Text Size AAA
 
 
Sep 2, 2014

An Airbnb or Uber for the Electricity Grid?

How DERs prepare the power sector to evolve into a sharing economy platform

 

As Thomas Friedman reported in the New York Times, the shared economy is booming, with companies like Uber and Airbnb continuing to disrupt the incumbent taxi service and hotel sectors. The Ubers and Airbnbs of the world tap the huge value of underutilized assets and create millions of dollars of value for users in the process. Shared economy companies unbundle existing assets and enable value exchange out of those assets, with close to zero marginal capital cost since the users themselves own the actual physical assets, whether a car or a home. Could the electricity grid be next to go the way of a sharing economy?

For more than a century, the electric grid has relied almost exclusively on centralized infrastructure, such as large power plants and long-distance transmissions lines. But distributed energy resources (DERs)—and the customers buying, installing, and using them—are changing the economic landscape for the power sector. Energy efficiency, demand response, distributed generation such as rooftop solar, distributed storage such as batteries, smart thermostats, and more are poised to become the front lines of a sharing economy revolution for the grid. Shared economy solutions will help to increase asset utilization rates and improve consumer and overall system economics, just as they have for other sectors.

What’s been missing—so far—is a trusted, open peer-to-peer (P2P) platform for DERs to “play” in a shared economy. An independent platform underlies the success of many shared economy businesses. At its core, the platform monetizes trust and interconnection among market actors—a driver and a passenger, a homeowner and a visitor, and soon, a power producer and consumer—and allows users to both bypass the central incumbent (say a taxi service, hotel, or electric utility) and go through a new service provider (say Uber, Airbnb, or in the power sector, Google).

Now as millions gain experience and trust with Airbnb, Uber, and Lyft, they should reasonably ask, “Why couldn’t I share, sell or buy the energy services of consumer-owned and -sited DERs like rooftop solar panels or smart thermostats?” The answer may lie in emerging business models that enable 1) peer-to-peer sharing of the benefits of DERs, and 2) increased utilization of the electric system and DERs.

Peer-to-Peer Access

Peer-to-peer (P2P) platforms empower consumers to directly buy and list a diverse set of products and services. For example, Vacation Rental by Owner (VRBO) allows anyone who owns a vacation home to rent it out when not in use. VRBO creates revenue streams for the house owner, and expands accommodations options outside of traditional hotels to travelling consumers. Similarly, good old-fashioned weekly farmers markets bypass “centralized” supermarkets, bringing “distributed” local foods direct from farmers to consumers. In both cases, P2P platforms provide consumers direct access to and enhanced information about the source of diversified goods or services.

On the electricity side, this past April, Netherlands-based Vandebron (literally translated as “from the source”) launched a platform similar to VRBO, which allows individuals to buy electricity straight from a local farmer with excess electricity production from solar PV panels or biogas-to-power installations. Forget farm-to-table food; this is farm-to-meter power. The website allows you to pick from different producers, each featuring a high-quality picture and a small story about their farm, betting on the trust component to change how people pick their electricity producer. In this example, farmers receive a higher compensation from the platform per unit of electricity then they would selling their power to traditional utilities.

Likewise, California-based Mosaic offers private investors a P2P lending platform for solar power, although Mosaic aggregates investors to fund larger solar projects, so it may more accurately be described as a group-to-peer platform. Mosaic customers invest in solar projects sited on top of schools and other locations, and earn a rate of return that beats many investment vehicles in the market today. Revenue from the solar generation is shared between the investor and employed to offset the customer utility bill.

Increasing Asset Utilization

Any underutilized private asset is now a target for shared economy platforms, and that includes DERs.

Distributed Energy Resources

Take rooftop solar PV systems, for one example. For grid-connected customers with rooftop solar, the majority of whom are net metered, existing valuation and compensation mechanisms fail to capture or share many values among participants at the distribution edge or exacerbates asset utilization problems.

Net energy metering compensates PV system owners for the kWh production of their system, but may not reflect the full range of system values that DERs can provide. These values—including wholesale peak shaving (since solar PV output is often coincident with peak demand), relief of distribution system congestion, and emissions reductions—are potentially left on the table, while a shared economy solution could enable direct exchange of those values between consumers. Peers on the same congested distribution circuit could buy and sell energy services from DERs from one another, for example, providing relief for their feeder circuit.

For another example, consider unused DER siting locations such as south- and west-facing rooftops of multi-family buildings and commercial buildings. These are prime targets for shared economy DER products and services. Emerging tariffs such as Virtual Net Metering in California utility territories allow for sharing of these unused locations and the renewable energy they generate by allowing their value to bridge from building owner to tenant.

Bulk Power System

A P2P platform for DERs can also benefit the bulk power system.

