Peer to peer solar energy trading – who will profit first?

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Businesses may switch off large solar arrays on weekends rather than feed electricity to utilities for free. Perhaps it’s time for peer to peer trading.

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There has been a lot of discussion recently about the poor rate paid for exported energy from a solar PV system, either at state government regulated rates, or voluntary offers by energy retailers.

In NSW there are energy retailers that fail to offer any credit for exported energy despite the fact that IPART has concluded a benefit to retailers of 6.6 to 11.2c/kWh. If retailers are not paying anything for that energy, it is a windfall profit.

There is clearly a failed market in distributed energy.

As an example, I know a commercial solar PV system owner who is prepared to switch off his 75kWp system on weekends, rather than “let the energy company get it for nothing”.

The penalties for breaking his current supply contract exceed the predicted value for exports at the rate offered by other energy retailers. He would love to sell his excess energy to the electricity users down the street and across the town, but there is no mechanism to do it, despite the fact that the electrons already flow to those locations.

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Image courtesy of ShutterStock

The success of solar PV owes a great deal to people’s embrace of the democratisation of energy – becoming empowered by generating your own energy. We are missing a truly competitive market for excess energy.

With storage, defection from the grid is a reality not too far around the corner. We are all familiar with the possible death spiral of traditional centralised energy generation, with articles reaching fever pitch in recent weeks on the basis of the European experience and predictions for the US market.

Here in Australia, a great deal up public money has been sunk into the grid; there must be a way to utilise it effectively through the transition to a grid focussed on distributed generation.

Peer to Peer

Imagine a system where one customer could sell energy to another customer, via the Distribution Network Service Provider (DNSP) who “clips the ticket” for transferring the energy – Peer to Peer Energy Trading.

Anyone with a smart meter could join the market as a buyer or seller. Customers could set their buy and sell rates for energy for distributed energy via an online portal. At any moment a smart meter knows how much energy is being imported or exported, with a data system connecting the 2 or more peers at appropriate intervals, logging the traded energy, and registering a fee for the transportation of that energy.

If that sounds difficult to do, remember this is an IT and accounting exercise (the physics is sorted already) and think about Peer to Peer file sharing with such protocols as BitTorrent file sharing, with hundreds of peers connected to each other in any one file sharing exercise. It would be a piece of cake for a handful of the right IT boffins.

Getting Smart

The DNSPs would still be making money charging for network access to the traditional centralised generation market; people will still pay their fixed charges for connection to the grid on their traditional electricity bills.

But here’s where the utility could get smart; with detailed network maps, the distance between any two registered smart meters could be known, and the rate charged could be proportional to the distance and networks assets between the two points.

Perhaps a rate for kWh.km ? This may have to be a regulated schedule, given the effective monopoly at play. Already there would be a financial incentive for buyers and sellers to be as close to each other as possible, to minimise the cost of the energy transaction, but it would also acknowledge the physical losses that occur as the distances increase.

The key point here is that the DNSPs get a chance to make some money out of distributed energy, on top of their usual income stream, at the same time opening up the market for distributed energy to customers currently hamstrung by a handful of poor offerings for their excess energy.

The NSW case

In September 2013, I attended the NSW Energy Security Summit, hosted by the NSW government. The first half of the day was all about CSG development and the apparent scarcity of a commodity that from what I read is going to get more expensive quickly.

I’m not quite sure about the logic of trying to overcome the rising international gas price by extracting as much as possible as quickly as possible, but I’ll leave that to the gas experts.

The afternoon sessions were much more interesting, one of which involved the future of the energy grid, and the best ways to utilise it, chaired by Rob Stokes MP, a politician clearly across the issues at play. There were representatives from energy generators, retailers, distribution & transmission networks, their associated bodies, academics and a couple of PV minded folks such as myself.

After some intense discussions, it was apparent that everyone agreed that all technologies should be able to access the grid and compete to deliver energy at lowest cost. It was also agreed that the regulatory framework should allow for market investment & innovation.

The three DNSPs in NSW, Essential Energy, Ausgrid & Endeavour Energy are all now merged under the umbrella of Networks NSW, still owned by the NSW government.

There are currently about 220,000 PV customers in NSW with 143,000 of them gross metered under the NSW Solar Bonus Scheme. Most of those customers are heading for a rude awakening in December 2016 – only two and a half years away, when the Solar Bonus Scheme ends & they will suddenly receive a dramatic increase in their electricity bill.

They are all, at the same time, going to want a decent Feed in Tariff, or a new NET meter installed, to get full retail value for self-consumed energy.

Perhaps they would pay to have a smart meter installed, to get access to a realistic market for excess energy?

Peer to Peer energy trading: It’s an IT & accounting exercise, with some regulatory hurdles thrown in for good measure.

Who will be the first DNSP to unlock the distributed energy market and profit at the same time?

Here’s an opportunity for Networks NSW – could they be the first?

Geoff Bragg is chairman of the Solar Energy Industries Association, NSW, and a director at the Australian Solar Council.

