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Peering into the World of Peer-to-Peer Energy Trading

Peer-to-peer markets are nothing new to the modern consumer. This decentralised model essentially connects individuals directly with each other, to purchase or share goods and services, thereby reducing or eliminating the need for a middle-man traditionally found in these markets. You can see such markets emerging in P2P financing, where startups seek investment directly from funders without the need for banks. Think P2P financing through a platform like Grab, where users may transfer funds directly to each other’s GrabPay accounts without going through banks and for no extra fee. The aim of a P2P system is to provide greater consumer choice, increased adoption of green energy, and to encourage investment in renewables.

How Does P2P Energy Work?

The theory behind a P2P electricity market is simple. Person A generates electricity using their home solar installation. They consume some of this electricity themselves, leaving the excess energy unused. In a P2P network scenario such as the one set to be trialled as a sandbox in Malaysia, Person A can use a P2P market platform to post about the available energy for sale, which can then be purchased by Person B. Person A utilises the established grid infrastructure, operated by the local utility company, at a prearranged  system access charge, to transmit and sell that energy to Person B.

A P2P market platform allows prosumers to post about available energy for sale

The global emergence of P2P energy trading has been enabled by several pioneering technologies. Renewable energy generation, particularly rooftop solar, provides the technical foundation for electricity consumers to evolve into electricity generators. The International Energy Agency (IEA) predicts a substantial expansion of this technology in coming years, with the number of rooftop solar systems projected to more than double to reach 100 million globally by 2024.

Battery storage technology represents a much-needed resource in this chain, providing the ability to store electricity generated or purchased from renewable sources. Smart meters, blockchain, and digitized energy infrastructure provide the means to manage and monitor electricity consumption and generation, functionalities which are essential in establishing a transparent and trusted energy trading market.

While the technologies to bring P2P to life already exist, the P2P energy trading structure will require stringent structural, technical, and regulatory requirements that cannot be adopted overnight. However encouraging these developments may seem, the reality is that P2P technology will require intensive planning and analysis of the current electricity environment before being introduced as a complementary arrangement for the existing market structure.

Trialling P2P in Asia

Set to begin its first sandbox of peer-to-peer (P2P) energy trading, Malaysia is joining a growing number of countries exploring the potential of this new technology in its energy ecosystem. Going beyond the emerging two-way grid, this P2P energy trading sandbox aims to create an interconnected energy network to directly connect prosumers and consumers, creating a shared market for electricity.

The Malaysian P2P sandbox period, announced in October 2019, will see the Sustainable Energy Development Authority (SEDA) partnering with global P2P leader Power Ledger to assess the feasibility of its energy trading platform over an eight-month trial.

Direct connection of prosumers and consumers creates a shared market for electricity

Power Ledger has also undertaken pilots with utility company KEPCO in Osaka, Japan, and BRPL in Delhi, India. These pilot projects are essential in assessing the value of P2P networks as part of an integrated electricity supply ecosystem. The IEA makes clear that significant policy and tariff reforms are needed to ensure that the rollout of such technology is sustainable, with unmanaged growth potentially disrupting electricity markets by increasing system costs, undermining grid integration of renewables, and challenging the viability of key network operators.

The Malaysian P2P sandbox run will position the nation amongst other pioneering markets across the region. In Thailand, Southeast Asia’s leading renewable energy generator, a pilot in a residential neighbourhood of Bangkok connected 635 KW of generation capacity across a mall, school, dental hospital, and apartment complex. This P2P pilot trial was delivered in partnership between Power Ledger and local renewable energy firm BCPG.

The affordability and sustainability of the entire network ecosystem is essential when assessing the viability of P2P trading. Under Malaysia’s sandbox programme, utility company TNB will charge ‘prosumers’ a set fee, known as the system access charges, for self-generated electricity passing through its grid infrastructure.

The adoption of P2P networks requires establishment of all relevant infrastructure

Information gained from the sandbox will be crucial in understanding how to sustainably adopt these projects in the future. The final system access charge would need to consider all factors involved, so that the cost of transmitting electricity and managing the system does not increase and will not negatively impact other consumers as a result of poor planning.

Ultimately, establishing all relevant technical and digital infrastructure is a vital prerequisite for the adoption of P2P networks. Designing a market which can be both trusted and provide benefits to prosumers and consumers alike is the next step. Developing an appropriate and supportive regulatory environment that reflects the latest technological changes represents another key foundation that must be addressed to ensure the success of the P2P energy economy.

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