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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 energy sources

Local energy distribution

Energy price competition


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
    consuming energy
    generating energy
    storing energy
    Providing flexibility
Potential Functions
    controlling energy consumption
    visualizing energy consumption
    managing energy consumption
Products offering these functions

Energy storage solutions

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


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 servicesaim 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

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

Government Initiatives


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)

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.

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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