Energy Communities – Taking Local Power into Local Hands

An energy community is a group of people who join forces to manage their own energy needs, partly or fully. Across Europe, such initiatives have grown rapidly, supported by EU legislation that recognizes them as participants in the electricity market. Residents in a neighborhood or region can collaborate to address local energy challenges, such as heating or solar power generation, through shared solutions.

While this model is still new in Iceland, rising electricity and transmission costs have sparked growing interest, especially in rural areas where energy is significantly more expensive than in urban centers. In some parts of the country without district heating, known as cold areas, homes rely on electricity for heating, leading to high energy bills.

One such area is Kelduhverfi in North Iceland, where Eimur, under the RECET project, held a community meeting on energy communities and solar power in early january 2025.

The event was well attended and resulted in the creation of the Kelduhverfi Energy Cooperative, established to explore ways to reduce local energy costs.

The cooperative plans to promote the installation of heat pumps, which can cut electricity use for heating by up to two-thirds compared to direct electric heating, and to experiment with small-scale solar energy systems on farms.

Beyond local savings, reduced electricity use in such rural areas also lowers the national cost of energy subsidies for electric heating. Inspired by similar models across Europe, energy communities like Kelduhverfi’s could eventually enable local energy trading, strengthen energy security, and promote fairer energy distribution across Iceland.