Community Energy and Peer-to-peer trading in the UK

The following outline literature review may be helpful to readers interested in community energy projects:

Community Energy and Peer-to-peer trading in the UK: an outline literature review.

Contents

Introduction

Literature

Conclusion

Bibliography of on-line material

1 Introduction

The topic of this outline literature review is the current difficult situation faced by community energy groups in the UK, and the way that local peer-to-peer trading of energy might provide a solution.

Community energy groups are organisations operating at a local level and promoting some form of carbon reduction through energy saving or the generation of sustainable energy. This review concentrates on generation.

Major difficulties restricting the growth of community energy initiatives in the UK are the very substantial reduction in recent years of the government subsidies for renewable energy schemes, and the limited capacity of the electricity grid to accept energy from geographically distributed sources.

Peer-to-peer energy trading is an arrangement between producers and consumers of energy reached independently of the major energy suppliers, though often using the national electricity grid to transfer energy.

The main points to be addressed in the literature sections are:

1.1 The place of community energy power generation projects in the national carbon reduction program;

1.2 The effect on potential renewable energy projects of the loss of subsidy revenue and of electricity grid congestion;

1.3 Peer-to-peer (P2P) trading of power as a possible solution, and its use in existing projects;

1.4 The present legal and regulatory restrictions on P2P trading in the UK;

1.5 The future of P2P trading at the local level.

References to the bibliography will be made informally by number.

2 Literature

The literature discussion is divided into five sections corresponding to points 1.1 to 1.5 above.

2.1 The background to community energy projects, along with data on the energy produced has been documented by a number of sources in the years since such projects became significant. A list of sources is given below. It can be argued from such data that community energy projects have made a significant contribution to carbon reduction in the UK, and that is it important to ensure the initiation of new projects.

[Information on carbon reduction and alternative energy is available from the Carbon Trust (1) and the Centre for Alternative Energy (2) as well as the Committee on Climate Change (3) and (4). Documents on international targets include the Kyoto Protocol (5) and EU publications (6).

Community Energy has been the subject of UK government publications (7), and is served in the UK in a number of ways, such as by the publications and conferences of RegenSW, a subscription-based organisation (8), and by grant awarding bodies such as the Rural Communities Energy Fund.]

2.2 The two main restrictions on new projects.

2.2.1 The background to subsidy and its subsequent reduction

The UK government initially offered generous subsidies for renewable energy installations in order to encourage their execution and establish an industry supporting such work. The Feed-in Tariff (FiT) is a subsidy based on the amount of energy generated. Over time the FiT was reduced substantially, and it is now only a minor positive factor in the business plans of new projects. Consequently community energy groups now have great difficulty in finding viable new renewable energy projects.

[Data on the FiT is published by the Office of Gas and Electricity Markets (Ofgem) (9)(10).]

2.2.2 The grid and the reasons for present and predicted grid congestion.

The electricity distribution system in the UK, known as the national grid, is designed primary for the distribution of electrical energy from a relatively small number of power generation stations to a large number of distributed consumers. These power stations supply the grid with energy at high voltage, but the voltage is reduced in stages until it reaches the consumer at low voltage. Thus the grid can be described in terms of sections operating at different voltage levels. Consumers are charged not only for energy consumed, but also for use of the grid. Grid charges may be based on the assumption that consumers make use of all voltage levels of the grid when consuming energy.

The growth of distributed energy producers presents the grid operators with the problem of accepting energy from locations to which the grid was only intended to provide it - a problem of reverse energy flow. A second difficulty is that sources of distributed energy may in some parts of the UK and at certain times provide more energy than the local area can use. (The problem of the temporal matching of distributed generation to consumption can involve the question of energy storage, which will not be discussed here.)

Modification of the distribution network (grid reinforcement) to cope with these new demands is potentially very expensive, and would result in increased costs to all electricity users.

Further difficulties for the grid can be envisaged if the charging of electric vehicles and supply of electricity for heating purposes increases according to some forecasts.