In Thomas Edison’s grid, as with much of the grid today, central-station bulk generators with monopoly power deliver energy and information unilaterally through transmission, distribution, and metering networks to end users. According to the New York State Department of Public Service, “the bulk power system is designed to meet retail peak demand, which ... tends to be 75% higher than average load. The total rate of system utilization is under 60 percent.” Similarly, SDG&E’s load factor has been steadily declining (to less than 50 percent in 2013).

With a growing difference between “base” and peak load—and central power assets that sit idle much of time, more or less called into use only to meet the peaks—the bulk power system’s decreasing load factor is a sign of increasing asset underutilization … just like the spare bedroom in your house that’s vacant most of the year, or the empty car seats so prevalent in Americans’ single-occupancy car commuting. That’s untapped value a shared economy P2P platform can access, including in the bulk power sector.

For example, optimally-deployed and dispatched DERs (ranging from energy efficiency and demand response to generation and storage) can shave peak demand, reducing the need for utilities to purchase and deliver expensive wholesale energy during peak demand periods. DERs have the potential to produce a smoother load curve, resulting in a smaller amplitude difference between “base” and peak load, and thus improving the grid’s load factor and improving the grid’s overall asset utilization rate. By enabling sharing of P2P DER energy services, the distribution system platform can more fully capture that economic opportunity.

P2P, But Not Without A Central Backbone

As decentralized DER markets emerge, the possibility that the power sector becomes a massive platform for shared economy businesses is real and exciting. As others have opined, the electricity consumer will quickly become a prosumer in a shared power economy, benefitting participants and non-participants alike. The question is how the incumbent grid can financially survive the coming energy system disruption, as it is a valuable component of the platform.

No P2P platform is without a centralized backbone. Whether Airbnb, Uber, or something as yet unknown for DERs, telecommunications and software infrastructure—and the electricity grid—is a critical enabler of a P2P sharing economy. This is true, not just to literally make the platform work, but also to provide consumers with both choice and reliability.

Can’t find a ride on Uber? Take your personal car, or use a car-sharing service, or call a taxi, or rent a car, or take public transportation. You’ve got options, including several “centralized” ones, and those options give you both choice and reliability. So it should be with power, too. A P2P sharing economy for DERs doesn’t obviate centralized power resources and the grid—it complements the grid to provide consumers with a more optimized set of choices and reliability.

P2P solutions are an exciting prospect, but other options, including grid-sourced power, will remain a piece of the puzzle that together offer the system reliability people and businesses demand of today's electric power grid.

The Path Forward

Along with grid utilization improvements, the increased market adoption of decentralized energy resources creates new markets for democratized and transactive trading of power and information. In turn, the opportunity for trade creates opportunities for new business models to disrupt the current utility monopoly around power delivery.

The regulatory challenge and opportunity is to determine the best path forward to support innovation through markets, maintain gains in clean energy programs, and uphold regulatory compacts to provide reliable service at reasonable rates. Existing regulatory paradigms and utility systems are insufficient to enable the same type of information, payment, and market disruption that spawned the sharing economy. New distribution system platforms are under development in several jurisdictions, either leading—or being led by—the explosive growth of DERs.

Image courtesy of Shutterstock.

Join the Discussion


Showing 1-10 of 12 comments

September 4, 2014

In the last 2 years I have added PV panels with Grid Buddy battery back up and a SAMSUNG heat exchanger. My home is now self sufficient in respect of energy and MY lights will NOT go out in future power blackouts. I do not want biomass incineration to burn poisonous nanotoxic waste to keep MY lights on. I can do this today with the Sun. Neat huh?


September 4, 2014

It's a neat idea. But where the analogy breaks down is that the sharing economy unlocks a huge new SUPPLY of a resource (i.e. cars that were otherwise parked on the street, vacant bedrooms). It would be difficult to argue that a grid-connected PV system is similarly underutilized.


September 4, 2014

Michael,

I see what you're saying, but don't agree. Perhaps it's a semantic difference, but in my view this is less about supply and more about asset utilization. A single-occupancy car is being driven down the highway whether its extra seats have passengers or not. I own and live in my home whether my guest bedroom is occupied or not. A sharing economy improves utilization rates for these assets (cars and houses). The same can be true with grid-connected DERs, including rooftop solar.

Yes, the kWh output of grid-connected solar is in one sense more fully utilized, since utilities are obligated to accept that distributed generation onto the grid. But compensating only the generation and not other potential values (peak shaving, load shifting, etc.) of solar and other DERs under-utilizes the assets. California's duck chart is a good demonstration. Solar that's maximized only on the basis of kWh supply suppresses net daytime demand on the grid and exacerbates both the size and steepness of the generation ramping needs into evening. The sizable difference between the trough and peak of that ramp results in huge asset under-utilization (calling upon fast-ramping peaking plants that otherwise site idle), which is why many utilities are seeing their system load factors going down.

But if a sharing economy enables consumers to sell and buy a more diverse set of DER services from one another, we can still fully utilize the kWh output of resources like rooftop solar, while also smoothing the grid's overall demand curve, improving generation asset utilization rates across the board.

