Is An Electricity eBay in our Future?
- Posted on October 23, 2012
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The Smart Grid can deliver significant changes to consumer interactions in electricity markets. Today, consumer enrollment in demand response (DR) programs is the typical form of participation with a focus on the production of negawatts. Among the most exciting possibilities for Smart Grid innovations are the opportunities for consumers to become prosumers – and participate as producers as well as consumers of energy in the distribution (low voltage) grid.
There are two primary models that have been proposed to foster prosumer participation. The first model presumes that the utility is the ultimate arbiter of all transactions as the buyer and seller. This is the model that we see enacted today in the form of net metering and Feed-In Tariffs (FiTs). The second model is referred to as a peer-based or transactive energy grid, in which all participants have equal status and may deal directly with each other in hyperlocal energy markets. Think of it as an eBay model for electricity buying and selling.
At the recent Metering/Billing/CRM Europe conference in Amsterdam, I learned firsthand about an interesting pilot called PowerMatchingCity in the Netherlands that is exploring peer-based energy grids. This project has a number of players associated with it, including TNO, a Dutch R&D organization funded by the government, private enterprises, and European Union grants; Enexis, the local electric utility; DNV KEMA; and the Delft University of Technology (TU Delft).
This project covers 25 residential homes in the city of Groningen that are equipped with micro combined heat and power (CHP) equipment, smart appliances, smart meters, electric vehicles, and rooftop solar. This project addresses participants, markets, and devices. This week’s article covers participants and markets.
The existing electricity market in the Netherlands (as is the case elsewhere) is structured for a relatively limited number of generator participants with devices that deliver high voltages of power using traditional (steady-state fossil fuel, hydro, nuclear) energy sources typically found at the transmission grid level. But Smart Grid technologies can integrate intermittent generation sources like wind and solar into the overall energy source mix. Smart Grid technologies can also enable medium and low voltage energy resources to deliver electricity in the distribution grid. However, these intermittent sources require markets to function in more granular time intervals than the traditional 15 minute interval for buy/sell transactions to ensure grid stability. TNO has created a “realtime” market that functions in 5 minute intervals. Using new technology called PowerMatcher, this market platform software balances power supply and demand in distributed clusters and uses agents to manage transactions on behalf of participants and their devices.
This software is already in place for the larger-scale EcoGrid project conducted on the Danish island of Bornholm. The initial results from both pilots indicate that this 5 minute interval is effective to manage intermittent energy sources and maintain grid stability. That is a significant finding since the EcoGrid project covers 28,000 customers and an energy mix that is 50% renewables. Also important for grid stability – this model elicits faster responses from smaller production/consumption units than larger units.
From a policy perspective, there is no restriction on the size of a market participant in terms of kilowatts or megawatts. Contrast that to grid-tie policies in the USA that put true market participation out of reach of many interested parties. These European pilots contain a substantial research goal to identify and remove the policy barriers to wide-scale deployment of peer-based energy grids.
Technology innovations modernize the grid and enable microgrids and consumer-owned distributed energy resources (DER) to become market participants in an electricity eBay. There’s also a need to create a framework for all devices to communicate in this marketplace, which is the subject of a future article. But we will need to move past traditional thinking in terms of policy and market models to deliver these Smart Grid benefits to all players.