Australia out in front with blockchain energy trading
Poppy Johnston | 9 August 2018
The appeal of decentralised energy models is being underestimated in a market where consumers are wary of traditional energy retailers, says LO3 director of public policy Con Van Kemenade.
“People like sticking it to the traditional retailers. They are not much loved.” Mr Van Kemenade told the audience at Siemens Digitalize conference at the Melbourne Cricket Ground on Wednesday.
“[People] like the concept of supporting the community, the circular community, keeping money within the community. Creating self-sustaining communities by creating resiliency, storage, local investment in solar and wind… And there is a strong sustainable component to it. People who believe in climate change typically like this idea.”
According to Mr Van Kemenade, there is a perception that traditional energy models are currently not working in the long-term interests of customers. That’s why LO3 Energy decided to change the way energy is consumed, produced and sold by building what Mr Van Kemenade claimed to be the first blockchain-enabled peer-to-peer (P2P) transactive market platform.
The company’s P2P microgrid ecosystems allow households, businesses, schools and other organisations to buy, sell and share energy locally.
Although you can purchase renewable energy products from big retailers, Mr Van Kemenade said this was “a bit less connected”.
“Our platform creates a direct line to what the customer pays and where generation is coming from. So it’s that engagement that’s underestimated.”
How does the P2P energy platform work?
Customers, not retailers, decide on energy prices through mutual negotiations. Communities decide on both quantity as well as the source of the electricity – renewables, local renewables or fossil fuel electricity.
“This allows customers to take more control over their energy needs, which we believe will drive more sustainable outcomes,” Mr Van Kemenade said.
The platform is cloud-based and leverages a form of private permission “proof of authority” blockchain that does not require
expensive, energy-intensive “mining” to add transactions to the ledger.
The platform can be accessed via an app. Customers use the app to place bids specifying the amount they are willing to pay for the energy made available by prosumers (producers/consumers) and local energy producers.
An auction algorithm then matches their bid with the market offerings and capacity is then allocated to the users willing to pay the most for it, which Mr Van Kemenade said he imagined would be “well below the retail price”.
The value is somewhere between the retail price and the feed-in-tariff price, he said.
“We’re trying to build a decentralised model but we can’t do that at the moment without a retailer, which kind of defeats the purpose in a way. This is changing. At this point every connection point can only have one financially responsible market participant. This is typically a retailer,” he said.
“The Australian Energy Market Commission is bringing in new rules that will allow that to change. There will then be multiple trading relationships at each connection point. So you’ll then no longer be reliant on a retailer to implement your P2P trading framework.”
Mr Van Kemenade added that Australia will “probably be ahead of the rest of the world in this respect”.
“We could be operating under these rules by the end of next year.”
New York first, Australia to follow
The company’s flagship project is the Brooklyn microgrid in New York. Mr Van Kemenade believes this is where the first P2P transaction took place between a consumer and prosumer with solar panels situated across the street.
“…in the Brooklyn microgrid, customers love the concept. So they have this thing called Net Metering in New York where solar energy system owners are credited for the electricity they add to the grid,” he said.
“However, in Brooklyn, consumers are willing to pay more just because the energy is local and supports their community. So it’s a social issue as well.”
LO3 currently has two projects in Australia – one in South Australia and one in the Latrobe Valley in Victoria.
The blockchain-based virtual microgrid in Latrobe Valley will allow local dairy farmers and other participants to buy and sell locally generated renewable energy. For dairy farmers, who have a high energy demand when they are milking, but not otherwise, a local energy marketplace allows them to sell the energy they produce in the middle of the day to the local community.
The feasibility study in the Latrobe Valley received $370,000 from the Australian Renewable Energy Agency.
Perth, White Gum Valley
Residents of Perth’s White Gum Valley are also soon to become early beneficiaries of P2P energy trading in the residential space.
Using blockchain technology developed by local outfit Power Ledger, residents will be able to trade solar energy generated by the development’s 53.6-kilowatt solar system and stored in a 150kW battery.
Australia is predicted to become one of the most decentralised energy markets in world by 2040, according Mr Van Kemenade.
“We think it has the potential to bring additional competition into retail market because customers interact with one another rather than with a retailer. All they need is the platform. And the platform, because it is built on blockchain, it can create trust.”
Poppy Johnston travelled to Melbourne and attended the Siemens Digitalize 2018 Conference as a guest of Siemens.