George Tecușan: Peer-to-peer electricity trading

Peer-to-peer electricity trading 

The COVID-19 pandemic changed the world drastically: millions of people were confined for several months, being able to leave their homes only for basic needs or medical emergencies. A lot of activities moved on-line and others were completely forbidden, impacting a lot of people and businesses. We are seeing deconfinement measures and surely but slowly we are going back to what we used to call our “normal” life.  During this period we have witnessed our vulnerability when faced with a big challenge, which brought a lot of unknowns. The question we have been asking ourselves is: “Once we have surpassed the virus, how are we going to deal with the greatest challenge of the modern times: climate change?”

Researchers have demonstrated that climate change is mainly due to anthropogenic emissions of greenhouse gases (GHG), the most “popular” one being the carbon dioxide (CO2). This is the result of burning fossil fuels in order to generate the necessary forms of energy to ensure our economic growth: mechanical work, electricity, heat etc. In my opinion, we are witnessing one of the most important transformations that humankind has ever experienced: the energy transition. In a nutshell, this change means that we should decrease our energy consumption and use more green energy in a very efficient way. Governments, businesses, universities – they are all investing huge amounts of money to accelerate this process. The European Union is one of the global leaders of this movement, having set 3 ambitious objectives for 2030: 1) At least 40% cuts in greenhouse gas emissions (compared 1990 levels); 2) At least 32% share for renewable energy; 3) At least 32.5% improvement in energy efficiency. In order to have a clear view of how these objectives will be met, each member state developed the National Energy and Climate Plan (NECP) for 2021-2030. One of the targets Romania set for 2030 is to reach the 750 MW threshold of installed capacity as production facilities owned by prosumers. The Romanian legislation defines the prosumer as the final customer who owns facilities of electricity production with an installed power of less than 27 kW, whose specific activity is not energy production and who uses, stores and sells electricity produced by renewable sources. 

As prosumers, we become our own electricity providers. By doing that, we can better control our energy sources and we can contribute to a “greener” community.  In Romania, people deciding to install solar photovoltaic panels on their rooftops have only 2 possible options to manage the electricity they do not consume: 1) To waste the surplus (to curtail the electricity), if they don’t possess storage facilities; 2) To inject the surplus back to the national electricity grid, being financially compensated by their supplier. Worldwide there are an increasing number of projects developing a 3rd solution: peer-to-peer (P2P) electricity trading. (e.g., The United States, Australia, Germany, Switzerland, Netherlands). The EU, in its revised Renewable Energy Directive, defines P2P trading as:

‘The sale of renewable energy between market participants by means of a contract with pre-determined conditions governing the automated execution and settlement of the transaction, either directly between market participants or indirectly through a certified third-party market participant, such as an aggregator. The right to conduct peer-to-peer trading shall be without prejudice to the rights and obligations of the parties involved as final customers, producers, suppliers or aggregators.’

These P2P markets are platforms where a consumer or a prosumer can buy/sell electricity (produced locally) from renewable energy sources with the most common one being solar photovoltaic panels. In this way, the energy generated is not wasted when the producer can’t use it and it is transferred directly or via a storage system (personal or common property) to another market participant, who is willing to pay the price set by the seller. For the moment, most of these projects are in their development phase, being deployed only at community level – from a block of apartments to several thousand households. The trading itself is done using blockchain technology, some projects having developed their own token used as currency. The 2 most important challenges encountered by this new way of exchanging electricity are: 1) Regulatory framework – what is the best market design in order to deploy it at large scale? 2) Technological process – a) how will the Internet of Things be used in order to implement the best control over the technical elements that are part of the (micro)-grid? b) development of blockchain technology. 

As it is presented in this article (which I strongly recommend for a comprehensive understanding of the topic), there are 3 structures proposed until now for P2P markets: 1) Full P2P market – peers directly trading between themselves; 2) Community-based market – a community manager is in charge of trading activities within the community, as well as with players from outside the system; 3) Hybrid P2P market – a combination of the two previous designs, having different layers of trading.

Such a new type of market arrangements can open the door for the development of another concept: Vehicle-to-Everything (V2X) – integration of electric vehicles in the energy and transportation systems.

Hoping that I succeeded in raising your interest on the topic, independent of your expertise, I will explain why I consider Romania should invest and accelerate its efforts to become an important developer of peer-to-peer trading. Among experts there is the idea that the energy sector is going through an important transformation, becoming Digitalised, Decentralized and Decarbonised. I will go now through each of the “3 Ds” to show how P2P electricity trading is facilitating this transformation.

1)      Digitalization

In order to trade energy, both the commodity and its financial counterpart, the platforms enabling this service need huge amounts of data – and where there are data and financial transactions, cybersecurity is mandatory. Thus, 2 very important elements have to be put in place in order to be sure that market participants will maximize their benefit: as much green energy as possible at a low price.

1)   Blockchain technology for electricity trading – the traditional centralized electricity systems offer access to a narrow spectrum of market data and limit the possible interactions between market participants. Blockchain will bring transparency, immutability and decentralization using distributed databases of records, such as location, consumption data, transactions, tariffs etc. To ensure process’ safety, transactions and settlements are made using smart contracts that contain the business logic, shared and validated by participants. These will foster the market competition in a digitalised energy sector, by eliminating intermediaries and allowing the interaction of multiple users. 

