Blockchain P2P solar energy trading proves feasible and popular in world-first trial
An Australian government-backed trial of peer-to-peer (P2P) solar trading has demonstrated the potential of localized two-sided energy markets and blockchain technology to improve the energy system. However, current electricity tariff structures would need to be modified to realize the full stack of values that this technology has to offer.
A world-first blockchain solar energy trading trial that lets households set their own electricity prices has found the technology is feasible, popular with consumers and valuable for network operators faced with increasingly decentralized energy systems. The trial, funded in part by the Australian federal government, ran between December 2018 and January 2020 as part of the RENeW Nexus Project and involved using Power Ledger’s blockchain technology to track the transactions of rooftop solar energy traded between 48 households in Fremantle, Western Australia (WA).
The trial was led by WA’s Curtin University in cooperation with Murdoch University, Landcorp, CSIRO/Data61, CISCO, Synergy, Western Power, Water Corporation, and energyOS. In addition to the P2P trial, the project also includes a study of a distributed Virtual Power Plant (VPP) as well as a microgrid with a 670kWh battery that will service homes within the East Village development in Fremantle.
Using the existing electricity network and working with the local energy retailer, Power Ledger’s platform enabled households to buy and sell excess rooftop solar energy in near real-time at a price agreed between them, with residents able to view electricity usage in 30-minute intervals. As noted in a report into the project prepared by Power Ledger, Curtin and Murdoch Universities and released on Friday, the trial showed that P2P energy trading is technically feasible and desired by customers.
The report also found that energy trading is able to provide a potential price signal instrument to deliver localized energy markets that can contribute to lower-cost grid stability in what would be a major win for network operators. However, it also noted that under the current electricity tariff structure in WA, some participants’ financial outcomes were largely dependent on their daily energy consumption rather than trading volume.
Results and recommendation
Namely, Phase 1 of the RENeW Nexus trials led to a financial loss for a majority of the participants. Seventeen of the 18 households experienced higher costs than they would’ve received under Synergy’s A1 residential tariff. Since energy generation costs in the WA electricity market make up only 15-20% of an electricity bill, participants that consumed less energy, that is below 11.5 kWh/day, were worse off due to inflexible tariffs. “Unbundled tariffs that reflect system costs via a high fixed-supply charge favour higher energy consumption because higher energy use brings down the per-unit cost,” the report found.
Another contributing factor was the suboptimal ratio of prosumers and consumers (70% prosumers to 30% consumers), which led to limited demand for P2P energy resulting in more rooftop solar electricity being sold to the retailer. Participants in Phase 1 purchased 19.3% of their energy from peers, with the remainder purchased from the retailer.
The outcome was different in Phase 2 that resulted in a financial benefit for a majority of participants: 18 of the 29 participant households (62%) experienced lower costs than if they’d been charged the A1 tariff whereas 11 participants experienced higher costs. In this phase, the prosumer to consumer ratio was reversed, with the new cohort initially consisting of 20 consumers and 10 prosumers. All recruited participants had a historical average consumption of 11-16 kWh/day, which aimed to cover the $3.30 total daily fixed costs when compared against using the A1 tariff. As a result, energy bought from peers rose to 38%, while the remainder was sold back to the retailer for the default buyback rate.
Overall, “participants had a positive view of P2P energy trading and could see its benefits but stated that changes to the tariff structure would be required to make it attractive,” the report found. Therefore, the report recommended P2P coupled with a dynamic feed-in tariff as a way to deal with excess solar during the day so that prosumers would be able to monetize their excess solar at all times of the day, without any subsidy, and also provide services to the grid.
The report also found the potential for virtual power plants (VPPs) to give battery owners access to additional revenue streams and in doing so decrease the payback period on investment in a battery. A VPP could increase localized energy autonomy by approximately 30% with the current prosumer-consumer mix in the SWIS where battery system sizes were 15kWh, the report said. “Up to 68% local energy autonomy was possible when half the cohort were prosumers which would deliver a greater amount of system benefits at the same time,” it found.
As a result, the report notes, VPP energy trading could further reduce the excess solar during the day, thereby improving the resiliency of the grid, and then dispatch that electricity when the system actually needs it with households being financially better off even with a reduced feed-in tariff. Report co-author and Power Ledger Chairman Jemma Green added that “P2P and VPP trading is a viable alternative to curtailing the output of renewables, or needing more subsidies to encourage the consumption of excess solar during the day.”
“If governments around the world are serious about incorporating renewable energy into their future energy planning then it needs to be price-competitive,” said Green. “For markets that have or are retiring their feed-in tariffs, P2P and VPP trading market mechanisms can replace FiT income for households and at the same time facilitate a more stable grid, dealing with the grid problems that renewables can cause.”