Designing DERtopia: How do we get to a decentralised, democratic grid from here?

Democracy: noun, (Greek, dēmokratiā, from dēmos ‘people’ and kratos ‘rule’) A system of government by the whole population or all the eligible members of a state, typically through elected representatives, (or) The practice or principles of social equality.

The democratic grid: An energy system in which users individually and collectively control local energy resources for supply, storage, trading and consumption.

There is a bill before federal parliament to establish an Australian Local Power Agency.

Proposed by Indi MP Dr Helen Haines and building on her 2020 Local Power Plan, the bill aims to increase the number of community energy projects in Australia and the competitiveness of renewable energy supplied by community energy projects in Australia.

The bill is the subject of a Parliamentary Inquiry, with submissions being accepted until 9 July. I would encourage you to consider lodging a submission in support of the bill.

However, even if this bill became law, community energy would remain a niche part of the energy sector. The bill’s financial impact statement is a clue. The cost is estimated at around $74 million per year. The Australian electricity sector turns over well over $20 billion per year in retail bills.

Maybe a more appropriate comparison is with the amount of money that AEMO has forecast needs to be spent on transmission infrastructure over the 20 years of the 2020 integrated system plan: $27 billion.

By either metric, that’s not just small, it’s needle-in-a-haystack territory.

This is not a criticism of the bill or of community energy in general. It is a recognition of the power of incumbency and the legacy of a top-down, centralised model of energy supply that has become outdated in the world of burgeoning distributed energy resources (DER).

We already have the world’s highest rooftop solar uptake, and market bodies are projecting that this and other DER could provide half of all system capacity by 2030 or 2035. Yet decision-making continues to be centralised – and in some cases, increasing. The recent AEMO-directed solar cutoff in South Australia is a good example.

In the recent past AEMO has also demonstrated a desire to develop and operate a single distribution level marketplace for DER energy and services, rather than allowing a plethora of third-party trading platforms to emerge using a common API or interoperability standard so that they can talk to the distribution network to maintain system security.

The Total Environment Centre and other consumer advocates have been working on an alternative model for the relationships between parties in the supply chain which we call the democratic grid. We have just published a discussion paper on it called Designing DERtopia.

Based on the US model known as the layered decomposed optimisation model (catchy, no?), the old centralised supply chain is effectively flipped upside down.

Users become increasingly responsible for their own supply, relying on the distribution system as backup; in turn, the distribution networks (DNSPs) rely on the bulk supply system for additional energy and security services.

The two points of connection between the three main levels of the grid – the user’s inverter and meter, and the bulk supply points – then become like border crossings; places where supply/demand data as well as energy and system services are exchanged.

The implications could be far-reaching. It might, for example, follow over time that:

• AEMO has no need to control (even indirectly), or even have visibility of, inverters and other DER, because this is the role of the DNSP as distribution system operator.
• More opportunities arise for the local or regional trading of flexible demand and other energy services — eg, in P2P networks or between the members of community energy projects.
• DNSPs are encouraged or required to offer local use of system tariffs that stimulate the rollout of DER such as community scale batteries, since the democratic grid model implies a direct relationship between the extent of the system utilised and the appropriate tariff for its utilisation in both directions.
• Users are encouraged and incentivised, when installing solar and battery systems, to ensure that they are islandable in the event of blackouts, where the regulatory framework also recognises the resilience value of DER.58
• Communities have the opportunity to “buy back” their local grids to function as isolated or islandable microgrids where they see an environmental, economic or social benefit in doing so.
• Some transmission assets are derated or decommissioned, with cost savings to users, as the utilisation of existing distribution network capacity and new SAPS increases.
• Users without active DER such as solar, batteries and EVs have more opportunities to benefit from them, as well as to trade their flexible demand, because of the emergence of multiple localised marketplaces unfettered by centralised control.

But this is just the beginning. The point of a democratic grid is not to enable or incentivise particular known products or services: it is to put literal and metaphorical power back into the hands of users by localising markets and services as much as possible, and then to get out of the way.

How people and communities choose to respond will depend not only on their resources and ingenuity but also on the governance frameworks we put in place around this model. The intended outcome is beautifully summed up in a promotional video from peer-to-peer platform provider Enosi:

“Clean, low cost energy is a basic human need. What if… you get to decide where it comes from, and where the benefits flow. People and communities in control of their electricity and futures.”

It is early days, and there are some significant challenges. For instance, will we see the emergence of a bottom-up grid architecture model in parallel with the old top-down model, so that users who do not want to take a more active role in their energy supply can stay with the status quo?

And how do you make decisions in the brave new world of local energy systems – if, say, 99% of the residents of a town want to go off-grid onto a microgrid, but the other 1% want to stay with the old grid connection?

We need to sort through these important governance issues. But that can only happen in the context of an overarching vision and a model of the grid that puts this into practice.

RenewEconomy contributor David Leitch has repeatedly lamented the Energy Security Board’s failure to propose an integrated vision for the future grid as part of its Post 2025 market design program.

In respect of DER, at least, we agree. Whether this oversight is remedied in the final ESB paper to energy ministers before its demise a month from now remains to be seen.

But in the meantime, TEC and other consumer advocates have also proposed a grid architecture co-design process to the ESB that would guide further reforms to support DER integration, while supporting inclusive, clean, affordable and dependable energy for all consumers.

It’s time to bring community energy, alongside peer-to-peer trading, microgrids and other DER, in from the cold.

Mark Byrne is energy market advocate at the Total Environment Centre