Peer-to-peer energy: an opportunity for storage?

We look at the potential impact of peer-to-peer energy trading networks – such as those from Vandebron in the Netherlands and Open Utility in the UK – on energy storage.

What impact will peer-to-peer energy trading networks – like those from Vandebron in the Netherlands and Open Utility in the UK – have on energy storage? Photo credit: Vandebron

A growing interest in peer-to-peer energy trading raises questions over whether storage could help consumers gain extra benefit from distributed power generation.

Current attempts to trade energy on a peer-to-peer basis are primarily designed to let producers maximise their profits on excess power at the point when it is produced.

The Dutch platform Vandebron, for example, lets consumers buy power directly from independent renewable energy producers such as farmers who own wind turbines.

By eliminating the utility’s margin from the equation, producers can offer consumers cheaper energy and still make more money than they might with a traditional feed-in tariff or off-take agreement.

Open Utility, a UK platform that is due to kick off a six-month pilot this summer, says producers might be able earn up to 30% more than the government base rate for their energy, simply through the ability to shop around for better power-purchase agreements.

These early schemes might not quite qualify as true peer-to-peer setups.

Two-way traffic

What they are effectively doing is connecting groups of unregulated suppliers with a pool of potential customers, rather than facilitating real two-way traffic between all members of the group.

However, that could be set to change with the increasing penetration of smart grid technologies in deregulated energy markets.

With the right technology in place, writes Australian Solar Council secretary Geoff Bragg in RenewEconomy: “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 … registering a fee for the transportation.”

If the price you can get for your energy varies a lot over time, it might make sense to invest in a storage system, most likely in the form of batteries, so you can sell when prices are high.

But whether or not peer-to-peer trading would help energy storage in the long term is far from clear.

Easy to decide

Currently, it is relatively easy for a grid-connected consumer to decide whether to get storage because the power they buy from their utility comes at a set price and the cost of a distributed energy system with batteries is also known.

With extensive peer-to-peer trading, however, it might be more difficult to predict the buying and selling price of energy. But both are likely to be much lower than current utility prices, weakening the case for consumer investment in energy storage.

Furthermore, across a very large peer-to-peer network you are perhaps more likely to find a customer prepared to pay a decent price for energy at the time you produce it, which again lessens the need for storage.

At low peer-to-peer energy trading penetration, however, the reverse might be true.

A limited pool of potential customers could conceivably offer opportunities for energy sales with returns as great or even greater than would be achieved by saving power to offset grid supplies.

Hence a simplistic view is that peer-to-peer trading might initially favour storage but then make it less attractive over time. But there are likely a number of additional factors to bear in mind. One of these is the progress of smart grids.

Improving end-user power-pricing dynamics

Besides acting as the foundation for true peer-to-peer energy trading networks, smart grids themselves have the potential to improve end-user power-pricing dynamics through techniques such as demand response.

This again could lessen the case for energy storage, although it is important to note smart grids have so far not always been synonymous with improvements in electricity pricing.

In Spain, for example, utilities are in the midst of a European Union-mandated smart grid rollout programme, but very few energy-saving features have been implemented and, indeed, the regulatory framework actively discourages power-use reduction.

Lack of progress on smart grids might not only delay the introduction of peer-to-peer networks, but in high-cost markets could also stimulate the uptake of energy storage as part of consumer grid-defection trends.

Once consumers are off the grid, peer-to-peer networks become largely irrelevant, of course.

A final factor in whether batteries will play a part in peer-to-peer networks is if the investment in energy storage is purely for the purposes of trading or is effectively a sunk cost because it is used for other applications.

Electric vehicle batteries

The classic example here would be where electric vehicle batteries are integrated into the home energy system.

But it is also conceivable that battery storage could feature heavily in future peer-to-peer trading simply because it is already widely integrated with distributed generation systems.

Currently, at this stage there are clearly too many variables involved to be able to say with certainty if peer-to-peer trading will help or hinder the adoption of energy storage.

It is also highly likely that case for deploying storage within a peer-to-peer setup will vary greatly from one case to another. Right now there is no way for a consumer to know. But that might not be a problem.

If companies such as Open Utility are already crunching data to get you hooked up to a cheap independent energy provider, you can bet that by the time peer-to-peer goes mainstream they will have found whether it would pay you to buy a battery.

Written by Jason Deign

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