out activities in the field of energy (the Energy Law, the ‘EL’) 7. Following this division and bearing in mind that, in EU law, the provisions on CECs are contained in Directive 2019/944 and the provisions on RECs in Directive 2018/2001, it would be expected that the Polish provisions on CECs and RECs should be contained (respectively) in the EL and the RES Act.
Currently, two legal institutions can be identified in Polish law which (albeit with certain reservations, which will be explained below) can be categorised as energy communities within the meaning of EU law. The first is an energy cooperative and the second is an energy cluster. An energy cooperative is a type of cooperative within the meaning of the Cooperative Law of 16 September 1982 8 or the Act of 4 October 2018 on farmers’ cooperatives 9. The RES Act does not specify which entities may or may not belong to an energy cooperative. Under the Cooperative Law and the Act on Farmers’ Cooperatives, both natural persons and legal entities can be members of a cooperative. The RES Act indicates that the number of members of an energy cooperative is to be less than 1,000 (Article 38e(1)(2)). The scope of activity of an energy cooperative is the production of electricity, biogas, or heat for the needs of such a cooperative and its members, which the RES Act defines as “demand balancing” (Art. 2(33a)).
Energy cooperatives’ energy generation activities can only be carried out on the basis of renewable energy. In doing so, the provisions of the RES Act do not provide for the possibility for an energy cooperative to sell the energy it generates on the market. As regards the place of its activity, the energy cooperative is a dedicated entity for areas located outside large urban agglomerations. Indeed, according to Article 38e(1)(1) of the RES Act, an energy cooperative may only operate in the area of a rural or urban-rural municipality, as defined by the provisions on public statistics, or in the area of no more than three such municipalities directly neighbouring each other. The RES Act also imposes strict, technical, requirements as to the capacity of the generating facilities and the extent to which energy generation is to cover the energy cooperative’s own members’ needs. These requirements are described by renewable energy specialists as very strict and therefore considered an obstacle to the development of this form of activity. In particular, this concerns the requirements set out in Article 38e(1)(3) of the RES Act. According to this provision, where the scope of activity of an energy cooperative is the generation of electricity, the total installed electrical capacity of all renewable energy source installations must make it possible to cover no less than 70 per cent of the energy cooperative’s own needs and those of its members during a year, while at the same time it must not exceed 10 MW. Where the scope of activity of the energy cooperative is the generation of heat, the thermal generating capacity must not exceed 30 MW and, in the case of biogas generation, the annual capacity of all installations must not exceed 40 million m3. On the basis of the provisions indicated and when juxtaposed with the previously discussed provisions of EU law, it can be concluded that an energy cooperative falls within the category of an REC as defined in the provisions of Directive 2018/2001.
An energy cluster can be considered as a type of CEC. Although it does not meet the requirement of legal personality set out in Article 2(11) of Directive 2019/944, as, according to Article 2(15a) of the RES Act, it has the nature of a civil law agreement 10. However, the scope and principles of its activities make it very similar to a CEC within the meaning of the aforementioned Directive. An energy cluster may include a wide range of entities, as the RES Act does not introduce limits as to the number of its members. These may be both natural and legal persons, in particular local government units (Article 2(15a)). The activities of an energy cluster may include the generation and balancing of energy demand, as well as the distribution and trading of energy. This energy may come not only from renewable sources, but also from other sources or fuels, including fossil fuels. It should be added, however, that the provisions in the latest draft law amending the RES Act 11 aim to ensure that at least 50 per cent of the electricity generated and fed into the distribution network within an energy cluster is generated from renewable energy sources. The area of activity of the energy cluster must be within the distribution network with a rated voltage lower than 110 kV, which is located in its area of operation, and at the same time the area must not exceed the borders of one powiat district within the meaning of the Act of 5 June 1998 on powiat self-government 12 or five municipalities within the meaning of the Act of 8 March 1990 on municipal self-government 13. The RES Act also requires that an energy cluster is represented by a coordinator, which may be a cooperative, association, foundation, or any member of the energy cluster appointed for this purpose in a civil-law agreement.
IV. Draft of New Polish Regulations on CECs
Notwithstanding the provisions on energy cooperatives and energy clusters contained in the RES Act, the Polish legislator also intends to establish new legal provisions to be included in the EL, which will introduce the institution of the CEC into the Polish legal system. The first draft of the relevant provisions amending the EL was dated 30 April 2021 (the ‘2021 draft’) 14. The latest version of this draft was adopted by the Council of Ministers on 26 January 2023 (the ‘2023 draft’) 15. There are differences between these two drafts. These include, first and foremost, the intention, clearly articulated in the justification for the 2023 draft, to implement not only the provisions of Directive 2019/944 on the status of CECs, but also the provisions of Directive 2018/2001 on the status of RECs. This intention is to be implemented in such a way that the proposed legislation will use only one term, namely, CEC. As included in the justification to the 2023 draft,
in order to avoid the simultaneous operation in the legal system of two definitions of energy communities with similar powers, the above regulations also aim to implement into the Polish legal order also the renewable energy community referred to in Article 22 of Directive 2018/2001 of the European Parliament and of the Council of 11 December 2018 on the promotion of the use of energy from renewable sources... .