Pete Bronski
Editorial Director


September 4, 2014

I'm impressed with the logic in this article. My field is education. I'm wondering if a P2P education platform could supplement and reduce peak load on our public schools without destroying them. If this interests you, please talk to me at www.openeducativesystems.wikispaces.com/implementation


September 4, 2014

Thanks for the input, Michael. You're right - in one sense, the grid is already a giant platform that enables DER value sharing, with grid-tied PV generation flowing back to the grid as a primary example. But there is a lot of value left on the table that PV provides, to include avoided capacity at the wholesale, transmission and distribution level, as well as environmental benefits (See, VOST). It's these values that, combined with great rate design and a web-based platform, that should be made available to system owners and non-owners. If system owners want, they should be able to offer/sell those values to others, who may not actually be able to buy a PV system. Similarly for NEM customers, they could earn more credits than the current limitations, and trade, buy, or sell those credits.


September 4, 2014

Great article Matthew and a concept I love, I hope you can follow this up with a similar post.

However in practical terms, for a place like Australia, there are some high hurdles to be overcome. At the moment there is now very little incentive for solar owners to dispatch excess power into the grid, in fact in some states this is even being penalized. Which is such a waste.

There has to be financial incentives to the distributor and retailer, I am not quite sure how this could work.


September 5, 2014

Couple of questions:
How is this different than deregulation?

Suppose the market functions were worked out that would guarantee/backup committments to deliver a service at a particular time, in order to ensure reliability. Suppose further that this sparked a major boom in construction of rooftop solar. Who would pay for the distribution grid upgrades and fast ramping/ancillary services resources that would be required to keep the power quality constant and reliable?

There are physics considerations in distribution grid management that have to be acknowledged. That's going to be a factor as long as you are sharing resources using a grid. Since you are still sharing onsite generation, you still have to deal with peak load conditions, and the fact that the system is going to be idle during non-peak hours. Battery charging during off-peak might mitigate this to an extent, but that would have to be managed somehow.


September 5, 2014

Dave,

Thanks for your comment. In theory deregulation efforts in California, Texas, and New York could enable direct access providers, REPS, or ESCOs to innovate and develop P2P solutions for mass-market customers. In practice, many of these entities provide commodity services to the largest customers, and at least in New York, haven't really dived head first into DER provision. That is changing and could accelerate through new regulatory efforts like the NY REV proceeding, which is the first to institutionalize a distributed system platform provider to actively manage DER resources and optimize grid management.

On your other points, I didn't argue that this concept gets around the laws of physics. To quote a former colleague @PecanStreetInc - they're not just a good idea, they're the law! What I'm describing is unbundling, monetizing, and sharing the value of the DER through the platform, separate from the energy, ancillary service, or load reduction it provides.

On the question of who pays for grid upgrades, interconnection cost allocation is of course an ongoing issue. A real issue in my mind is - who should pay for upgrading the aging grid if we do nothing? With flat load growth forecasts and exploding DER growth, the cost of doing nothing may be IMHO the greater cost to society.


September 5, 2014

There is a critical difference between rental housing, taxi rides, and electricity. The former are all unique, but electrons are all the same. Timing and quantity matters, but not identity. If power is to be exchanged through the utility grid, that is much like commodity prices in that there should be a central clearinghouse to establish the common price. If the price is local, and truly peer to peer, then there should be a wire between the two entities making the exchange. In this case, there is a technology proposal which meets this need - Local Power Distribution - more on it at http://nordman.lbl.gov

LPD operates within a building, or between adjacent buildings. It may be that we will want a power exchange system like that described in the article, but to do that we should first create and deploy LPD so that each building has a local price and price forecast. This can then be the basis of exchanges. LPD is useful regardless of the grid context and financial mechanisms, and even more useful when there is no utility grid, always or some of the time. It is a key enabling technology for a better future. - Bruce - bnordman@lbl.gov


September 8, 2014

It sounds like a feed-in tariff is all that's needed. Customer-generator puts up a solar PV system on their barn, house, church or school, or a wind turbine in the field and sells all the energy they produce to the utility through a guaranteed connection to the grid; the rate paid to the customer-generator is designed to pay off the equipment and produce a reasonable return on their investment, just like the utility would require for central-station generation like coal or nuclear. Regulators determine the rate the utility must pay for the different renewable energy types, including all those underutilized assets that you mention in rate design.

All customers, with or without renewable energy installed, pay for the full value of the energy they're using, and the utility maintains the P2P backbone, i.e. the grid. Fair compensation flows between the energy consumers and the distributed energy producers, while the utility is compensated for grid maintenance.

Feed-in tariffs or FiTs are already being used in over 70 countries, have demonstrated success, and according to NREL are responsible for 75% of solar PV and 45% of wind installations globally.

PAGE: 1 2 
 
Show Subscribe