Designing Renewable Energy Communities for Incentive Optimisation: Hydropower vs. Photovoltaic Systems

Abstract The increasing adoption of distributed renewable energy sources introduces new challenges for local energy management. Renewable Energy Communities (RECs) offer a promising framework by promoting collective energy self-consumption and citizen participation. This study presents a methodology for optimally sizing a REC based on consumers grouped into three typical energy consumption profiles. The objective is to maximise the economic revenue from feed-in tariffs associated with shared renewable energy, using hybrid systems with a total installed capacity of 100 kW in central Italy. Five renewable energy generation scenarios are analysed: i) HYDROpower- (HYDRO) only, ii) Photovoltaic- (PV) only, and iii) three PV-HYDRO hybrid combinations. Each scenario is assessed under two ownership models: i) third party-owned generation and ii) REC-owned generation. Results show that the HYDRO-only configuration delivers the highest economic benefits, namely 71, 450 in total revenue, which €33, 538 comes from in feed-in tariffs, and over 127 tonnes of CO 2 avoided annually. Consumer savings peak at €184 per household per year under third party ownership, which, while less financially beneficial to the REC itself, can support broader community initiatives. The analysis confirms that integrating HYDRO into RECs enhances energy efficiency, economic performance, environmental impact, and social value.