Power Ledger sticks it to low solar feed-in tariffs
Cameron Jewell | 15 August 2016
Generous solar feed-in tariffs are coming to an end in many states this year, exposing thousands of households to bill shock and paltry sums for solar power exported to the grid. However, a new solar energy trading platform being trialled in Western Australia could solve their woes and lead to increased penetration of renewable energy.
Perth company Power Ledger is trialling technology that will enable users to trade excess solar energy fed into the grid directly between one another, rather than sell it back to the energy retailer for a rate usually well below the retail price (feed-in tariffs are generally around 6c a kilowatt-hour, while retail prices can cost upwards of 25c/kWh).
Power Ledger is based on blockchain technology – the key innovation behind the Bitcoin currency – enabling ownership of energy to be identified as it’s generated while also managing the various trading agreements between consumers who buy the solar and those who generate it.
According to Power Ledger chair Jemma Green, this bypasses the addition of market costs and commercial margins, meaning cheaper renewable electricity – and more of it.
“The owners of excess energy can sell their surplus to their neighbours for less than the uniform tariff but more than they would get from selling it to their retailer,” Ms Green said. “Effectively, we’re cutting out the middle-man to save consumers, and to maximise returns for producers.
“It’s a win for the people who have been able to afford to invest in rooftop solar, but also a win for customers who haven’t: they will be able to access clean, renewable energy at effectively a ‘wholesale’ rate. Everyone wins.”
She said many people installed solar as an investment, and the technology worked to maximise the return on investment.
“Just as Airbnb and Uber have up-ended the hospitality and transport markets, Power Ledger has the potential to change forever the way we buy and sell energy to power our homes.”
Working in tandem with battery market
While the technology would allow users to on-sell energy to consumers rather than sell it back to the retailer or store it in batteries, Ms Green told The Fifth Estate it was not necessarily a threat to the battery storage sector.
“I think it’s actually complementary, because people with batteries could use it as well to sell their battery-stored electricity back to the market if there was peak pricing,” she said.
As Australia moved towards cost-reflective pricing for electricity, this scenario would become likely, Ms Green said.
She also said the technology could lead to increased renewable generation, incentivising people to get larger solar systems for their homes.
“Householders at the moment are perhaps sizing their systems to supply their own needs, but if they could get a good return they may increase the size,” she said.
Not just for the resi sector
The move is set to disrupt more than just the consumer space though.
Ms Green provided an example of a local government, which in one space had high energy demand but no roof space, and in another area low energy demand but a lot of space for solar.
With technology like Power Ledger there would be a financial case for generating solar energy on the low demand area to then on-sell.
“Up until now they haven’t bothered installing solar … but [with the platform] you will start to see more renewables deployed onto the system.”
An opportunity, not a threat, for retailers
Green sees the technology as an opportunity for retailers, rather than cutting them out of the picture.
“I think consumers are moving to wanting to have more control of electricity, so if retailers can enable their customers they’re more likely to have longer-term relationships with them,” she said.
“Churn is a big problem for retailers, and if they were to have these kinds of relationships with consumers they could compel them to stay.”
The technology also provides protection against a utility death spiral, whereby demand for network infrastructure – the poles and wires – falls as solar and storage is taken up, leading to increased network charges to cover the diminishing base, further incentivising defection from the grid.
“This technology offers the opposite of the death spiral,” Ms Green said. “At the moment, if electricity is generated at the household level then stored and consumed that’s not touching the network, and the less the grid is used, the more the death spiral scenario plays out.
“But if you actually see the grid as trading platform and begin transacting across it, and you put more distributed renewables on it – and every time it touches the network you pay a network access fee – you’re going to be maintaining the utilisation of the network and therefore its value. So the death spiral scenario is no longer a concern.”
While increased renewables sounds like a definite environmental win, Blockchain technology has come under fire for its energy consumption, with cryptocurrency like Bitcoin relying on huge amounts of data processing to ensure the security of the system, such that it is predicted to consume as much electricity as the whole of Denmark by 2020.
Power Ledger, though, says its system is much more energy efficient.
“Power Ledger uses a new state-of-the-art permissioned hybrid blockchain designed and developed in Australia by [blockchain company] Ledger Assets,” a media release said.
“Currently the Bitcoin blockchain uses vast amounts of electricity (equivalent to a large city) as thousands of computers run expensive hardware all competing against each other for the next block rights.
“Power Ledger’s blockchain is extremely energy efficient as it uses the latest high security proof-of-stake mining and solar-power, making it the world’s most eco-friendly and sustainable blockchain ideally suited to data intensive applications such as required for Power Ledger’s Peer to Peer trading and settlement platform.”
An Aussie first, with a world first to come
The technology is undergoing a virtual trial at a retirement village in Busselton, where up to 20 properties with and without solar will trade energy through the platform.
Ms Green told The Fifth Estate the retiree market was chosen “very deliberately” to show how easy the system was to use.
“They don’t have to do anything. It’s plug and leave,” she said.
“If it can find a buyer at a higher rate than what you’ll get from [the retailer] it will sell it for you, and if not it will sell it back to [the retailer] at the feed-in tariff rate.”
Though there is the option to manually alter settings.
“If you want to get more geeky about it you absolutely can.”
Following on from the virtual trial will be a world-first real-world trial with around 80 homes in Fremantle, some also with battery storage, where energy will be sold across the network. The project is being backed by state land developer LandCorp and retailer Synergy.