Energy self-consumption: what it is, how it works and the different types
Self-consumption involves generating electricity to meet all or part of the energy needs of a home, business, industrial facility, owners’ association or other premises. In the renewable energy sector, photovoltaic self-consumption is the most widespread form, although wind, hydro, biomass and other renewable sources may also be used.
The IDAE defines electricity self-consumption as the ability of individuals and businesses to generate renewable electricity to meet their own consumption needs through installations such as photovoltaic solar panels or other renewable generation systems. This definition can be expanded in the IDAE’s Self-Consumption Office.
In a self-consumption system, the electricity generated is used primarily at the point of consumption itself. When generation falls short of demand, the remaining energy can be drawn from the electricity grid. If production exceeds instantaneous consumption, the surplus can be stored, curtailed or fed into the grid, depending on the technical configuration and regulatory framework of the system.
How does energy self-consumption work?
Self-consumption works by matching, as far as possible, the output of a generation installation with the consumer’s electricity demand. In a solar photovoltaic installation, the panels produce direct current when they receive solar radiation. That electricity is transmitted via the relevant photovoltaic strings to the inverter, which converts it into alternating current compatible with the electrical installation. The energy generated can follow different paths:
- Instant consumption: renewable electricity is used directly to power loads in the home, business or industrial facility.
- Import from the grid: when self-generation does not cover the entire demand, the consumer obtains the remaining energy from the grid.
- Surpluses: when production exceeds consumption, any surplus electricity can be fed into the grid if the installation is configured to do so.
- Storage: a battery system can store some of the surplus energy for later use when generation levels drop.
The inclusion of a BESS (Battery Energy Storage System) enables a higher level of self-consumption by shifting some of the energy generated to times when there is demand but renewable production is insufficient.
The European Union recognises consumers’ right to become self-consumers of renewable energy, to generate electricity for their own consumption, to store it and to sell any surplus production. This framework also covers self-consumption carried out jointly by several consumers. The European framework can be consulted at the Article 21 of the European Renewable Energy Directive.
Individual self-consumption and collective self-consumption
One of the main categories of self-consumption is based on the number of consumers connected to the generation facility.
Individual self-consumption
Individual self-consumption occurs when a generation installation is linked to a single consumer. It is common in detached houses, factories, industrial units, logistics centres, hotels, shops and commercial buildings. In a factory with a rooftop photovoltaic installation, for example, the electricity generated by the panels can be used directly to power machinery, air conditioning, lighting and other energy-consuming equipment within the company itself.
Collective self-consumption
Collective self-consumption enables several consumers to share the energy produced by a single generation facility. It is particularly relevant in owners’ associations, industrial estates, office blocks and groups of nearby consumers. The energy produced is distributed amongst the participants using allocation coefficients established in accordance with the applicable regulations. In this way, a single photovoltaic installation can allocate part of its output to different supply points.
European legislation expressly recognises the right of self-consumers located in the same building, including blocks of flats, to engage jointly in self-consumption activities and to share the renewable energy produced. In Spain, the IDAE also has a Guide to Collective Self-Consumption specific details on procedures, energy allocation, connections and administrative processes.
Self-consumption with and without surplus
Another key classification distinguishes between installations based on their connection to the grid when electricity is generated but not consumed immediately.
Self-consumption without surplus
In self-consumption without surplus, the installation is fitted with a system that prevents surplus energy from being fed into the electricity grid. These systems use power control devices to match generation to instantaneous demand. When the installation is producing more electricity than the user consumes, the system limits production to prevent surplus energy from being fed into the grid. This approach may be suitable when the consumer wishes to generate electricity exclusively for their own consumption and does not wish to manage any surplus electricity.
Self-consumption with surplus
In the case of self-consumption with surplus electricity, any electricity generated that is not used directly can be fed into the grid. In Spain, within this category, there is also a significant difference between installations eligible for compensation and those not eligible for compensation.
- With surplus energy eligible for offsetting: the economic value of the surplus energy can be deducted from certain components of the electricity bill in accordance with the conditions set out in the regulations.
- In the case of surplus electricity not eligible for compensation: the electricity exported is treated as energy sold on the market or via the relevant commercial mechanism.
The simplified compensation scheme should not automatically be confused with the Net Metering. Although both mechanisms enable surplus electricity to be monetised, their regulatory and economic functioning may differ. For exemple, the administrative, technical and economic conditions governing these schemes are regulated in UK by the Ofgem – Smart Export Guarantee (SEG).
Types of self-consumption by energy source
Although solar photovoltaic self-consumption accounts for a large proportion of current installations, the concept of self-consumption is not limited to a single technology. Various energy sources can be used to generate electricity for personal consumption.
- Solar photovoltaic self-consumption: this uses photovoltaic modules to convert solar radiation directly into electricity. It is the predominant technology in homes, businesses and industrial facilities due to its modularity, cost savings and ease of integration into roofs and land.
- On-site wind power: this involves using small or medium-sized wind turbines to generate electricity for local consumption. Its viability depends largely on the availability of sufficient wind resources.
- Hydropower for self-consumption: certain installations located near watercourses can use mini- or micro-hydropower technologies to generate electricity for their own consumption.
- Self-consumption using biomass or biogas: industrial, agri-food or agricultural facilities can generate electricity using resources such as biomass, biogas or certain types of organic waste.
- Hybrid self-consumption: this combines two or more generation sources, such as solar photovoltaic and wind power, and may incorporate energy storage to improve the continuity and utilisation of the electricity generated.
The choice of technology depends on the available resources, the consumption profile, the location, the available space, the necessary investment and the technical characteristics of the installation. In photovoltaic projects, combining solar generation with batteries makes it possible to increase the proportion of energy consumed directly, as opposed to energy imported from the grid. Storage can also be used for additional energy management strategies such as Peak Shaving, particularly for industrial or commercial consumers with high power peaks.
