Follow Us

Blog Back

AAEAAQAAAAAAAAhtAAAAJDA2ZDk0YjMwLTYzZTgtNDA0Ni04NDkwLTM5ZWUzMjFjOTkzMw

Developing decentralised power markets to match local generation

The idea of a centralised power market where you have “one power price” for a particular country or region is the norm throughout most of the world. However, with the build-up of intermittent renewables, most of which is going into the local or distribution grid, there are increasing issues in transporting that to other regions and there has to be a big question mark whether one centralised power price gives the best price signal to enable the most efficient and cost effective integration or renewables into the system. The good news is that we do have cost effective and secure distributed database technologies such as blockchain  which could make peer-to-peer power trading a reality while at the same time reducing costs to end customers.

One of the issues with the build out of renewables is that usually requires upgrades in grid infrastructure which push grid changes up for people living in that area (for example in Cornwall in the South East of England).  In addition, in many parts of the world investments in grid have not kept pace with increases in renewables which means that oftentimes renewables are not taken into the grid and are simply curtailed. So for instance, in 2015 Chinese curtailment of wind totalled 34bn kilowatt hours which is enough to power 8.5m households for a year. But this is not just in China. In 2014, in Ireland some 4.1% of total available wind energy was curtailed. In Germany, some1,580GWh (1.16% of all renewable produced) was curtailed which is enough to power over 400,000 German homes for a year. To make matters worse, in the case of Germany, the renewable asset owner is actually paid when his asset is curtailed which means the end consumers pays for power that is not used!

The obvious solution is to build out the grid but this is exceptionally time consuming and expensive. One alternative is to create local power markets. By doing this a region like West Ireland or the Scottish Highlands could provide a price signal locally which would incentivise customers to put in storage (hot water and batteries) and flexibilise their demand profiles.  You could even envisage the local utility giving power for free to the local swimming pool or to the energy poor. And the result of it would be a drop in curtailment which would also would negate the need for grid build out.

Taking this a step further, the use of blockchain would also enable pro-consumers where energy users are also energy generators, transacting directly with each other or through community energy schemes, or via aggregators or local utilities. This would decrease inefficiencies in the grid caused by moving renewables (most of which is in the distribution grid) up to the medium and high voltage grid and then back down again to bring it to another customer in another region, which is not only expensive but also inefficient, given that depending on the country, some 5-10% of total generation is lost by doing this and never actually reaches the final end user!

The other advantage of embracing technologies such as blockchain is that not only do they enable distributed energy technologies but they also will make it easier and more cost effective to integrate new technologies such as electrical vehicles, distributed networks, energy storage, and the internet of things into our power system. And all of this will make our world a safer and cleaner place to live.