Information on the grid, the distribution companies using it, and their charging methods, statistics on UK energy use and predictions of future use are given below.

[National Grid (11)

Network Charging (12)(13)(14)

Distribution Use of System (15)

Digest of UK Energy Statistics (14)

Energy Roadmap 2050 (15)

Energy Suppliers in the UK (16)

Future Challenges (17)(18)

Grid connection, cost, reinforcement and restrictions (19) (20)

Shaping Transmission (21)(22)

Significant Code Review (23):

Targeted Charging Review (24) (25)]

2.3 Peer-to-peer (P2P) trading of energy

Ideally, all the energy generated by a sustainable energy project would be used in the immediate locality and without involving the national electricity grid. Such a situation would be ideal in that no transmission charges would be paid to a power distributor and very little energy would be wasted in the process of transmission. This situation can obtain, for example, in the case of an island community which generates all its own power, but connection to the grid is the norm in industrial countries such as the UK. However, if connection between a sustainable energy generator and a nominated consumer nearby is made using only a short, lower voltage section of the transmission grid, then arguably a reduced fee for grid use should be applicable. This can make the difference between such a project having a viable business plan or not. The parties concerted can trade energy at a price beneficial to both, and not determined by a national supplier. This is a form of peer-to-peer trading, but one which is not wholly independent of third parties such as the network distribution organisation, and is still subject to legal and safety restrictions.

P2P trading is related to the more general field of ‘Smart Energy’, which will not be explored here. An example of a research program in this area may be found at Keele (26).

A comparative review of five P2P electricity trading systems points out that restrictions on such trading varies from country to country, and that the such systems are still largely unfamiliar and experimental (27).

Another review of ten trading systems, notes that some of the technologies facilitating such schemes are more suitable for national or regional than for local trading. Only one was described as particularly focussed on local P2P markets (28).

A paper concentrating onP2P trading at low voltage develops a methodology for assessing the viability of a proposed project (29).

A study on bidding systems for P2P trading conclude that its use has the potential to enable a large penetration of renewable energy generation into the power grid (30)

2.4 The restrictions on P2P trading in the UK

The UK energy market is licenced; a 2013 paper gives background information on the licensing regulations in the UK, but notes that licence exemptions are applicable to certain cases (31).

Details of licence exemptions are given in a UK government guidance paper (32)

2.5 Some possible methods of overcoming P2P restrictions.

In certain circumstances trials of novel systems may be licensed in the UK. Community energy groups wishing to establish a P2P trading system may be able to do so by agreement with bodies such as Ofgem and their appropriate distribution network operator.

An example is the Piclo® peer-to-peer energy marketplace for UK business launched in 2015 by Open Utility in partnership with Good Energy. A Local Grid Charging White Paper is available from Open Utility (33).

Conclusions

Some indication of the possibilities for further development of community energy projects in the UK has been given above. Interactions between government, regulators, distributors and commercial and academic research bodies have been noted, and it is hoped that this outline literature review may be developed into a document of some use to community energy groups.

Bibliography

(1) Carbon Trust: https://www.carbontrust.com/home/

(2) Centre for Alternative Energy: www.cat.org.uk/

(3) Committee on Climate Change: https://www.theccc.org.uk

(4) Clean Growth Strategy: CCC review:

https://www.theccc.org.uk/wp-content/uploads/2018/01/CCC-An-independent-assessment-of-the-Clean-Growth-Strategy-Technical-Annex-Buildings.pdf

(5) Kyoto Protocol: http://unfccc.int/kyoto_protocol/items/2830.php

(6) EU: https://www.clientearth.org/public-participation-part-eu-climate-governance-regulation-help-transition-cleaner-efficient-energy-future/

(7) Community Energy: https://www.gov.uk/guidance/community-energy

(8) https://www.regensw.co.uk

(9) Office of Gas and Electricity Markets https://www.ofgem.gov.uk/

(10) https://www.ofgem.gov.uk/data-portal/total-installed-capacity-kw-installation-type