A simple and efficient method to allocate costs and benefits in energy communities

Purpose: Define a simple and efficient method to allocate costs and benefits in energy communities, and characterize some of its key properties.Design/methodology/approach: The approach is theoretical. We define an algorithm to allocate costs and benefits in energy communities, and derive some of its formal properties using mathematical reasoning. We also compare the proposed algorithm with several alternatives.Findings: The proposed algorithm is simple and it ensures that the resulting distribution of costs and benefits is (i) beneficial for every member of the community, (ii) efficient, (iii) fair (in a formally defined sense), (iv) smooth (small changes in the consumption or in the generation of energy cannot lead to big changes in the allocation of costs and benefits), and (v) environmentally friendly in the sense that the individual allocated cost is a strictly increasing function of individual consumption.Research limitations/implications: The properties of the proposed algorithm are satisfied for a specific type of energy community that is defined in the manuscript. Practical implications: The algorithm is easy to implement in any energy community.Social implications: The algorithm is highly relevant for any community of prosumers who are willing to exchange energy internally. It guarantees a number of desirable properties that are formally defined in the paper.Originality/value: We prove that a simple algorithm to allocate costs and benefits in energy communities guarantees the fulfilment of several desirable properties.