Blockchain is the main element of P2P electricity trading. There is a whole digital infrastructure that has to be developed in order to deploy blockchain at large scale. Digital awareness together with the popularization of blockchain’s advantages and limitations are crucial for a high adoption rate among prosumers.  In order to facilitate the development of these solutions, the government should support the start-up ecosystem. In 2017, Romania had 28 start-ups per million citizens, compared to the average of the CEE region, which was 58. Personally, I consider this as an important area where there is big room for improvement.

2)      Smart metering – reliable data in real time is crucial to trade a commodity that is produced almost instantaneously and cannot be stored easily. Injected and withdrawn electricity in and from each of the network’s nodes every second is key information for the grid operator in order to ensure its safety (maintaining the 50 Hz frequency value). Smart meters will be able to offer all this data together with each household’s consumption profile. Romania has the objective of introducing smart metering until 2028.

2)      Decentralization

Anyone who has a rooftop can install a PV panel and consequently become an energy producer. Different policies are being implemented all over Europe in order to encourage citizens to become prosumers, showing a clear trend to a decentralized energy system, where production is consumed locally. Romania launched the “Green House” program, supporting people willing to install their PV panels with a maximum amount of approximately 4100 EUR (20.000 RON) for a minimum of 3 kW installed capacity. Today, there are only around 500 prosumers in Romania, but more than 25000 people registered for the above mentioned scheme. An increasing number of content users will create a snowball effect, with more and more people getting in the game. This will create the premises for the appearance of communities where peer-to-peer trading can be implemented. A policy to encourage the installation of PV panels on newly constructed buildings can accelerate this process. Micro-grids, with PV panels as electricity generators and storage facilities represent a very good solution for buildings or communities that are far away from the national grid. The costs of grid’s extension would be high, so most of the time implementing a micro-grid is the best possible solution.

3)      Decarbonisation

Given the fact that solar photovoltaic panels are the most common way to produce energy locally in a small community, I am going to give an overview of this solution.

1)    Cost – levelized cost of electricity (LCOE) delivered by photovoltaic panels is decreasing rapidly, several projects already winning contracts for 14-16 €/MWh. (The average price of electricity for a Romanian household in 2019 was 138,95 €/ MWh). These remarkably low prices are due to the economy of scale as well. The price of PV modules is also decreasing, driven by continuously improving manufacturing techniques. Nowadays one can find modules on the market with 0.3 €/Watt-peak (maximum electric power that can be supplied by one photovoltaic panel in standard temperature and sunshine conditions). Future projections are showing massive reductions in costs. 

2)   Efficiency is increasing as well, modules available on the market having 20% efficiency, the world record being held by a cell with an efficiency close to 50% (at laboratory scale, with very high costs, but the potential is there).

3)     CO2 emissions – solar PV (at rooftop scale) is, on average, 10 times less polluting than combined cycle gas fired power plants and 20 times less polluting than coal fired power plants.

4)   Recycling – most of the photovoltaic panel is made of aluminium, plastic and glass, elements for which there are very well established recycling procedures. Today, over 80% of one solar PV panel is recycled in Europe.

A low pollutant energy form, whose efficiency is quickly increasing and whose cost is rapidly decreasing, which also has a high degree of recyclability will do nothing but be a great asset in the journey towards a decarbonized energy sector.

Energy transition is a complex challenge. Governments, policy makers, economists, academia, business leaders, civil society – we all have to work together because something is certain: there is no bright future ahead of us without the transition to an efficient and non polluting energy sector. Blockchain has the potential to revolutionize this domain, being one of the digital antidotes that can “heal” Romania in the post-pandemic era. Starting to accelerate our efforts today can make Romania one of the digital and energy leaders of the CEE region. The most important question is: are we as a society capable of finding the right way to collaborate for this greater goal?

Scurtă biografie: Sunt absolvent al Universității POLITEHNICA din București, cu o licență în Ingienerie Aerospațială și un masterat în Inginerie Industrială. Pe parcursul studiilor, m-am implicat în activitatea de reprezentare studențească și am lucrat cu Asociația Europeană a Studenților la Inginerie Aerospațială (EUROAVIA). Cu dorința de a face parte din proiecte cu impact pe scară largă, în 2015 am început să activez în Liga Studenților Români din Străinătate, unde am fost responsabil de relațiile externe și strângeri de fonduri și ulterior, Secretar General. În ultimii 3 ani de studii la București am lucrat pentru divizia de Aviație a grupului General Electric, având responsabilități operaționale în cadrul unității de producție a componentelor pentru motoare de avion.
În 2018 am făcut trecerea spre domeniul energiei. În calitate de bursier, am început un program de master axat pe energii regenerabile și tranziție energetică la École polytechnique, Paris. Prima experiență profesională în Franța a fost un stagiu de cercetare în Laboratorul de Meteorologie Dinamică din cadrul universității unde am lucrat pe subiectul micro rețele de electricitate. În prezent sunt analist de piață pentru divizia Global Markets a grupului ENGIE, în Paris.

Acest articol face parte din proiectul “România post-pandemică și antidotul digital”, o inițiativă a Fundației C.A.E.S.A.R.

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