This paper sheds a light on how local conditions affect renewable energy innovation. As empirical case, we study an energy transition policy regulation in the Netherlands: the zip code-rose regulation (PCR) intended for community energy initiatives. Firstly, we analyse the capacity of the PCR to facilitate the accommodation of renewable energy projects by community energy initiatives. Secondly, we analyse how emerging area-based energy practices are feeding back into the energy policy system. Based on empirical evidence from a desk study and interviews with community energy initiatives and key governance actors we find that the policy does provide a modest incentive for initiatives to develop renewable energy projects under local conditions. Nevertheless, the policy falls short of allowing initiatives to openly seek for locally desired solutions and hence, to increase opportunities at a local level to develop projects based on local conditions. However, current difficulties with the policy are being considered at a national level urging for adaptation of Dutch energy policies.