The Regulatory Environment of Energy Communities, 2025

In recent years, the concept of energy communities (ECs) has appeared more and more frequently in discussions about Hungary’s energy market. Community energy is not only a technological and economic innovation but also a social one, finally allowing local communities to become active players in the energy sector.

But how does European and Hungarian law regulate all this in 2025? In this article, we provide a comprehensive overview of the current regulatory environment for ECs.

Legal Background

The European Union’s Framework

The regulation of ECs in Hungary continues to be fundamentally shaped by the energy policy goals of the European Union (EU). The core objective of this policy is to enable citizens and local communities to actively participate in the energy market, promoting environmental protection, decentralized energy production, and reducing system-level dependence.

Clean Energy for All Europeans

The EU’s comprehensive energy market reform, known as the Clean Energy for All Europeans package - adopted in 2019 - was created to support these strategic goals.

Key objectives of the package:

• Improving Energy Efficiency: By 2030, the EU aims to reduce final energy consumption by at least 0.8% annually and achieve a 32.5% improvement in energy efficiency.
• Raising the Share of Renewable Energy: By 2030, renewables should account for at least 50% of electricity generation.
• Empowering Energy Consumers: The package promotes active participation of consumers in the energy market, notably through strong support for ECs.
• Decarbonisation and Climate Neutrality: The EU intends to achieve climate neutrality by 2050, meaning EU countries collectively must not increase the overall volume of greenhouse gases (especially CO₂) in the atmosphere.

In addition to these goals, the package includes several directives to guide and regulate the creation and operation of energy communities:

Directive (EU) 2018/2001

The Renewable Energy Directive II (RED II) focuses on increasing the use of renewable energy sources. It introduced the legal definition of ECs and requires Member States to support community-based renewable energy initiatives. This directive provides the legal foundation for local communities to produce and share renewable energy legally.

Directive (EU) 2018/2002

This directive aims to further improve energy efficiency by amending the previous 2012/27/EU Energy Efficiency Directive (EED). The goal is a 32.5% improvement in energy efficiency by 2030. It supports the transition to a low-carbon economy and emphasizes energy savings in end-user sectors. It obligates Member States to set and meet annual energy-saving targets.

Directive (EU) 2018/844

This directive amends both the 2010/31/EU Directive on the Energy Performance of Buildings and the 2012/27/EU Energy Efficiency Directive. It aims to accelerate the renovation of building stock, promote smart technologies, reduce energy consumption in the building sector, and spread digital solutions such as smart metering. It supports the development of near-zero and low-emission buildings and encourages the uptake of smart building technologies.

Directive (EU) 2019/944

The Directive on Common Rules for the Internal Market for Electricity (which also amends Directive 2012/27/EU) modernizes the functioning of the electricity market. It introduces the concept of Citizen Energy Communities (CECs) and regulates the active participation of energy consumers, including energy production, storage, and trading. This directive allows communities to participate in the EU electricity market as equal players.

Hungarian Regulation

The Clean Energy for All Europeans package not only obliges Hungary to act but also presents an opportunity to strengthen energy independence, expand the use of renewable energy sources, and improve energy efficiency, especially through the modernization of the building stock.

This package provides not just environmental benefits but also economic and social advantages, contributing to sustainable growth and enhanced energy security within the EU. In line with this, Hungary has transposed the relevant EU directives into national law, both through legislation and government decrees.

Act LXXXVI of 2007 on Electricity (VET)

Hungary’s current electricity law, the Act on Electricity (VET), includes the main rules governing the operation of the energy system, its participants, and the market. Recent amendments to the act introduced the definitions and rights of ECs, along with regulations on how accounting and participation should work within them.

The VET serves as the primary legal framework for ECs in Hungary, laying the foundations for their operation and integration into the national energy market.

273/2007. (X. 19.) Government Decree

This government decree implements the Electricity Act (VET) and outlines detailed rules for the operation of the electricity market. It covers definitions, the conditions for grid usage and connection, as well as accounting, measurement requirements, and how system usage fees are applied. While it does not specifically name ECs, several of its provisions directly impact how they function:

• Grid Usage and Connection: The decree defines the technical and legal conditions for connecting to the grid. These conditions apply to power plants operated by energy communities as well.
• Measurement and Accounting Rules: It sets out requirements for electricity meters and settlement periods, which are particularly important when several members produce and consume energy jointly.
• Balancing Group Responsibility: The decree defines the role of the balancing group manager, which becomes relevant if an EC wants to form its own balancing group or join an existing one.

299/2017. (X. 17.) Government Decree (METÁR)

This decree regulates the mandatory offtake and premium-based support system for electricity produced from renewable sources, known as METÁR (Megújuló Támogatási Rendszer). While it does not explicitly mention ECs, it does not exclude them either. If an EC meets the general eligibility criteria, it can take part in the renewable energy support scheme, provided that it fully complies with both legal and technical requirements.

10/2024. (XI. 14.) MEKH Decree

Issued by the Hungarian Energy and Public Utility Regulatory Authority (MEKH), this decree lays out the rules for applying system usage fees and other charges. It has a direct effect on how ECs operate, as it defines how these fees are calculated for electricity production, consumption, and grid feed-in. Essentially, it determines what and how ECs must pay - or settle - for using the electricity system, especially when they manage multiple consumption and production points for their members.

Types of Energy Communities

The Clean Energy for All Europeans package, and accordingly the Hungarian legal system, distinguishes between two main legal categories: Renewable Energy Communities (REC) and Citizen Energy Communities (CEC).

Renewable Energy Community (REC)

The primary goal of an REC is to produce electricity from renewable sources and use it jointly among its members. Members typically include residential consumers, municipalities, and micro or small businesses, i.e., non-dominant energy market players. The purpose is not profit, but rather to strengthen energy security and independence and reduce energy bills.

