["Environmental Policy and Governance, EarlyView. ", "\nABSTRACT\nIncreasing electricity demand from data centres, industrial applications, electric vehicles and domestic heating is creating pressure to develop electricity systems in many parts of the world, but especially in Western countries. In response to challenges such as grid congestion, interconnection queues and climate‐related hazards, network operators, municipalities and entrepreneurs are turning their attention to local solutions. Positive energy districts (PEDs) are emerging as a prominent new organisational model to implement these solutions. The main objective of a PED is to achieve net‐zero emissions on an annual basis, which requires investments in local energy production and its flexible use. However, their success is not guaranteed, as they must overcome the ‘liability of newness’. PEDs require strong policy support and a shared understanding among diverse stakeholders, who often have conflicting business objectives and interests. This article examines the legitimation processes of four distinct frontrunner PED projects in Finland and qualitatively analyses the challenges associated with their legitimation. Drawing on the ecosystem literature on legitimacy, we categorise legitimation efforts into identity creation, discursive legitimation and performative legitimation. The qualitative case analysis reveals that the primary legitimation challenges facing PEDs can be distilled into four identity‐creation dilemmas: (1) differentiation versus conformity in relationships with energy incumbents; (2) holistic versus focused scope; (3) top‐down versus bottom‐up governance; (4) balancing timescales and uncertainties through stability versus innovation. This paper contributes to the literature in two main ways. First, it explores the challenges that PEDs face in legitimising themselves. Second, it compares legitimation dynamics across industrial and residential PED contexts. The findings enhance our understanding of PED creation processes and can inform the development of more effective policy support to facilitate their diffusion.\n"]