P2P electricity trading and the impact on developing communities

3 minutes read

The global energy industry is evolving. With renewable generation technologies like solar photovoltaic (PV) and wind now a cheaper option than traditional thermal generation plants (such as coal or gas) in many cases, as well as with the continuing falling costs of energy storage technology, there is a notable shift towards more decentralised power networks taking place.

At national levels, countries look to integrate more renewables into their generation mix as they aim to meet emissions targets, necessitating a less centralised power system as solar and wind resources are generated across the grid network. Simultaneously, trends such as the rise of electric vehicles are challenging grid infrastructure from the other end, demanding charging power availability in previously low-demand areas. Traditional centralised networks and their infrastructure are becoming heavily strained under such evolving demand patterns, and the benefits of decentralised energy generation and distribution are being explored as grid operators shift their focus.

For smaller scales, the ability to offer more affordable access to clean electricity has not only empowered consumers around the world to become more self-sufficient, but it has also boosted economic activity and improved standards of living in many low-income regions. This boost has largely come off the back of the rather new microgrid/mini grid and micro solar industries, currently flourishing in Sub-Saharan Africa and Southeast Asia, as well as in South America and the Middle East. This industry is continuing to see evolution and innovation, in both the technology involved and the business models in which they operate.

What is P2P electricity trading and what does it do?

In such developing markets, with affordable electricity generation now available down to the household level, typically as a rooftop solar PV installation typically paired with a battery energy storage system, consumers now find themselves in the position of having access to clean and affordable electricity on demand for most, if not all, of the day and night. But what to do if one household does not need all of the power that they are generating on a given day? What if they could sell their excess power to their neighbours who need it more? Enter peer-to-peer (P2P) electricity trading.

P2P electricity trading enables consumers to become prosumers (those who both produce and consume) and enables locally distributed energy generators to sell their electricity to consumers for an agreed price. The trading itself takes place on a platform that connects all consumers and producers, without the need for an intermediary, and as long as the electricity flow can reach the same participants, the platform can be any size, making connections along one street, between villages, or even linking different communities together. A key aspect of this system is being able to directly trade between participants, and be able to track who has sold what to whom. So far, the majority of real-world P2P trials have attempted to tackle this issue using distributed ledger technologies (DLTs), most prominently blockchain.

By enabling communities in low-income regions better access and control over their electricity use, improved socio-economic conditions result. Creating an environment in which local residents, industries and commerce can operate with access to reliable and affordable electricity strengthens economic output, and, if managed correctly, can address many of the UN’s 17 Development Goals, such as gender equality, poverty, clean water and sanitation, hunger, education, etc. By creating P2P-enabled networks, the scalability and impact of the mini grid industry grows as more communities become connected, and reliance on public funding shrinks. With better access to electricity for lighting, refrigeration, communication, and much more autonomy over electricity generation and consumption, the opportunity to dramatically change the socio-economic status of many communities is real.

How can blockchain help?

The use of DLTs in minigrid energy trading is currently being developed primarily in higher-income countries with well-developed grid networks, but the opportunities in countries with weaker grid networks and off-grid communities are important, albeit more difficult to implement. Blockchain technologies help reduce the electricity trading transaction costs among prosumers, allowing the platform to record generation and consumption of all participants in real time, as well as autonomously pair buyers and sellers without the use of a middleman. The technical challenge lies in the linkage of DLTs with smart meters, mini-grid infrastructure, Artificial Intelligence, and well-designed user interfaces that allow the trading of electricity between and within minigrids to the benefit of all users and generators, making the system more efficient by allowing users to only pay for what they need, and receive the electricity when needed.

BCI’s involvement

BCI is partnering with local innovators in Southeast Asia looking to develop prototype mini grid P2P systems that utilise blockchain-based ‘smart contract’ proofs-of-concept with AI/Machine Learning to facilitate the users’ ability to buy, sell, and trade electricity through mobile applications. The prototypes are targeting off-grid communities who are reliant on diesel and kerosene, or even basic solar-home systems by creating prosumers and linking their households and communities together. The ambition is to promote and catalyse the next step in mini grid development and create workable and scalable blockchain-based platforms, as well as to improve not only the technological capabilities of minigrids, but also the lives of Southeast Asian and other remote communities through promoting energy independence and studying the socio-economic impacts of improved access to affordable and clean energy.

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