‘Peer-to-peer energy trading’ is a buzzword that is thrown around quite a bit in Australia as the number of solar & battery storage systems grows. What is peer-to-peer energy trading and how can it benefit you?
We caught up with Localvolts founder Jitendra Tomar to gain a fuller understanding of the concept – and to refine our scrutinising filter for what constitutes ‘true’ peer-to-peer vs peer-to-peer trading in name only.
What are the benefits of peer-to-peer energy trading?
The internet and modern day communications technology have made a peer-to-peer approach to many things more tenable than ever before – peer-to-peer shopping with Ebay, peer-to-peer accommodation with Airbnb, or peer-to-peer file sharing on BitTorrent, to name just a few examples.
For most people, the concept of peer-to-peer trading has appeal in the first place for two reasons:
- Peer-to-peer cuts out the middle man and should theoretically save both parties money, and
- Peer-to-peer allows transparent dealings among equals as opposed to being treated as a ‘consumer’ by large corporations.
These two points encapsulate the ‘heart and soul’ of the peer-to-peer ideal, so it’s important that anyone signing up for a purportedly peer-to-peer energy trading program be sure that it is true to them.
Is it peer-to-peer? 3 questions to ask
More specifically, Mr Tomar notes that there are 3 questions to ask to determine unequivocally whether a program adheres to peer-to-peer values. These questions are outlined below.
1. Can you choose your preferred energy source or destination?
In effect, all electricity sold on Australia’s National Electricity Market is exactly the same in terms of its ability to power devices in your home; once the electricity is put into the grid, it all goes into the same ‘pool’. But you may have preferences with regard to the origin of that energy.
By signing up to a peer-to-peer energy trading program, you should be able to choose who you do business with. In being able to identify your peers as sellers or buyers in their own right (as opposed to dealing with a company representing customers of their own), you avoid price obfuscation – and can even build relationships that are beyond the purely transactional. Similarly, being able to identify your peers is that it is then possible for your energy trading relationships to reflect your real-life relationships and values.
For example, under a peer-to-peer energy trading arrangement, it should be possible to:
- ‘Give’ your solar energy to your friends and family for free or at a discounted rate
- Set a preference to purchase energy from a local wind farm, solar farm or even coal plant
- Opt to source as much energy as possible from distributed rooftop solar systems or home battery banks
- Opt to source as much energy as possible from your neighbourhood, region or state.
2. Can you set agreements own terms (especially price)?
In order for a program to truly fit the definition of ‘peer-to-peer’, as a fundamental rule participants should be able to set their own terms for their transactions. These terms may consist of a few things, but the most important one is price.
As a participant in a peer-to-peer trading program, you should be able to set a price for the energy you buy or sell – although the open market will be the ultimate determinant as to whether that price request will be satisfied. For example:
- You may set your price threshold for no more than 20c/kWh from any source – in this case, any producer may opt to sell you electricity at that rate (or less), although you’ll have to fall back to higher rates in the instance that there are no willing sellers
- You may wish you source your energy from solar as much as possible, but never paying more than 6c/kWh – some solar producers may be willing to sell to you at this rate, but others may not (in which case you’ll have to pay more or source your electricity from elsewhere)
Another requirement for bona fide peer-to-peer energy trading is that participants should be able to agree on when and how much electricity is delivered. These agreements may be for one-off, instantaneous transactions or longer-term agreements made over weeks, months or even years. They may be restricted to specific days or times of day (e.g. every Sunday in May between 10am and 5pm), or be open-ended within the broader time frame.
3. Are you treated differently because you are smaller – or bigger?
In a peer-to-peer arrangement, your size as a generator or consumer should also be irrelevant. At present, in order to be an active participant on the National Electricity Market, you must have a generator no smaller than 5 megawatts – about 5,000x 5kW solar systems. In a peer-to-peer trading environment, on the other hand, everyone from a homeowner with a 1.5kW solar system or a the biggest coal-fired power plant owner in the country should be able to trade on an equal footing.
Finding the right peer-to-peer energy trading program
The prospect of peer-to-peer energy trading is promising, provided that you can find a program that delivers the full suite of potential benefits. The three questions outlined in this article should help you to determine how ‘true’ to the ideal a particular program is, ultimately helping you to make a decision about whether it’s worth your while.
© 2017 Solar Choice Pty Ltd