Understanding P2P Energy Trading

SunContract Use-Case

Peer-to-peer energy trading is a concept whose foundation lies in the idea of a peer-to-peer economy. In short, a sharing economy. As solar and battery storage systems increase, the concept of a P2P energy trading system is becoming more and more popular. This system allows consumers to take advantage of other users who produce more energy than they need.

SunContract — our use case for today’s article on P2P energy trading, is an energy marketplace that leverages the transparent, immutable nature of blockchain technology, to optimize power distribution.

While most markets discourage monopolization, it has been a different story altogether in the energy sector which still remains heavily centralized and heavily dependent upon monopolies. SunContract’s vision is to open up the energy market, allowing for greater total energy production, and a variety of choices for energy customers.

On the platform, users are at liberty to select their preferred energy option and the options range from solar, to hydro, biogas, wind, as well as cogeneration. While renewables have often been given a bad rep of destabilizing the energy market, the SunContract team strongly believes that renewables can in fact contribute to greater market health and stability by adding more options for sources of energy production.

So how exactly does P2P energy trading work?

P2P energy trading is one of my favourite things to discuss seeing as it an industry that I am at the center of. The image above shows you the current system in many of the European countries.

Before, the producer would sell his energy at a less than optimal price to a middleman company who would then make a profit by selling this energy to a much higher price to the end consumer. With SunContract, the producer and consumer directly agree on the price. The result of the agreement is a lower price for the consumer and also a higher price for the producer than if he sold it to a middleman company. This way the consumer incurs electricity cost savings while the producer becomes more profitable and can break even much faster on the costs of his production assets.

Any producer on the SunContract trading platform can become a trader and offer their surplus electricity to others. This makes it easier for other consumers to purchase electricity based on the renewable energy source of their choice. Also, prices of electricity can be lower than those of conventional energy suppliers.

The main advantages of P2P energy trading are:

• no middle man — people make deals on their own terms
• everyone saves money — operations costs are minimized
• transparent dealings directly with other consumers

Electricity as a commodity

A new idea is that electricity is a commodity. People can choose how they use it and who they sell it to. P2P energy trading is an efficient way of maintaining competitive electricity prices in the wholesale market.

I mean, who wants to be a passive consumer subject to market rules? As new technologies emerge, society continues to identify potential sellers or buyers. This is already happening. Think of sites like Gumtree and eBay where users trade with others on their own terms.

P2P Energy Trading Allows Players To:

• trade their energy production to friends and family for free or at a discount
• Choose to buy solar energy from a neighbour, or support a local wind or solar farm
• Choose to source as much energy as possible from distributed rooftop solar systems or home battery banks, or even neighbours

For a program to fit the definition of ‘peer-to-peer solar energy’, users setting their own terms is the primary benefit. The most important one is price. Consumers set their price limit for example for no more than 25c/kWh from any source.

In this case, any producer may choose to sell electricity at that rate, or less. However, users will have to fall back to the SunContract platform electricity price if there are few sellers at a given time. This price is still competitive compared to other energy providers and offers users on the platform that guarantee that they will never go without electricity in their households. In order to provide this back up energy, SunContract has partnered with energy company SONCE in Slovenia — where the project deployment is currently in full swing.

Zoomed out look at P2P on SunContract’s platform

So how does Blockchain relate to P2P energy trading?

Traditionally, to buy or sell power, traders need to draft contracts and communicate with each other directly. Many contracts for can get complicated. Traders call each other, send emails, or use an instant messenger. This is a time-consuming, inefficient and expensive process.

However, with the introduction of the blockchain, traders on the SunContract platform are able to trade directly and place bids for power and let sellers turn it into a trade and vice versa. This happens through the implementation of smart contracts, without the need for a central retailer.

Smart contracts are essentially transactions that are only completed after certain conditions are met. For example, if I wanted to buy power at 15¢ per kWh, the smart contract would only activate when a seller was willing to meet this condition and deliver the power. Additionally, payments are made daily to sellers of surplus electricity on the platform.

Blockchain technology offers companies like SunContract an opportunity to make significant cost-saving and process efficiencies which, in this era of an inefficient energy sector, are too compelling to ignore.

Thanks to the blockchain, we can now increase efficiency and reduce costs of buying and selling electricity. More revolutionary is blockchain’s ability to incorporate smart meters in a blockchain, where computers could automatically reconcile demand and supply in real time to better balance the grid. While the technology is still in its infancy, it is clear to see the immense potential that the blockchain has to offer.

There you have it. P2P energy trading 101.

Winfred K. Mandela is an accomplished marketer and business developer in the Blockchain space. She is responsible for linking the innovations of various companies’ product teams to the customer-focused operations of the business units to build blockchain brands, create consumer awareness in the regions where the projects are implemented and drive customer preference for the brands through their channels, every day. Winfred is fond of biking in the outdoors, loves analyzing the markets and will always be up for reading a good book!

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