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Local energy systems are effectively controlled by local shareholders or members, generally value rather than profit driven, involved in distributed generation and in performing activities of a distribution system operator, supplier or aggregator at local level, including across borders. The term encompasses both the organisational and technological elements required.

The implementation of a local energy system shifts the energy production from a centralised system to a decentralised system. In a local energy system, the energy is produced close to where it will be used, in contrast to a centralised energy production system or a national grid where the production is centralised. The local generation reduces the transmission losses and is able to adapt to the local needs. The system includes the generation, the storage and the consumption of energy. To optimise the energy consumption, a visualization of the consumption or controlled energy consumption is possible. Local energy systems can also promote civic engagement, allowing people to actively participate in energy related decision-making. And as renewable energy sources, such as wind and solar, are usually more decentralised than traditional power sources, decentralised local energy systems offer greater opportunity to increase usage of low carbon energy sources.

Problems to be solved

Transmission losses

Reliance on fossil fuels

Energy management

Carbon Emissions

Reliance on distant sources

Local energy distribution

Energy price competition


Main Benefits
  • Reducing use of fossils

  • Improving energy supply efficiency

  • Creating new jobs

  • Enabling new business opportunities

  • Reducing energy bills

Potential Benefits
  • Reducing GHG emissions

  • Increasing share of renewables


Functions help you to understand what the products can do for you and which ones will help you achieve your goals.
Each solution has at least one mandatory function, which is needed to achieve the basic purpose of the solution, and several additional functions, which are features that can be added to provide additional benefits.

Mandatory Functions
    Consuming energy

    Energy is consumed by the producer and/or distributed to the network for consumption

    Generating energy

    Energy is generated from renewable and low-carbon sources

    Storing energy

    Presence of energy storage solutions to manage consumption

    Providing flexibility

    Provides more flexibility for generation to match local demand patterns

Potential Functions
    Visualizing energy consumption

    Demand prediction through accurate energy demand forecasts

    Optimising energy consumption

    Supply and demand matching based on forecasts

Products offering these functions

Energy storage solutions

Intelligent battery-based storage solutions to enable a sustainable, reliable, and cost-effective electricity supply.

Microgrid balancing solution

Balancing microgrid against city-wide virtual power plant by selling energy when demand is exceeded in the microgrid and vice-versa.


There are various projects that have been done to create local energy systems. The following variants cover the broad range of models , though some can cut across diffferent variants.


Local consumer services aim to improve energy outcomes for local people, such as through providing energy efficiency schemes, fuel poverty schemes, or energy awareness and advice schemes.


A local generation asset is used to benefit local consumers. The projects are usually at least partly financed by the community and generate revenue for local use.


Local supply models aim to provide local communities with affordable and low carbon energy through direct supply or retail models.


Decentralised grids, read more here

Value Model

Benefits of Local Energy Systems (BABLE, 2021)

Costs of Local Energy Systems (BABLE, 2021)

City Context

Local conditions greatly affect the effectiveness and viability of most distributed generation power sources. Local options for energy generation, such as high wind speeds, high solar irradiation or the possibility of firing Combined Heat and Power Units with locally available materials, are preconditions for sustainable local energy systems. Financially viable business cases may depend on support schemes or incentives, such as Feed-in-Tariffs.

Stakeholder Mapping

Stakeholder Map of a Local Energy System (BABLE, 2021)

Government Initiatives


Various European initiatives and regulations support the implementation of local energy systems. The following figure from the Journal of Energy Efficiency shows the regulations that apply to this solution. DG in this case stands for distributed energy generations, which is the local generation of energy. As the figure shows, the regulations that strongly support the implementation of local energy systems are the EU Sustainable Energy Goals. 

An example is the Directive 2009/28/EC, which includes national binding targets for EU countries. This states that by 2020, at least 20% of EU’s final energy consumption should come from regenerative energy system. Furthermore, each Member State is required to reach a 10% share of biofuels in the overall use of transport fuels by 2020.

At European level, there are also two directives referring to smart meter deployment.

  • Directive 2006/32/EC: regulates the use of smart meters to increase energy efficiency and better inform customers about their consumption

  • Directive 2009/72/EC: (Third Energy Package) encourages the implementation of smart grids, ‘in a way that encourages decentralized generation and energy efficiency’

Problems within the implementation and operation of such systems can occur due to various regulations on integrating local energy systems in the national or international grid.

Regulations that apply to Local Energy Systems (H. Lopes Ferreira et al., 2011)

Supporting Factors

  1. Local potentials for energy gain
  2. Already in-place distributed generation capacity
  3. Digital monitoring and visualizations to improve user experience, consumption levels and participation


Market Potential

Local energy schemes can enhance consumer choice and competition, and electricity supply markets are quickly diversifying. For example, in the UK, the share of the electricity market owned by independent suppliers increased from 1% to 14% between 2012 and 2016 (Ofgem 2016).