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12 Comments
  1. Beat Odermatt 6 years ago

    Maybe the new Panasonic Power Supply Container could become a viable alternative. I refer to today’s article in Gizmag.com. I am sure some power companies would do everything in their “power” to stop any sensible environmental solution. Or is Red Sky Energy on the right track? Could a business so sell its excess energy to a company like Red Sky Energy?

  2. juxx0r 6 years ago

    If they’re making a windfall profit. then perhaps we need a super profits tax. It would be rude not to.

    • Chris Fraser 6 years ago

      At least we can dream about crossing the super profits tax threshold !

  3. Chris 6 years ago

    Check out this report from the Institute for Sustainable Futures looking at the opportunities and barriers to this exact scenario:
    http://www.tec.org.au/images/reports/ISF_TEC_VNM_paper_20130627.pdf-1.pdf

  4. Chris Fraser 6 years ago

    Good ideas there. The kWh.km grid-use tariff sounds like a feasible way. And it would be reflective, meaning that the grid-use fee is not levied to the generator until the actual transfer of energy is complete. Perhaps the fee could be levied once at the end of each day after line losses and the distance travelled were calculated.

  5. rick davies 6 years ago

    What about collective bargianing as another option, where multiple solar panel owners are bundled together by an intermediary who then bargains on their behalf for the best feed in rate for them from an electricity retailer?

  6. Wolf Messthaler 6 years ago

    we really have to embrace freeing the market
    fully in the sense of Tony Abbott’s ‘Australia is open for business’:
    the most sensible way is to just feed in the PV excess at a commercial
    rate back into the grid to be used by demand anywhere in the grid! the
    main initial driver for Solar PV is to reduce GHG emissions by employing renewable sources energy and solar is Australias biggest natural assett !
    YES reduce red tape : take your actions there where your mouth promissed to go!

  7. Motorshack 6 years ago

    “It would be a piece of cake for a handful of the right IT boffins.”

    As a retired IT boffin, let me introduce you to a technique we used to call “sneaker-net”, which is to say, data transfer implemented by sneaker-shod feet.

    The idea is that instead of setting up some sort of expensive, complicated network to get data from one computer to another, you just dump the data to some storage medium – back then floppy disks or tape cartridges, now thumb drives – and then walk it over to the destination. As a very creative co-worker once asked in about 1979, “what is the bandwidth of a station wagon full of nine-track tapes?”

    In the case of excess PV output, you could store the energy in some useful form, such as ice or hot water, for example, and then send those products to paying customers.

    The foregoing paragraph is just an off-the-cuff example of a much more general idea, which is that energy can be stored in many useful forms, which do not need the grid for transport to the end users.

    To put this point the other way round, instead of shipping the power to where the work is being done, move the work to where the power is available. Then ship the resulting products by whatever means is appropriate.

    Whatever you do, don’t get fixated on paying for the use of wires to ship electrons around the neighborhood. That is only one solution among very many.

    • JonathanMaddox 6 years ago

      On the other hand, it’s the sheer convenience of wires and electrons that make energy fungible. Ice and hot water aren’t commodities — they lack ease of transportation, ready buyers, and they don’t hold their value over the long term.

      For a long time we’ve been prepared to pay more for electric power delivered directly to our homes and workplaces than for any other form of energy — and for the most part without caring what fuel or technology was used to generate it. Only recently in this era of peak oil has liquid fuel for our vehicles become comparable in price to the same amount of energy in the form of electricity from the grid.

      Once the industrial nations would turn cheap oil into valuable grid electricity as a matter of course, but that’s now unheard of except in Saudi Arabia, on islands, and in remote off-grid locations. I anticipate it’s only a matter of time before we’re turning cheap (off-peak) grid power into expensive liquid fuel, to serve the role of a commodity which your suggestion of a station wagon full of thermos flasks doesn’t quite satisfy. However doing it at the domestic scale doesn’t strike me as a safe or particularly profitable exercise. It would seem to make more sense to do it at industrial locations such as former oil refineries, fed via the grid.

      • Motorshack 6 years ago

        I would not much argue with any of your points. However, you may be losing track of what prompted my comment in the first place, which is that once you’ve sunk the capital into a particular system, then any failure to capture all the possible returns will be objectionable, and perhaps even harmful.

        In this case, I would not build an expensive array of solar panels, and then be happy to see the power going to waste on the weekends. I would be very strongly inclined to look for ways to use that power, even if those ways would not ordinarily justify building the the array in the first place.

        In particular, if the obvious solution, selling my spare power to my neighbors, is being blocked by dog-in-the-manger incumbent utilities and their pet politicians, then I would be very inclined not only to find a way to make the sale anyway, but to make sure I was sticking it to the assholes in charge as blatantly as possible.

        In an ideal world, of course, such tactics would never be necessary.

        • JonathanMaddox 6 years ago

          Okay, I get it. I guess I missed the tactical nature of your proposal 🙂

          I would like to think that utilities will ultimately be prepared to operate in such a way as to maximise societal value from their assets, rather than being belligerent and obstructionist.

  8. Alan 6 years ago

    Check out this group, doing something in this area:

    http://www.openutility.com/

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