Trading excess generation with neighbors is no longer science fiction, writes independent energy expert Fereidoon Sioshansi, publisher of the newsletter EEnergy Informer. An experiment in Switzerland shows that peer-to-peer trading is ready to be scaled up. First published in EEnergy Informer.
By now, it is accepted that with the passage of time, more consumers will become prosumers – that is, produce some or most of the kilowatt-hours (kWhs) they consume by generating it – typically by investing in rooftop solar PVs. Australia, for example, already has over 2 million solar roofs and California is perhaps approaching a million. Depending on the size and efficiency of the panels and the amount of sunshine, many of these prosumers produce more kWhs than they need for local consumption during the sunny hours of the day.
The excess generation can usually be fed into the grid – assuming there is a decent reward for the exported power – or can be saved in a storage device for use at later hours, say in a battery, in an electric vehicle (EV), in a hot water tank or similar devices. All of these options are being explored, especially if there are limitation on how much can be fed into the grid and/or if very little is paid for it during the sunny hours, when solar generation has little or no value.
This has led to a new idea. How about selling, sharing, or trading the excess generation with a neighbor, perhaps one who can put the excess kWhs to good use, say to run their air conditioner, their pool pump, their Jacuzzi, or charge their EV battery.
On the face of it, such peer-to-peer trading has many merits.
- First, it allows the locally generated electrons to be consumed locally, rather than overloading the local distribution network, which was not designed to handle such flows.
- Second, if the neighbors can agree on how much to pay/get for the kWhs traded, then the retailer and/or the distribution company need not have to worry about such transactions, nor will there be any need for billing and settlements if the neighbors can amiably sort things out.
Complicated it may be, but science fiction it is not. As reported in My EV, Your PV, Or The Other Way Around, in the Jan 2019 issue of Energy Informer, variations of such P2P trading schemes already exist, such as a homeowner with excess solar generation offering some of the excess juice to anyone with an empty EV battery who can simply charge up from a private EV charging station in the driveway. This may not be strictly legal – certainly not encouraged under current regulations – but it is already happening. It is not fundamentally different than setting up a lemonade stand in the driveway. And should regulations allow such practices, it is likely to take off. Australia’s 2 million solar PV owners are likely to start experimenting, especially since they are getting very little for feeding the excess solar into the network.
Legal and regulatory barriers aside, how can future prosumers engage in P2P trading? Once the number of traders exceeds two, things get progressively complicated.
How can large number of consumers transact without going through a central clearinghouse, which will add to the costs and complexity? Can a community of like-minded consumers and prosumers set up a local electricity market for trading? Moreover, since P2P trading makes use of the existing distribution network, how much should they pay so that non-participants are not adversely affected? And most important, how can traders in such a scheme settle among themselves in a way that is fair and reasonable, that is, pays those with excess power according to what they are willing to sell and charges buyers according to what they are willing to buy?
These are vexing questions that keep increasing numbers of researchers, academics and practitioners busy, including a group at ETH Zurich in a project called Quartierstrom which literally translates as ‘district power’ in German.
For the demonstration, the researchers recruited 37 households, 27 of them prosumers, with 200 kW of combined solar capacity and 80 kWh of battery storage in Walenstadt, Switzerland. The households are in close proximity of each other and downstream of a transformer. The objective of the experiment was to engage the participants in local electricity trading without a central authority or clearinghouse, but rather relying on a distributed blockchain technology. The participants in the local market – consumers, prosumers, and prosumagers – could trade with one another by setting price limits on how much they were willing to buy or sell for locally produced and consumed electricity.
Moreover, the research team came up with a bottom-up grid tariff, where traders would only pay a reasonable amount for utilizing the local grid infrastructure but not the rest of it, that is the portion upstream of the transformer, which they did not use in the experiment.
It must be pointed out that the Swiss legislation – as well as regulations prevailing nearly everywhere else – currently does not allow for such a scheme where the local community only pays for the local portion of the network. For such innovative schemes to take place, regulations and tariffs must be modified.
The logic of the local grid tariff means that you pay less for the grid if you trade within the community, which incentivizes local generation, consumption, storage, and balancing. You pay for what you use. Electrons remain in the neighborhood. Less energy losses, less pollution, less grid congestion. What is there not to like?
The scheme has successfully run since January 2019 without a central authority. It suggests that the idea can be scaled up on larger community level, according to Sandro Schopfer, the Quartierstrom Project Lead at Bits to Energy Lab, which is part of the Institute of Information Management at ETH Zurich.
In describing the proof of concept, Schopfer said, “Beside demonstrating the technical feasibility of localized trading, the project aimed to illustrate how current tariffs at the local level can be replaced with prosumer-friendly schemes for future ecosystems where localized trading is permitted.”
The researchers are now looking at ways to integrate flexible loads and making battery storage systems not only reduce exports at the household level but also at the community level to achieve higher self-consumption and self-sufficiency at the local community level.