Under the provisions of the 2023 draft, a CEC is to be an entity with legal capacity. Article 11zi(1) of the EL will set out the legal forms in which the entity may operate. According to these provisions, a CEC may operate in one of six legal forms, namely, (1) a cooperative within the meaning of the Cooperative Act of 16 September 1982; (2) a housing co-operative within the meaning of the Act of 15 December 2000 on Housing Cooperatives 16; (3) a housing community referred to in Article 6 of the Premises Ownership Act of 24 June 1994 17; an association within the meaning of the Law on Associations of 7 April 1989 18, excluding an ordinary association; (5) a partnership, with the exception of a professional partnership, within the meaning of the Act of 15 September 2000 – Commercial Companies Code 19; or (6) a farmers’ cooperative within the meaning of the Act of 4 October 2018 on farmers’ cooperatives 20. Compared to the 2021 draft, the catalogue of legal forms in which a CEC can operate has been expanded. Namely, three legal forms have been added: a housing association, a housing cooperative, and a farmers’ cooperative. At the same time, the legal form of a limited liability company, as provided for in the 2021 draft, has been abandoned by the drafter. It may also be noted that the legal forms provided CECs include, inter alia, the forms provided for (previously discussed) energy cooperatives, namely, the form of a cooperative within the meaning of the Cooperative Act of 16 September 1982 and the form of a farmers’ cooperative within the meaning of the Act on Farmers’ Cooperatives of 4 October 2018. In this respect, the provisions CECs are therefore a ‘competing’ solution to the provisions on energy cooperatives.
According to Article 3(13f) of the EL, participation in a CEC is to be voluntary and open, but the decision making and control powers are to be vested in strictly defined members, shareholders, or partners of the CEC. These are to be exclusively natural persons, local government units, micro- or small entrepreneurs within the meaning of the Act of 6 March 2018 – Entrepreneurs’ Law 21, for which economic activity in the energy sector does not constitute the subject of the main economic activity defined in accordance with the provisions issued pursuant to Article 40(2) of the Act of 29 June 1995 on Public Statistics 22. In the 2023 draft, the group of entities with decision making and control powers in a CEC included the aforementioned natural persons, whereas the 2021 draft, instead of natural persons, identified household electricity consumers. As a result, under the provisions of the 2023 draft, the group of entities with decision making and control functions may also include such natural persons who are not household electricity consumers.
The group of entities exercising decision making and control functions is defined in a special way (in the 2023 draft) if a CEC will only operate in the field of renewable energy sources. In such a case, decision making and control powers are to be vested only in those of its members, shareholders, or partners who have their residence or registered office in the area of operation of the same electricity distribution system operator (Article 11zi(2) of the EL). In this case, decision making and control powers may also be vested in medium-sized entrepreneurs within the meaning of the Act of 6 March 2018 – Entrepreneurs’ Law and the entities referred to in Article 7(1)(1), (2), (4) to (8) of the Act of 20 July 2018 – Law on Higher Education and Science 23 (Article 11zi(3) of the EL). Defining the group of entities with decision making and control powers in a CEC in such a way that they are the smallest participants in the energy market is intended to make CECs a real alternative to traditional energy companies. The idea is that these companies, since they can be members, shareholders, or partners in CECs (participation in a CEC is to be voluntary and open to all entities), should not be able to ‘control’ CECs by exercising decision making and control functions in them 24.
As regards the scope of CECs’ activities, it is defined in detail in the proposed Article 3(13f) of the EL. These activities may include, with regard to electricity, its generation, consumption, distribution, sale, trading, aggregation, or storage. CECs may also carry out energy efficiency improvement projects as referred to in the Energy Efficiency Act of 20 May 2016 25, provide charging services for electric vehicles, as referred to in the Act of 11 January 2018 on electromobility and alternative fuels 26, and also engage in the provision of other services on the electricity markets, including system services or flexibility services. The scope of a CEC’s activity may also include the generation, consumption, storage or sale of biomass, agricultural biomass, biogas, and agricultural biogas within the meaning of the RES Act. However, the main purpose of the activities carried out by a CEC is always to provide environmental, economic, or social benefits for the members, shareholders, or partners of the CEC or the local areas in which it operates.
V. Conclusion
The implementation of the institution of a CEC into Polish law will create a complex structure of legal regulations concerning energy communities. On the one hand, a form of energy cooperative, which can be regarded as a type of CEC within the meaning of the provisions of Directive 2018/2001, already exists in the provisions of the RES Act. In addition, there is the institution of an energy cluster in this Act, which has certain characteristics of a CEC within the meaning of the provisions of Directive 2019/944. On the other hand, provisions establishing the institution of a CEC and using this very name will be introduced into the EL. These provisions are to implement into the Polish legal system both the institution of a CEC within the meaning of Directive 2019/944 and the institution of an REC within the meaning of Directive 2018/2001. This way of allocating provisions implementing energy community provisions into Polish law can be considered to be in principle in line with the provisions of Directives 2019/944 and 2018/2001. Such a solution also corresponds with the proposals made by representatives of legal scholarship 27. The variety of organisational forms in which energy communities may operate should promote their development by allowing them to choose the legal form that best suits the future members, shareholders, and partners of these communities. An issue that may raise concerns is the way in which the Polish legislation defines the area in which a CEC is to operate. On the one hand, the proposed regulations mention ‘local areas’ (Article 3(13f) of the EL). On the other hand, however, they do not specify this term. Instead, they contain (Article 11zk(1) of the EL) a very broad formulation that the area of operation of a CEC is ‘the area of operation of a single electricity distribution system operator to whose grid the installations belonging to the members, shareholders or partners of this community are connected’. Given the area of operations of the largest operators of this type in Poland, the activities of a single CEC could extend over the area of even several voivodeships, which would go far beyond an acceptable understanding of the term ‘local area’. This issue is the subject of separate academic studies 28.