How Peer-2-Peer Trading Model can Revolutionise Renewable Energy Supply

What is Peer-2-Peer energy trading? How does it influence the current situation of energy distribution? This brief contains an overview of the P2P energy trading model and all you should know about it.??

As much as the need for renewable energy solutions increases, more attention is drawn to the Peer-to-Peer energy trading model. This system emerged as a viable solution to increase the consolidation of distributed energy resources into power systems.???

Formerly, the energy grid was devised to be a one-way system. However, it is now being updated to a two-way channel, promoting exports and imports of electricity. One alternative to facilitate the two-way energy flow is local sharing or Peer-to-Peer energy trading.?

Okay, that’s too fast! Let’s go a bit slower! Before we delve into the main course, let’s look at some basics that would aid easy understanding. Jumping straight into that;?

What are Peer-to-Peer (P2P) Models??

Simply put, Peer-Peer means ‘user to user.’ A Peer-to-Peer (P2P) model is a non-hierarchical technique of exchange, transmission, or transfer. Each party has equal capabilities and responsibilities in a P2P model. Each peer in a peer-to-peer grid is equivalent to the other peers. There are no privileged peers and no primary administrator.?

A typical example of a P2P model is commonly spoken in networking. Peer-to-Peer networking is a decentralized communication model in which each member of the connection has equal capacities. Each computing device is authorized to operate as either the client or server. Also, any party is allowed to initiate a session.?

A P2P network can also be an ad hoc connection—a couple of computers connected via a Universal Serial Bus (USB) to transfer or share files.

Status Quo of Renewable Energy Systems?

The evolution of renewable energy continues to advance rapidly, with investments, policies, and public regard for climate change, driving technological advancements and, consequently, growth of clean energy adoption. The increased deployment of renewables will also bring other benefits. Renewable energy technologies create jobs, reduce local air pollution, and require less water.

The benefits of renewable energy are many and evident, but so have been the barriers to their uptake. Market setups, a lack of understanding of emerging renewable solutions, high financing costs, and inadequate regulatory frameworks have all hindered the deployment of renewables.? Fortunately, with active work by industries, Governments, financing establishments, and regulators, many of these obstacles are gradually declining.

Barriers to Current Renewable Energy Solutions?

High capital and Investment costs?

The most apparent barrier to the use of renewable energy is the initial cost -the upfront cost of constructing and installing the energy farms. Renewable energy technologies require massive capital costs compared to their conventional alternatives.?

Difficulty in Siting, Transmission, and Storage??

• Siting refers to the necessity to locate its energy facilities on land. This requires a lot of economic and political regulations and interventions which could slow down or eventually terminate the project.??
• Transmission refers to the power infrastructure needed to distribute electricity from where it’s generated to where it will be consumed. Because renewable energy technologies are still stagnant in some developing countries, most of what exists today were built to serve fossil fuel -new transmission infrastructure is therefore necessary. This would require a lot of financial funds, as it currently costs a handful of corporations millions of dollars to distribute generated energy under strict regulation by government bodies.?
• It also costs a lot of money to store renewables. The National Renewable Energy Laboratory (NREL) has projected that it would approximately cost $304/kWh for a 4 - hour overnight storage in 2022.?

Reliability Barrier?- There are many conceptions about the reliability of renewable energy sources (primarily wind and solar). This poses a severe obstacle to the implementation of the technology. Renewable energy sources depend on the weather, climate, and geographical location, meaning that one type of energy generation is not appropriate and sufficient for a region.?

How P2P Energy Trading Systems Can Help

P2P energy trading is simply exchanging (buying and selling) energy between two or more grid-connected parties. It is a business model based on an interconnected platform that functions as an online marketplace where producers and consumers “meet” to trade electricity directly, without a need for a middle man.?

It is a medium that allows local energy generators to sell their electricity at the preferred price to clients willing to pay. Often, any excess solar energy is sold to other users in the grid through a secure platform using technology like blockchain. This gives the consumers the leverage to decide who they purchase from and sell to.?

Currently, excess solar energy is transmitted back to the grid for a low feed-in tariff rate. However, this technique is becoming outdated as more people seek flexibility in controlling how their energy is distributed.

The P2P energy trading model would eliminate the ‘middleman’ and allow transparency between network members instead of as a ‘consumer’ by a corporation. The party in the grid that sells is called ‘prosumer’ because they consume energy and produce it.?

Energy sharing could happen between everyone on the same network.?

For example;?

If my solar panels at home produce excess electricity while I'm not home, I could sell the surplus energy to my neighbor who doesn't have solar panels. I could also donate the electricity to other buildings as a social devotion.?

That aside, how does this affect the current state of renewable energy distribution??

Typically, deploying a P2P energy sharing model will improve the status quo of renewable energy globally. Such ways include;?

• The P2P energy trading model makes renewable energy more accessible while encouraging consumers to better use their distributed energy resources.?
• Energy does not have to be transported from centrally located power plants, reducing electricity transport costs and solving the problem of siting and transmission.?
• P2P trading platforms enable better control of decentralized generators by always matching local electricity demand and supply.?
• P2P trading could improve the energy access and the reliability of local electricity generators. Users are generally supplied electricity through solar home systems in mini-grids, which often cannot store the electricity surplus. By allowing P2P energy trading and connecting many solar systems together (other homes without electricity supply), the energy access of consumers can be enhanced. This improves the problem of reliability.?

Benefits of P2P Energy Trading?

The main advantages of local energy trading are;?

• NO MIDDLEMAN -It allows consumers to make their own terms by cutting out the electricity retailers.?
• Energy generation is mainly from renewables, which is highly beneficial.?
• Everyone saves money because energy costs can be relatively lower for the buyer.?
• There is transparency in the dealings.?
• Energy can be purchased from a known source.? This allows you to choose where your power comes from.?

Barriers to P2P Energy Trading?

Presently, there are several barriers to P2P energy trading. Some of the principal obstacles include:

• It is not yet commercialized?
• Regulatory barriers?
• Numerous stakeholders have to be convinced of the business case (e.g., retailers)

Blockchain as its Supporting Technology?

If you’re familiar with cryptocurrency, you should know what blockchain entails. Blockchain allows digital information to be shared but not copied. You can think of it as thousands of shared spreadsheets.?

Since P2P energy trading involves many transactions between prosumers and consumers, it needs a? technology that allows for low-cost authentication and validation while ensuring privacy. One of the most promising technologies to facilitate this is Blockchain. It is a distributed ledger technology. Blockchain is mainly known as the supporting technology for Bitcoin.

Blockchain technology offers a secure, distributed ledger that can track where electricity was generated, where it can be distributed, and who consumed it. This transparent technology does not need a significant entity to store and manage shared data. It also makes it more effortless for new and smaller members to be involved, even an individual solar home.

Current Status of P2P Trading in Africa?

The progress of the deployment of P2P energy trading in Africa is slow! Undoubtedly, many things must be implemented, and underdeveloped and developing countries are still lagging.?

For P2P energy trading to succeed in African countries, technical, regulatory, and policy requirements must be fulfilled. Its deployment has been mostly unsuccessful, partly because there was no funding and the current market situation.?

Hopefully, we get to see a change in years to come.?

My Verdict

Renewable energy in Africa is indeed underutilised and far off from its potential. However, with consistent efforts, better results are achievable. All sectors could work together to improve its implementation effectively. And YES! Definitely! P2P energy trading is no doubt a valuable solution. Diversifying and embracing the model would significantly improve the supply and distribution of renewable energy.?

Let me know how you feel about adopting P2P energy trading! Is it an addition or a woeful minus? Please share your opinions and ideas!?