The Power Plant Next Door

15 January 2019

Throughout history technological advancement and change that has lasting impacts on humanity has largely come about through critical mass. As a child, I distinctly remember visiting a friends house and seeing their newly installed solar PV system on the roof. 25 years ago, this seemed like the future as I had only seen photos of such things in books about NASA and science fiction.

While some technologies are adopted quickly into day to day life, it seems to be taking an age for solar systems to become common place. Obviously cost is major driver of this but then so too is how seamlessly technology can be integrated into how we live.

Micro grids have been spoken about in energy circles for some time, but it is only now that the step change in the supply and purchase of energy appears to be gathering momentum as more and more end users are installing solar systems and battery storage.

Contact, Trustpower and Vector have all been trialing various strategies relating to this in Wellington, Tauranga and Waiheke Island respectively. Some third party companies are taking a slightly less traditional approach allowing end users to buy and sell energy directly between each other underpinned by blockchain technology removing the need for a “middle-man” so to speak.

The following post from Centrica has direct parallels with the New Zealand energy market.

Suzanne Schutte is a supermarket worker – and an energy pioneer.

The mother of two from Wadebridge, Cornwall is the first householder to have solar panels and cutting-edge battery technology installed as part of a £19 million trial that aims to help unlock further renewable energy use across her part of south west England.

What makes this scheme different to thousands of other rooftop solar schemes across the world – and what makes Suzanne a pioneer – is that the electricity generated by the solar panels and stored in her battery won’t just be used by her home or sold back into the grid.

Under the Cornwall Local Energy Market, homes and businesses will eventually be able to trade electricity with each other directly. This gives them greater control over their energy use and greater access to cleaner and cheaper electricity.

By taking part in the scheme, Suzanne joins a select band of people in communities across the globe trialling new ways of using and trading energy that are underpinned by the latest digital technology.

Rerouting Renewables

The need for schemes like the Cornwall Local Energy Market has been created by the rise of renewable energy and the inability of existing power grids to move this energy around efficiently.

In most western countries, power transmission networks were developed nearly a century ago to transfer electricity from large coal-fired plants over long distances across the country. However, the map of electricity generation in these countries has changed dramatically over the past decade. For example, renewable energy sources, dominated by wind power, now account for nearly a third of all the electricity generated in the UK.

And microgeneration – where energy is generated by homes or businesses and distributed locally – accounts for 17% of electricity generation.

Government incentives and the falling cost of technology has encouraged many to generate their own power with more than a million homes in the UK using solar panels for their electric and heating needs.

Old-style grids – such as that found in the UK – are not designed to move electricity from thousands of small power plants over short distances. Instead, electricity continues to be fed over long distances to central points in the grid, then fed out again.

This can create curious anomalies. Around the country, many wind farms have had to reduce their power output because of an excess of energy on the grid – due to strong winds and low demand – while major energy consumers including nearby factories have no way of accessing that extra electricity.

Being able to store and move electricity at a far more local level can help smooth out supply and demand, and address many of the problems caused by the intermittent nature of renewable electricity generation.

Going Local

The UK’s National Grid predicts that by 2050 up to 65% of the country’s electricity generation capacity could come from local sources. That means that something needs to change in the way electricity is moved between those producing it and those consuming it.

And this is where schemes like the Cornwall Local Energy Market come in.

The scheme is being funded by Centrica and the European Regional Development Fund, with support from partners including the local distribution network operator and academia. All of the organisations involved regard it as a critical test case for how energy markets around the world could operate in the future.

“The Cornwall Local Energy Market is an important test of how we can better integrate renewable technologies into local areas,” says Ed Reid, Head of Strategy for Centrica Business Solutions.

Reid adds that the opportunity today isn’t only to make the energy system more efficient, but also to give both producers and consumers greater involvement and control.

“The existing energy system is based on 1950s technology and treats the consumer as a passive recipient,” he says.

