Renewable energy communities and the ecological transition: A game theoretic bargaining approach

Renewable energy communities (RECs) are considered a key initiative for ecological transition by international institutions and policymakers. In our article, we analyze how RECs enhance cooperation in ecological transition with a game-theoretic approach. Depending on specific conditions, the interaction among RECs members can be modeled through a Prisoner’s Dilemma or a game where cooperation is the only equilibrium. A REC creates incentives for cooperation through three primary revenue sources: cost savings from self-produced and consumed energy, surplus energy sales, and government incentives. We identify the combination of these factors that leads to a cooperative Nash equilibrium, where the dominant strategy for prosumers is to create a REC with passive consumers. We further include bargaining in our model to explain how revenues are distributed between prosumers and passive consumers. Our results indicate that profit-sharing dynamics are influenced by factors such as self-consumption subsidies, energy pricing, and energy storage technology. Finally, we identify key policy parameters that influence REC viability, demonstrating that well-calibrated government incentives can significantly enhance participation and cooperation. Our study fills a gap in the literature by offering a formal strategic model that explains both the coordination mechanisms enabling successful REC formation and the bargaining processes that determine revenue distribution. • Renewable energy communities (RECs) are key for ecological transition. • REC incentives for cooperation are cost savings, surplus energy sales, and subsidies. • We identify the combination of these factors that leads to a cooperative Nash equilibrium. • Profit-sharing dynamics depend on self-consumption subsidies, energy pricing and storage technology. • We identify key policy parameters that influence REC viability.