Another major market factor lies in the shipping and handling of energy, which costs billions every year. These costs occur due the construction and maintenance of massive transmission infrastructure (11.7% to 12.9% of the total energy price) due to energy losses during transportation (circa 7% of all electricity generated) and congestion charges due to peak times. In total, Forbes estimates that the costs of energy transportation represent 25% of the energy price.

Local Energy Systems do not need to transport energy as the energy is produced where it is consumed. Therefore, this 25 % can be saved using this solution. Several studies verify the cost savings of using local sustainable energy systems. For example, a study conducted by Southern California Edison in 2012 found that the utility could save $2 billion in system upgrade costs if they guided distributed generation to key locations on its grid. Also, the Long Island Power Authority determined that the development of local solar installations could meet rising demand for electricity while saving customers nearly $84 million in avoided transmission costs in New York.

Besides the financial benefit, distributed energy generation creates a stronger, more resilient power system in the face of extreme weather, human error or terrorist attacks.



  • Directive 96/92/EC on the common rules for the internal electricity market
  • Directive 2003/54/EC, enabling new electricity suppliers to enter Member States’ markets and allowing customers to choose their electricity supplier
  • Regulation EU 2016/631 establishes a network code on requirements for grid connection of generators
  • Regulation 2016/1388 establishes a Network Code on Demand Connection
  • Regulation 2013/543 creates disclosure obligations that apply to data relating to generation, transportation and consumption of electricity

The creation of this solution has been supported by EU funding

Use Cases


Sustainable District Cooling Solution that uses residual heat

A highly energy efficient district cooling system was installed in the densely populated city center of Tartu using the river cooled chillers. The system was made more energy efficient by Fortum, using a heat pump that reuses the residual heat from cooling system for the district heating system.



Reusing EV Batteries for Energy Storage

Solutions for re-purposing EVs' rather quickly deteriorating but valuable batteries. EV taxis of the private company OU Takso in Tartu will be partially recharged based on renewable energy that is produced on-site with PV panels and stored in used EV batteries improving the yield of the batteries.


Open District Heating for Sustainable Heat Recovery

This Open District Heating aims to recover waste heat to the existing DH network by developing an innovative business model for plug and play heat pumps and contracts where the DH provider buys waste heat from local sources like data centres and supermarkets.


Switching from steam based to water based heating systems powered by biomass

Steam pipes were changed to district heating based on water as energy transmitter. The power is supplied via a biomass power plant owned by the municipality.


Greencity in Zurich

Greencity is the first urban district in Switzerland to meet the conditions of the 2000-watt society and represents a largely grid-independent area, relying on 100% supply from locally generated renewable energy sources and an innovative and environmentally friendly mobility concept.



Real-Time Energy Map, Nottingham

The energy maps solution as part of project REMOURBAN, represents the ability of the citizens to visualise the energy consumption of the controlled region in real-time.


New heating network

As part of the HeatNet North West Europe Interreg project, Aberdeen is completing a pilot project in Torry. An existing district heating network within this area currently serves three multi-storey blocks. The pilot will expand this existing network, linking in three municipal buildings.



Creating Renewable Energy Communities

Citizens are involved in the definition of the actual needs and the most appropriate solutions for the energy community. They also participate in the design of the energy community as an entity (legal form, structure, organisation, rules of operation and governance), and management of decisions.




Energy Communities with Agro-Photovoltaic Projects

Citizens are involved in the definition of the actual needs and the most appropriate solutions for the energy community. They also participate in the design of the energy community as an entity (legal form, structure, organisation, rules of operation and governance), and management of decisions.

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Related solutions

District Heating & Cooling Systems

State-of-the-art district heating and cooling systems are paving the way for municipalities to reduce overall carbon emissions and to speed up the energy transition through the efficient distribution of heat and cold from renewable energy sources.

Municipal Energy Saving Systems

The supply of energy to households, public buildings and services accounts for the majority of GHG emissions in the majority of municipalities. Energy Saving Systems represent punctual solutions to optimise energy consumption.

Energy Storage Systems

Energy storage systems are used to store energy that is currently available but not needed, for later use. The goal is to create a reliable and environmentally friendly system. As the share of renewables increases, so does the need for storage. With storage, energy can be used when it is needed.

Public Charging System for Electric Vehicles

The current EU regulation on emissions for cars is the strictest worldwide. Along with further restrictions the thresholds cannot be meet with conventional cars only anymore. One alternative technology, reducing the local emissions, are electric vehicles.

Virtual Power Plant

VPPs are a response to the growing number of distributed energy resources (DER) making their way onto the grid, as VPPs allow their production to be pooled to achieve the flexibility and scale needed to trade in the electricity market; unleashing gains for prosumers, aggregators, and grid operators.

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