“It’s far less dynamic than other markets, and I think going forward what we’re seeing with new technologies is that it is allowing customers to be more involved in energy and take better control.”

The Airbnb of Energy

When energy industry experts like Reid talk about making energy more dynamic the way it is in “other markets”, they are referring to the kind of transformation that is currently taking place in sectors such as finance, travel and hospitality.

Specifically, it is the ability for digital technology platforms to enable so-called “peer-to-peer” transactions. In finance it can be seen when, for example, those seeking foreign currency for their holidays can trade their own currency via an app with other travellers.

Arguably the most famous example comes from the hospitality sector, where Airbnb has enabled millions of homeowners to make extra income from renting out their spare rooms.

“Companies like Uber, Airbnb, have really changed the way that we think about business,” says Lawrence Orsini, Founder and CEO of energy blockchain pioneer, LO3 Energy.

“The very same things are happening now at very early stages in energy. We’re seeing more generation on rooftops in our communities, in businesses and that’s going to change the way that business works in the energy industry. It’s really distributing a lot of the power and control to members of communities, and putting more control in the hands of consumers at the edge of the grid.”

Orsini’s company will supply the blockchain technology through which participants in the Cornwall Local Energy Market will be able to trade with each other directly.

LO3’s blockchain for energy empowers consumers to set preferences for energy consumption including local energy produced by neighbours, commercial businesses and farms.

In Brooklyn, residents of the Park Slope and Gowanus neighbourhoods are connected with each other via a virtual microgrid using rooftop solar panels. LO3 has found that consumers want a choice in their energy and believe in creating a stronger, more resilient community focused on local values.

Trading with Blockchain

A blockchain is a database that is shared across a network of computers. It acts as a record of transactions. And because records of those transactions are stored on multiple computers and updated simultaneously, it’s much more secure and harder to hack than a centralised system.

Each transaction is a block, and when the transaction is complete the block gets added to a chain of previous transactions, providing a clear public history of those transactions.

In local energy markets and microgrids, tokens equal to the market value of electricity are traded and logged as transactions or “blocks”. This use of digital tokens means the trade between energy user and producer can happen instantly, without the need for bank approval of the transaction.

For Orsini, this kind of digital communication of data is the key to how grids will function in the future.

A lack of data is one of the main barriers that is stopping people from trading on microgrids, he explains.

“Our devices need to be able to speak to each other about what’s happening on the grid, in order for them to make choices about when they charge, when they discharge, when they produce electricity, how they move electricity. In order to manage the grid of the future, we have to have a significant amount of data. In fact, the grid of the future doesn’t run on coal or natural gas, or wind or solar; it runs on data.”

The Power Plant Next Door

The data vital for energy users and producers to trade locally won’t just come from the supply side. Local energy markets will also be able to understand electricity demand at a far more accurate level than ever before.

UK energy start-up Verv has developed an AI-powered smart hub that sits in people’s homes and learns how much electricity is used by individual devices in the home.

In a trial on a housing estate in Hackney, east London, Verv installed its smart hubs in 40 flats. The information from these boxes is being combined with a blockchain-enabled microgrid that trades the electricity generated by the housing estate’s rooftop solar panels and stored in a communal battery system.

This trial delivered the UK’s first peer-to-peer energy trade using blockchain in April 2018. Verv chief operating officer Maria McKavanagh says having highly detailed knowledge of electricity demand will enable local energy markets to behave like the current wholesale energy market. And that will increase the accuracy of future energy deals.

“We know which appliances are on in real time, how much they’re costing, what’s been used in the past and, therefore, we can predict your future energy requirements much better than we would be able to with smart meters alone,” she says.

That allows customers to buy the amount of energy needed based on a really accurate forecast. Similarly, for the person selling their solar energy, they will be able to ensure they’ve stored enough energy for that day’s needs, and only sell on the excess.

Whether you produce energy or not, schemes like those in Hackney, Brooklyn and Cornwall show how one day we could all become the power plant next door.