REC operations are subject to strict rules. One key requirement is that members must be located within the same distribution transformer zone, usually a range of just a few kilometres.

Citizen Energy Community (CEC)

CECs operate under more flexible and broader conditions than RECs. While they may use any type of energy source, in practice, they still mostly rely on renewables. A CEC has the right not only to store energy but also to trade it. It can even take on an aggregator role, acting as an active market participant in the electricity market.

Although the CEC must also serve community purposes (profits must be reinvested in community goals and not distributed to market actors), it is not geographically limited like an REC. A CEC can span several transformer zones or even operate at a national level, provided that grid conditions allow it.

Whether a community chooses to form an REC or a CEC largely depends on its goals, whether it aims only to share energy locally or to become an active producer and trader in the market. This decision is also influenced by available grid infrastructure, the makeup of the community, and its long-term strategy.

Operating Conditions

The establishment and sustainable operation of ECs are subject not only to legal requirements but also to technical and organizational conditions. Both EU and Hungarian regulations aim to ensure the lawful operation of communities, the stability of the electricity grid, and transparent energy accounting.

Territorial Restrictions

One of the most significant regulatory limitations in Hungary is geographical restriction. According to the rules, members of an EC can only be located within the same (MEK) or a nearby (PEK) distribution transformer area. In practice, this means participants must be located within just a few kilometres of each other. The goal is to avoid overloading the national grid by ensuring energy flows remain local, minimizing losses.

While technically justified, this restriction poses one of the biggest challenges for prospective ECs, as not every residential area, neighbourhood, or municipal group falls within the same transformer zone. Therefore, it is always advisable to consult with the local energy provider before organizing a community.

Organizational Framework

ECs can only be formed if there is a legally registered organization behind them. This can be an association, cooperative, limited liability company (kft.), or non-profit business entity. The chosen legal form should reflect the goals of the EC, namely, non-profit operation, democratic governance, and fair member participation.

When selecting the organizational form, it is important to consider aspects such as accounting, taxation, administration, and internal decision-making. For example, community decision-making may be easier in an association, while financial operations may be more structured in a Kft.

Accounting System

ECs are subject to unique accounting rules to ensure real-time and proportional energy flow among members. Under current regulations, accounting is most commonly based on 15-minute intervals, meaning the system records production and consumption every quarter-hour.

The system is based on gross metering towards the distribution grid, where the price of energy injected into the grid and the price of energy taken from it differ. The service provider always pays less for energy fed into the grid than it charges for energy consumed. This reflects both system operation costs and a profit-oriented pricing model.

Within the community, however, accounting works differently: if a member generates more electricity than they can use or store, the excess is automatically redistributed among other members who have a consumption deficit.

Technical Requirements

Another fundamental requirement for the operation of ECs is the development of appropriate technical infrastructure. This enables tracking of production and consumption, ensures accurate accounting, and facilitates cooperation between the community and other stakeholders in the energy system. Key technical components include, but are not limited to:

• Installation of Smart Meters: These devices can record and transmit time-based data on production and consumption, both within and outside the community.
• Remote Reading and Data Access Systems: These ensure secure, GDPR-compliant data handling and allow the energy management system (EMS) and the designated accounting partner to access necessary information.
• Installation of Production Equipment (e.g., solar systems) on individually or jointly owned sites, financed either individually or collectively by community members.
• Communication Links with the distribution system operator (DSO), and, if applicable, with aggregators or balance group managers. This supports grid stability and allows active participation in grid operations.
• Use of an Energy Management System (EMS): This optimizes internal energy flow, supports self-consumption, and allows the integration of shared storage or flexible consumers.
• Data Security and Access Rights Management: Access to data must be auditably restricted to appropriate levels for each party involved.
• Precise Identification and Certification of Metering Points, along with registration of each user site and production unit in the distribution operator's system.

Having the necessary technical infrastructure is essential not only for internal community operations but also for smooth cooperation with system and network operators. The creation of ECs should be preceded by careful preparation, including local consultations, legal and economic analysis, and detailed technical planning. This is particularly important if the community plans to participate in the electricity market on an aggregated (PEK) basis in the long term.

Authorization and Notification

In addition to setting up the technical infrastructure, formal notification and authorization of the EC are essential. The following main steps are required to launch a legally operating EC:

• Establishment of a Legal Entity: The EC must have legal status. This could be an association, cooperative, or business entity, but the chosen form must comply with the legal definition of an EC.
• Registration with MEKH: The formation of the community must be reported to the Hungarian Energy and Public Utility Regulatory Authority (MEKH). The registration process includes a declaration of goals, operational structure, members, and planned activities.
• Reporting or Requesting a License for Regulated Activities: If the community intends to engage in electricity trading or distribution, it must obtain a service license, which includes technical and administrative coordination.
• Contracting:
  • With the Distribution System Operator (DSO): Contracts must be established for grid usage and metering data.
  • With community members: Clear contracts should define members' rights and obligations, accounting methods, operation of shared infrastructure, and cost-sharing.
• Technical Implementation: Infrastructure such as smart meters, generation units, and communication/accounting systems can only be installed once the necessary permits and contracts are in place, especially when connecting to the public grid.
• Data Reporting Obligations: Operating ECs must regularly report production, consumption, and accounting data to MEKH and the distribution/service provider.

ECs are a new but promising model in Hungary. Regulations are designed to provide a transparent and functional framework while ensuring the safety and stability of the electricity grid.

In this sense, ECs are not just a technical innovation but a social one too, where citizens can move beyond being passive consumers to become active energy producers and decision-makers.