A South Australian trial of a peer-to-peer energy network is set to add 6MW of solar generation in the state.

Feed-in tariffs may have risen for some owners of solar PV systems around the same time retailers hoisted electricity charges in the middle of the year, but the difference between what you pay when you buy a kilowatt hour of power and what you get when you sell one is still a major embarrassment.

If you showed it to anyone in the stock-broking game they would immediately quit that gig, build a power plant and apply to the Australian Energy Regulator for a retail licence.

The price differential enjoyed by electricity retailers is seen by many as the next great playground where tomorrow’s energy providers will emerge. Anyone who can create a market in that wide, wide price spread will have no trouble attracting participants looking for a better deal, some of whom may own little rooftop power plants of their own.

In the United States, energy technology company LO3 is trialling a micro-grid in parts of Brooklyn, New York, where participants can buy and sell renewable energy away from the traditional retailers, transacting on a platform which uses a blockchain ledger system similar to that used by cryptocurrency bitcoin.

Brooklyn Micro Grid “prosumer” Daniel Power (and that’s his real surname).

Trading in SA

It’s very early days in the trial and the prices the Brooklyn consumers are willing to pay would indicate it’s a bit of a “feel good” experiment so far (they’re paying above the retail rate in some cases). But the systems works, and if it works in the US it can work here.

That’s the conclusion Mark Yates of South Australian renewables firm Yates Electrical Services arrived at after meeting LO3 founder and CEO Lawrence Orsini last year in Sydney. Soon afterwards Orsini supplied Yates with two of LO3’s TransActive Grid meters to test out for himself. One is installed at a small-scale solar farm and the other at a residence, where it is primarily importing.

Every participant in LO3’s Brooklyn trial and the planned trial with Yates in South Australia must use one of the proprietary TransActive Grid meters, whether they’re exporting, importing or a bit of both. “It looks the same as your standard residential smart meter,” Yates says. “It can do the same things a normal meter does, recording current flows and voltage in and out of the premises, but the IP in the meter is attached to the blockchain network – and that’s where transactions will occur.”

The two meters had been fitted about two months when EcoGeneration caught up with Yates, who figures the only constraints on long-term take-up of a planned network including 6MW of new generation are market policy and whether the regulator will have any problems with it.

“The technology has been proven in the US with the Brooklyn micro-grid, so it is achievable – providing you can get policy in place to support it.”

Working in Brooklyn

LO3 director of Australian operations Belinda Kinkead has seen the Brooklyn trial in action, where participants can set fuel source preferences, key in what they’re willing to pay for power and take part in a demand response market if they feel like it.

LO3 director of Australian operations Belinda Kinkead has seen the Brooklyn trial in action.

If a bid falls short, the participant can bid higher or defer to fallbacks such as brown electricity or regional renewable power. There is also potential for crowd-sourced funding of additional solar in the neighbourhood, she says. “If demand is consistently not being met there are options for people to contribute $50 or $200 [for example] to a community solar project … if people want the local stuff and there’s not enough of it.”

The folk in the Brooklyn Micro Grid are paying over the retail rate, she says, and the motivation to do that seems to be about keeping the money in the local community.

The first trades were “a little bit grey”, she concedes, and the regulator has requested LO3 become an energy service company. As soon as that happens, the system will “go live”.

The ultimate vision for LO3, she says, is that if a premium is paid for green, local energy it will be offset by lower network fees which result from the close proximity of supplier and user and the possibility of a distributed service operator or transmission companies rewarding participants for taking a load off the grid.

“You have these little elements that should add up to become a different value stream, so it’s not just all off a per-kilowatt-hour basis; it’s based on other services as well,” says Kinkead, an engineer with a background in climate finance, emissions trading and clean development mechanisms.

Right connections

It’s risky to go it alone in energy because of the danger of not being able to meet demand, and LO3 envisages relationships with retailers so its network can provide grid services. “We develop local energy marketplaces and you’d still need a retailer to wrap around that local energy marketplace so if there is any shortfall it’s supplied, and that’s linked into wholesale markets or what have you,” she says. “But ultimately we’ll be a local energy marketplace service provider.”

In theory, the model can be scaled up. In practice, we need to wait and see. Blockchain, which requires that a ledger of past transactions be passed along with each new transaction, draws a lot of computational energy. LO3 has moved to a private energy blockchain variant, with the intent it be made open-source in the years ahead.

“The network architecture is designed so that it can be scaled,” she says. “If you imagine the grid becomes a series of interconnected micro-grids where you’re dealing with potentially billions of tiny little transactions, you need something that’s light and fast – and you need that in real time as well.”

About six months’ rigorous testing in urbane New York and rugged South Australia should be enough to provide a clear picture.

In Australia Kinkead says a “handful” of commercial-size customers will likely be initial participants, to keep the logistics fairly simple at first. “If it’s working we’ll try to expand it more to include residential.” The Brooklyn trial has “been a bit organic”, she says, where interest has blossomed on the grapevine.

Mark Yates of South Australian renewables firm Yates Electrical Services says the spot market can be a better place to trade.

New generation

Supply for the network will come from megawatt-sized solar plants to be built by Redmud Green Energy, the renewables subsidiary of Yates Electrical Services and joint venture with a Chinese investment group. The plan is to build total capacity of 6MW, with sites ranging between 200kW to 1MW, primarily connected to the distribution network. Twelve are completed, three are under construction and another 20 are awaiting approval. Five awaiting approval are megawatt-scale, says Yates. The plants are dotted around the Riverland region, within a 50km radius of Renmark, near the Yates Electrical Services headquarters in Paringa.

Some of the solar sites have power purchase agreements in place with retailers but the company has recently been approved as a small generation aggregator, allowing it to bypass retailers if it wishes and sell directly into the spot market. Yates is happy with the outcome. “The return on investment stacks up a lot better if you can align your generation and consumption than selling it to the pool [the wholesale market],” he says.

“With the TransActive Grid meter, effectively the surplus generation rather than go to the pool [where it attracts a retailer’s margin] can be purchased directly by a customer.”

Anyone with a TransActive Grid meter can become a participant in the network, whether they have solar, storage, both or nothing at all. “It’s not limited to any type of customer,” he says. “Rather than have a central governing body like a retailer to manage transactions, the peer-to-peer framework can accommodate that. It’s like a network within a network.”