An energy community provides an alternative or a supportive model to the traditionally dominant state-owned or private energy utility. It can play a substantial role in the energy system by allowing the engagement of communities in renewable energy projects and supporting infrastructure, by sharing ownership, responsibilities, decisions and benefits. Beyond increasing renewable energy supply, the energy community can provide multiple social, economic and environmental benefits and ensure that these benefits are shared more widely (IRENA Coalition for Action, 2024).
An energy community can also serve as a crucial incubator for local innovation, developing energy solutions and service models that are specifically tailored to the unique needs and resources of the community, thereby fostering a more resilient and adaptive energy landscape. It is thus crucial to shift the narrative around renewables from solely climate change mitigation to emphasising local development benefits and productive use of energy for communities. Similarly, the energy community is not simply a means of providing energy, but also a means to reach development goals defined by the local community. In this way, energy becomes the platform though which a community can achieve its development goals. Setting the right narrative guides policy, and setting the right policy guides funding (IRENA, 2025a).
To be effective, energy community projects require community engagement, ownership, control, and the retention and sharing of benefits/profits. Innovation in engagement is critical. This involves creating structures to embed ownership and agency within communities, especially in developing world or off-grid contexts. Effective community engagement has been shown to reduce system costs up to 20% and to mitigate key socio-technical risks, including undersized systems, poor maintenance and unmet demand (IRENA, 2025a).
In the energy community model, communities own and manage the energy-related assets (usually distributed energy resources), giving them control of the project and of the distribution of economic and social benefits (IRENA, 2022b). The model offers a greater sense of ownership, higher acceptance of energy projects, and greater flexibility in mobilising local supply and demand. It also can empower local communities and ensure more inclusive development (Figure 15). However, barriers to scaling up energy communities include a lack of technical expertise and limited access to conventional financial instruments due to lower profit rates.
To make an energy community viable, there is a need for innovative financial mechanisms that are accessible and tailored to the local context. This includes exploring local bonds that a community can buy (potentially even by selling assets such as livestock), implementing outcome-based financing and designing revenue-sharing models to incentivise local operators for maintenance and healthy system operation. Enabling policies that allow for bi-directional power flow (from community to grid) and direct sales to creditworthy off-takers (such as mines or data centres) can ensure economic viability (IRENA, 2025a).
Building local capacities is crucial for communities to understand, operate and benefit from energy projects. This includes providing technical training for operation and maintenance and guiding communities on productive uses of energy for income generation. Facilitating the exchange of experiences and learnings among communities is also vital, allowing them to learn from each other’s governance models, negotiate effectively with developers and incorporate diverse perspectives such as gender (IRENA, 2025a).
Excerpt of: Innovation landscape for sustainable development powered by renewables (IRENA 2026)