Love thy neighbour and share energy by Gyula Gyukli on Adobe Stock

Love thy neighbour? Maybe you should be able to sell them thine energy

23 October, 2018

Reading time: 3 minutes

In this post CREDS/UCL researcher Michael Fell outlines his work on blockchain-enabled energy retail markets and what they might mean for people and society.

It feels like we are at on the brink of significant change in the way we buy electricity. Ofgem, the regulator, is seriously looking at alternatives to the ‘supplier hub’ model, where we choose a single supplier and buy all our power from them. The speed of digital innovation means that new ways of buying electricity are emerging that have not been possible until now.

One such model is peer-to-peer energy trading, where ‘prosumers’ who can generate their own electricity are able to sell it directly to others (such as their neighbours) rather than having to sell it to their supplier. Trials of such systems are taking place around the world, with many enabled by distributed ledger (e.g. blockchain) technology.

Peer-to-peer has many attractions. In theory it could reduce our bills by cutting out middlemen, and help network operators manage the electricity grid. Community energy groups could manage schemes to help fund their work, and people prefer the idea of powering their neighbours rather than just selling back to the grid.

However, there are also challenges. For example, at the moment we all pay for the costs of running the electricity network through our energy bills. If those costs were to change to reflect how much we use the network (and how much of the network we use), then those who mainly buy and sell their electricity locally could pay less. But those who can’t participate in a peer-to-peer scheme might be left picking up the extra costs for national network.

Development of peer-to-peer energy trading is consistent with a wider trend across sectors such as accommodation (AirBnB) and mobility (Uber) where participants transact more directly with each other, enabled by a platform, than with a conventional service provider. These models are posing fundamental challenges to regulators, such as determining where responsibility lies when things go wrong.

The project I’m working on under CREDS is exploring what the implications might be for people and society of a transition towards distributed ledger technology-enabled energy retail markets, such as those involving peer-to-peer trading. I’ll be drawing on evidence which is emerging from trials, as well as looking at ‘sharing economy’ models more broadly and considering the extent to which benefits, challenges and solutions might map over to energy. The aim is make recommendations for policy and market development to help maximise benefits while minimizing harm. To find out more about the project (which is led by UCL Professor David Shipworth) please visit my Open Science Framework page. If you have any questions, or you would like to bring any work to my attention that you think I should consider in the project, please don’t hesitate to email me or track me down on Twitter.

Banner photo credit: Gyula Gyukli on Adobe Stock