With smart thermostats such as Nest and home gateways like Alexa, you can already use your smartphone to control everything from your heating to your blinds. Energy trading is the next step in the digitisation of our homes and it’s a step that needs to be taken urgently if we’re to limit climate change.
Climate emergency
It’s no exaggeration to say the world faces a climate emergency. And without a shift to a decentralised system where energy is generated and used locally, the UK is going to struggle to cut carbon emissions further.
Currently, energy generation accounts for around 40% of UK carbon emissions. Reductions to date have been achieved in large part by the demise of coal and the construction of huge off-shore wind farms. But a decentralised approach would be a more cost-effective way to increase renewables further.
The falling costs of solar panels, onshore wind turbines and the communications technology needed to link them into smart local networks are strengthening the economic case for distributed energy systems. Using energy close to where its generated reduces the requirements for, and costs of, network infrastructure. Wholesale energy and network costs presently reflect around 58% of retail electricity prices.
Can smarter networks help democratise energy?
Digital trading platforms and Internet of Things data networks are facilitating an emerging business model, where customers can sell excess, solar energy directly to their neighbours, via local energy service partners. In 2018 Verv conducted the UK’s first peer-to-peer trade of energy, utilising a blockchain platform.
Systems like this use a ‘distributed ledger’, which replicates, shares, and synchronises digital data across multiple devices – there’s no central administrator or centralised data storage. In such a system, participants would have a unique ‘key’ that identifies them and enables them to connect to the system. Need to charge your electric car? Plug it in and use your ‘key’ to buy the energy you need. Later, if it’s been a sunny day and your solar panels have stored excess energy in your home battery, your house could automatically use your ‘key’ to sell that energy to other homes in your neighbourhood.
Happening now
At WSP, we’re already helping turn theory into practice. In London, we’ve supported Verv in relation to some of the grant funding they received to explore how peer-to-peer energy trading could reduce customers’ bills. Instead of exporting excess energy from solar panels on 13 blocks of flats to the grid, artificially intelligent hubs enable it to be traded within the community.
Local authorities and large landlords are also embracing distributed energy. We’re working with clients such as Gateshead Council and The Crown Estate to design low-carbon distributed energy systems with assets networked into local communities, effectively turning these organisations into aggregators and energy companies.
Overcoming barriers
Yes, there are security concerns about how distributed ledger technology would safeguard people’s financial and personal data. New technologies that are coming to market look to be an advance on blockchain in this respect, making it harder for information to be compromised.
Bigger barriers relate to policy and regulation. The current with rules to optimise infrastructure predate today’s understanding of the urgency of climate change, at that time these new technologies and systems weren’t feasible. In addition, the UK energy industry is locked into eight-year investment cycles.
With these investment plans agreed years ahead of time, it could be well beyond 2022 before the industry moves to adopt distributed peer-to-peer energy systems. Surely that’s too late if, like me, you believe this technology is needed to help prevent runaway climate change?
Bypassing incumbents
Fortunately, while incumbents are hamstrung by the industry’s eight-year cycles, the market is moving without them. We’re helping new entrants design for a smarter future that’s already arriving today.
David Healey: Director, Smart Energy at WSP in the UK
