- Climate hub
- 16 Mar 2022
- 4 min read
Peer-to-peer power: the future of sustainable household energy?
Peer-to-peer platforms have the potential to make household power cheaper and more efficient.
By Amy Hamilton Chadwick
If your household can capture more solar power than you need, you can sell it back to the grid. But could you instead sell it at a better price, directly to another household, which could a great deal on renewable power generated locally?
That’s the potential of peer-to-peer (P2P) power. It could be the future of sustainable household energy – but there are some major barriers to overcome before that happens.
Peer-to-peer power matches demand with supply
A P2P energy platform matches households who produce more energy than they need with other households who want to buy that extra energy. For example, your household might capture excess solar power and store it in a battery. You could sell that stored power via a P2P platform, where it could be purchased by another household user. P2P might mean you make more for the power you sell and they pay less than the retail price; both of you should get a better deal.
But it’s important to know that P2P platforms are only a way of interacting with the energy market, they’re not actually bypassing the grid or transferring specific power from one home to another. Unless you go off the grid entirely, your energy supply comes through the same system of lines and distributors as everyone else’s.
Around 35% of your energy bill is made up of the costs of lines maintenance, distribution and metering – and those costs must still be paid if you use an alternative platform to trade energy. Those costs will still apply when you use a P2P platform, but it could provide more options for users by cutting some of the retail costs.
Potential benefits to the whole network
P2P power could potentially lead to more innovation, more competition, and social benefits as Kiwis interact with each other, explains Joey Au, Chief Strategy Officer at the Electricity Authority. Plus, it could boost efficiency, “Reducing the need to invest in network upgrades or new expensive peaking generation plant; reducing the need to run existing generation plant [and creating] more efficient consumer investment and electricity use.”
Right now power must be bought and sold through the same retailer, because of our existing industry systems and contracts. That’s a major barrier to a more open P2P market, according to the Electricity Authority’s research.
Ara Ake is running a pilot scheme to investigate opening up the market so households can buy and sell power with several different providers, setting up multiple trading relationships. That would free up more options for managing household power – particularly if you are capturing and storing solar energy. Kāinga Ora is also looking into peer-to-peer trading.
Existing rules and systems create barriers around the world
There have been several P2P start-ups in the UK, but there’s no regulatory framework for trading power and the start-ups have struggled to come up with a business model that delivers enough profit to make it worthwhile.
Australia has been trialling P2P energy, not only with trading platforms but also with microgrids (connected to the main grid but able to trade within themselves). The most well-known provider, Power Ledger, uses blockchain technology to enable homes and businesses to securely trade or share power. Its technology is in use in 11 different countries, but there are still some major hurdles.
The main one is that the rules and regulations of power markets in most countries aren’t set up for the kind of flexibility that P2P power requires. The cost of trying to change long-standing power agreements and rules is a huge barrier to the success of P2P power.
Is P2P too expensive right now for Aotearoa?
There’s a long way to go before New Zealand has a system flexible enough for P2P to fulfil its potential, and the costs of setting it up could be too high in the near future.
“Strong evidence of significant consumer benefit will be needed to enable multiple trading relationships and P2P given the significant implementation costs, which could require a complete rewrite of the fundamental industry contracts, systems and processes the market is built on,” says Au.
But despite the challenges, could P2P power be a realistic way for Kiwi households to manage power in the future?
“As technology evolves, more consumers are choosing to generate their own electricity and explore the potential for battery storage. It is likely that local generators of distributed energy will sell electricity to consumers in their communities.”
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