How P2P energy sharing could alter our relationship with the power we consume
Increased innovation has brought us to the threshold of technology that could revolutionize how we perceive and use electric power. In a world where the exchange of ideas and information is constant, it is now possible to exchange yet another commodity: energy.
Peer-to-peer (P2P) energy trading allows producers of renewable energy to sell their excess electricity to other users who need it. Anyone on the same energy grid can purchase energy from producers, regardless of whether they own a solar panel. In this transaction, the seller is commonly referred to as a ‘prosumer,’ to recognize their role as both a ‘producer’ and a ‘consumer’ of sustainable energy.
Hinging on the simple economics concepts of demand and supply, this latest technological development in the energy market is widely considered one of the most viable solutions in the global battle against the energy crisis.
A peek into its working
P2P energy trading traditionally makes use of microgrids, which are energy grids that can operate independently from national power grids and use energy that is generated locally (energy.gov). Microgrids create a network of users in a particular region, who can directly conduct renewable energy transactions amongst each other.
Blockchain technology has often been touted as a technology capable of improving the traceability and security of energy trading, as it facilitates the storage of information regarding every transaction while protecting the classified data of users. A significant advantage proffered by blockchain is that it eliminates the necessity of a third-party to conduct transactions since all digital contracts between the prosumer and consumer are saved securely in virtual units.
The first time that P2P energy trading was used was in New York in 2016, when a resident with solar panels used the Ethereum blockchain to sell energy to his neighbor. Several companies have since ventured into this arena, and the big players in the field today include Power Ledger, SunContract and Grid+.
The Pros of P2P
P2P commerce is an economically viable option for both prosumers and consumers for multiple reasons. By eliminating the necessity of an intermediary in the transaction, both parties can avoid the costs associated with a third party’s involvement. Further, P2P energy trading is designed such that the seller receives an amount that is higher than the wholesale energy price that they would have received if they opted to sell the energy back to the grid, while buyers are free to select energy options offered at their preferred prices. As energy does not need to be transported from a power plant, the costs associated with wires and poles are done away with as well.
Another attractive feature of this altered approach to the production and consumption of energy is the transparency that it allows for; P2P commerce lets consumers choose between sources, and buy their energy from a source that is reliable or known to them.
Despite the numerous advantages associated with P2P energy sharing, the concept has not been developed to an extent where it can be commercialized on a large-scale, mainly due to high costs. Also, as governments of countries are often the regulatory bodies for commodities, they may set regulations on P2P energy trading, preventing transactions from occurring as efficiently or economically as possible.
Energy trading in the East
Until recently, P2P energy trading projects were undertaken mainly by startups in North America, Europe, and Australia. However, Singapore-based company Electrify has managed to carve out a niche in the market today and is one of Asia’s first companies to venture into this field. Unlike incumbent P2P energy trading solutions that operate on microgrids, Electrify’s technology was designed to work with large national grids, enabling energy trades to take place on a city-wide scale.
On July 22, 2020, the company announced the launch of SolarShare, the first commercial pilot project for P2P energy trading in Singapore, in collaboration with Senoko Energy and ENGIE Factory. Through an online platform, the project enables consumers to buy renewable energy produced by the solar panels owned by prosumers.
SolarShare is built upon Synergy, which is Electrify’s P2P energy trading technology. Piloted in Singapore in 2018, Synergy tracks the data of users using an energy market methodology called ‘time of use’, and uses a power grid to move power between the producer and consumer. Tokyo Electric Power Company (TEPCO) observed the pilot and its results, and invested a small amount into Electrify, to monitor its future activities. After this small scale pilot was successfully completed in 2019 , Electrify decided to aim even higher.
“We began talking to energy regulators, generation companies, and big retailers to go to market with them. We’re very fortunate to have found partners in ENGIE Factory and Senoko Energy with whom we launched SolarShare, a commercial product,” says Electrify CEO Martin Lim.
Unlike most other companies, Electrify does not rely entirely on blockchain to enable energy trading. After speaking to a few utility providers, Lim and his team realized that blockchain, though a seemingly obvious choice, wasn’t particularly favored by those in the field.
Lim believes that this disinclination was due to a general lack of digitization in the energy sector and legacy technology. He opted to use Amazon Web Services (AWS), a cloud platform, to accommodate the utility providers’ preferences, but ensured that customers could still use blockchain.
“A startup should always be obsessed about making sure it has the ability to pivot,” says Lim, when describing how Electrify quickly shifted its plans to cater to the preferences of utility providers.
Light at the end of the tunnel
Lim believes that Singapore is brimming with the potential to be a hub for energy-related projects in Asia. He attributes this to the stability of grids in the country, and the well-enforced regulations in the energy market. Additionally, Southeast Asian markets’ rapid growth makes it a place with staggering prospects for solar power trading.
“The market is at a position right now where they start without the burden of legacy. And we choose what the new models are going to be. I’d be hard-pressed to pick any other industry with that kind of growth potential,” he says.
Lim aspires to make people more energy conscious by increasing their engagement with the energy that they consume. Using SolarShare, consumers can monitor how much power they are consuming, what they are consuming the power for, and how much comes from utilities and green sources. Ultimately, it allows them to optimize their choices from an economic and environmental perspective.
Lim has set a high bar for Electrify in terms of what he envisions for the company. He hopes to create a platform where energy trading can be done from machine-to-machine using cloud technology.
“How far could we go? I’m pretty ambitious about it, to be honest,” he says.
Despite the high costs associated with P2P energy trading, it could transform our relationship with the energy we consume. With companies like Electrify setting a precedent for other startups in the arena, the beginning of our journey to a greener, more sustainable earth may be just one click away.