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Approximately one-quarter of the energy price is owed by the transportation of the energy. The implementation of a local energy system can shift 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 are possible. 


Main Benefits
  • Reducing use of fossils

    This is a short description

  • Improving energy supply efficiency

  • Creating new jobs

  • Enabling new business opportunities

  • Reducing energy bills


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
Potential Functions

Business Model

Implementation Facts

Average Implementation Time: 2-5 years 


Market Overview

The growing market of local energy system is a response to environmental concerns, rising power prices and regulatory pressures and incentives. It allows users to generate energy independently from big suppliers and to control their consumption. By now in most of the cases, local energy systems have a backup connection to the national or international grid to ensure undistributed energy supply at all time. (Bain, 2017)



Energy Savings

The shipping and handling of energy cost 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 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 attack.

(Forbes, 2014)

Driving Factors

Subsidies and Government Initiatives

Most European countries support the spread of sustainable energy. As locally produced energy usually is renewable energy, this support the implementation of local energy systems as well. The table adapted from Stenzel, Foxon and Gross (2003) shows the different types of subsidies on renewable energy in the EU. Besides capital subsidies, feed-in tariffs have an significant impact on the spread of renewable energy. Using fixed feed-in tariffs, governments set a price at which the country’s electricity supply companies must purchase all renewable energy delivered to the distribution grid.

(Stenzel, Foxon and Gross, 2003)

Legal Requirements


Various European initiatives and regulations support the implementation of local energy systems. The following figure from the journal 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. These state 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.

(H. Lopes Ferreira et al., 2011)

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.

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.

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