Why Energy Exchange without Social Dynamics will fail (2/4)

Local Policies and Stakeholders

This blog follows the introductory blog on laying out the issues and approach on integrating social dynamism with energy exchange platforms. This blog reflects on the social, national and local policies which needs to go hand in hand with adaptation of the energy exchange.
Solar PV energy enabled household in one of the most remote places in Northern India

Based on the first blog, where I discuss why energy exchange needs to integrate social dynamism, I will outline several policies which would improve integration. Before I will introduce you to the policies, I will outline different types of solar energy projects.

  • First, there is solar energy exchange, which can be done by simply exchanging energy from peer to peer (which are called “exchange” projects here).
  • One example of this is SolShare, where households exchange energy from one house to another. Another example of a exchange project is where energy is directly shared by renting out batteries, similar to what Rural Spark does.
  • Second, there are microgrids with a centralized unit of production and handled by one main operator. Energy is distributed to households from this central unit. Finally, there are also hybrid systems, where exchange projects and microgrids can live together, meaning microgrid infrastructure in the community exists, while the exchange of energy between households can also happen.

Within all of these different exchange projects, there is a wide variety of stakeholders who are active in energy exchange and all of them have a very important role in enabling the energy exchange. The following figure will make this chaos a bit clearer, but note that this is a merely an example and cannot be generalized towards all communities.

Stakeholders involved inside a community energy exchange platform and their interrelations

Based on these projects and given stakeholders, different policies are developed. These policies are product of extensive interview rounds with the stakeholders, development of a policy framework (institutional innovation framework) as introduced in last blog, and agent based simulations. These policies are also tested via an agent based model and the model with its results would be discussed in the next blog.

The recommendations and policies for all the energy providing firms (those who enable energy exchange platforms) are as follows:

  • Switching to hybrid projects is beneficial for both exchanging projects and microgrids. Especially for the microgrids, this is more beneficial, due to the presence of physical infrastructures in form of transmission lines and arrays of solar panels/ energy producing sources. Exchanging (and SHS) projects would face heavy investment initially, but a higher number of consumers would help in payoff and thus both projects should invest in it.
  • Introduction of the central grid has heavy impacts, but reliable products and contracts can help here on introduction of central grid connection. The latest possibilities of PPA (Power purchase agreements) by central government, can help arrange these contracts. However, these PPA are static agreements and Energy Bazaar comes here to provide dynamic agreements using smart contracts as the technology base.
  • Laggards are the customers which accept any innovation at the end (or after a very long time since introduction of the technology). In case of energy market related innovations, they are usually left out as the system becomes costly or get upgraded and they have no income or basic technology to accept it. Thus, they can be included using pay as service model and in-house manufacturing. Pay as service means that they can pay for the technology they are using in form of services like operations on the microgrid. This would help solve the issues of affordability in poor rural areas. Lessons are drawn from Barefoot college for in-house manufacturing, incorporating community knowledge development, and women empowerment.
  • The payments done to either of the projects: microgrids, or existing exchange projects are constant i.e. the tariffs are fixed for each. Thus, we introduce demand wise payment. It means that based on the demand, the tariff changes, e.g. if the demand is high, the costs for energy are higher than when it is lower. Usually the lower demands are close to the poor income groups and if a household has lower income then they cannot pay a high tariff for energy. The demands only increase if the household can afford it. Thus, demand wise payment helps reduce demand-income gap i.e. a household pays as per their demand and income, only. For example, a microgrid can be only used when the demands are high enough. What this means is that when the demands are low, people stick to exchanging platforms, and as it goes too high, microgrids come into picture for energy provision. As microgrid only works for higher costs, the cost for microgrid energy is higher than exchanging. This also means people who usually cheat with microgrids, would not do it, because of higher costs, preventing cheating which is common for microgrids failure. Such payment systems would be possible at Energy Bazaar platforms.
  • Available resource and individual requirements are important parameters to decide usage rules: These usage rules are the compensation, prioritization (distribution) or constraint rules for usage of the resource in the community, increasing the profits and access of the resources. Refer to the first blog to understand what usage rules and utilities mean in this context

Recommendations specifically for the microgrid energy providing firms 
The stakeholders map and relations are a bit different here, as shown in the following figure.

Stakeholder map for microgrids
  • When a community puts its energy produced in a livelihood, it is called community energy. This community energy is usually developed once and not nurtured further i.e. the growth of such community energy platforms are not a priority. This leads to steady decline of the community energy based livelihood options by community. It is important to have a steady growth in community energy systems, meaning there should be a constant influence from a livelihood organisation and they should serve as economic hub for good of the community. This is important to prevent a decline in number of producers and consumers.
  • Prioritization rules mean that the energy needs to be distributed as per the supply and demand gap. If the demand is too high and the supply low, the priority needs to be given to some households more than others e.g. the hospitals and community places would get more priority. The prioritization rules of important energy sources should be installed: In cases of emergency, distribution from community pool should be used. If these rules are not present, it might lead for the community to completely stop using the resource.

Recommendations specifically for energy exchanging projects

Stakeholder map for existing energy exchange projects
  • Variety of the products should be experimented. Energy variety doesn’t have any effect on the number of producers, buyers, but the effect on profits might be different. For example, in the case of Rural spark, the more modular products have helped to cater to different demands more easily.
  • Cashless payments would have a severe positive impact on the profits of the energy providing firms, because this would save a lot of hassle and time-investments for the energy provision firms.

Recommendations for local governments (with collaboration of energy providing firms)

  • Use more cooperative shops and anonymous exchanging to prevent discrimination between castes and sects in the community. Cooperative shops are community owned collaborating shops between households, where many people contribute and divide the profits. The collection of the small sections of society as one entity is always perceived to have more status than individual. Such collections makes people look in the weaker/ smaller section of society with more status.
  • Policy impacts should be considered: policies can lead to generation of unanticipated demands of energy, benefits and problems, which should be kept in mind. For example, policy of in-house manufacturing might lead to new community hub development and increased connectivity, and thus, such effects should be considered.
  • Delays in the administrative and energy distribution related processes need to be avoided. The demand for energy can change rapidly within a community, and delays in parallel processed lead to a loss in the trust of the services. Thus the processes of testing and registrations should be integrated with project deployment and design. This need a steady formal regulation from the governments

Interested to know how we integrate these policies in our work at Energy Bazaar? Follow our Medium blog, follow us on Linkedin and join our slack community if you have similar interesting ideas to share!

The complete research on this topic can be read at the TU Delft repository. Readers are asked to look at the executive summary for a complete idea of the work in given limited amount of time. I would like to thank Yvo Hunink , Dirk van den Biggelaar, Rob de Jeu, Steyn Verschoof and Vinay Bhajantri for their input on the blog. I would like to also thank Rural Spark, CEEW, Piconergy , Barefoot College, SolShare and TU Delft for providing resources for the research.