Household-Supplier Energy Market

Have you noticed that ever more wind turbines appear in the countryside? And more and more solar panels are installed on the houses on your route from work to home? All these are signs of the increasing uptake of micro-generation, whereby individuals or organisations install their own small-scale, renewables-based energy generators to produce and use energy. Presently, in the UK, they must sell the excess of their production back to the grid at a set price.

Perhaps you yourself have installed some PV panels and have to sell the excess of your energy production back to the grid at a set price? And perhaps you would much rather contribute your excess generation free of charge to the nearby homeless shelter instead? Or sell it to someone else at a better price?

Such free trade between micro-generators could become possible through a peer-to-peer (P2P) energy market. Similar 'sharing' platforms are already in place in other markets, e.g., via Airbnb in the hotel industry, or Uber in taxi hire (though both of these still impose substantial intermediation charges).

But what would such a market democratisation entail for the energy sector? Is the infrastructure for P2P energy trading technically feasible? Who would provide it? What will be the role of the current major power producers (like British Gas and EDF Energy) in such a market? Could supply continuity be ensured under the fluctuating generation imposed by the nature of these energy sources? What factors will encourage households/groups to join this market? What regulatory changes are necessary for this market to function? These are the questions that the HoSEM project sets out to address.

The key aim of this project is to research the feasibility of such democratised P2P energy market. To enable such a P2P energy market, this project will:

1. Develop a novel technical platform to support P2P household-level energy trading. Here all market participants must have read and write access to the records for the production, sale, and purchase of energy at low cost per transaction; each transaction must be accurately recorded, verifiable, and encryption-secured to guarantee accurate assignment of rights and responsibilities for trades and billing, allowing equal access to all interested participants. The distributed ledger technology uniquely meets all these domain requirements, providing an ideal technical tool for such a platform. The ledgers will also be available to 3rd party businesses that wish to provide new value added services for the energy market.

2. Establish a scientific basis for factors that would foster trust in households and organisations to participate in this market. Since prospective market participants will be acting as individuals or groups (e.g., likeminded "greens" or "profit seekers"), factors for both kinds of such participants will be researched. For instance, individuals may act upon trust in information and its sources, while a group member may follow what other members trust.

3. Research various possible configurations of such a P2P trading (e.g., where a few large groups are formed and influence the energy price, or each individual trades independently) along with algorithms for trade optimisation under each configuration (e.g., how to optimise own income and cut emissions as an individual, or minimising external energy dependency when trading as a community group).

4. Study the social, and economic implications of such a market: what will such a change imply for the current market participants, its impact on the energy supply chain, and how would this market affect everyday individual/community life?

The DLT-enabled P2P energy trading has a strong disruptive potential, which could enable new business models and processes in energy sector. This project will help the businesses, regulators, and households gain an understanding of this potential, and get ready to transition into and engage with this changing market.

The current state of the UK energy market is likely to be disrupted by the increasing number of the household-level energy generators undermining the dominance of the present major energy producers (MPPs). HoSEM project studies the upcoming changes in this market to help the businesses, regulators, and households gain an understanding of these changes, experiment with the potentially emerging structures of the new market, dispel uncertainty, and be ready to transition into and engage with this changing market.

Thus, HoSEM will deliver the following key impacts:

1. Sustainable economic viability to the lead commercial partner and broader energy sector. EDF Energy foresee that MPPs and the wider energy generation and distribution networks are threatened by disruption from peer-to-peer energy markets. While such a change in energy market can be beneficial to the society at large, it could also break down energy generation and distribution networks, and cause discomfort to the population, and financial losses to the MPPs. The HoSEM project will provide safe experimentation space, helping the MPPs to better understand and anticipate the upcoming changes, evaluate the alternative roles that MPPs could take in the new market, and prepare for a pain-free transition to new roles in it. For instance, MPPs could become the P2P (HoSEM-like) trading platform providers, or value-added service providers of new services that such a market would need. In short, this project will help EDF Energy and other current major energy market players reduce uncertainty and prepare for future-facing investment into the new kind of energy market.

2. Influence on energy market regulatory policy to take the possibility of mass-scale P2P energy trading into consideration. Current regulations will likely need updating to cater for the far more distributed production and significantly larger number of intermittent, small-scale suppliers. The HoSEM project will work closely with regulatory experts and industrial representatives from the wider energy field (through the project's Advisory Board), to ensure that the P2P energy market remains safe and secure, and is acceptable to the intended participants, the government and the society at large. Thus, HoSEM will help regulators to anticipate and regulate for the new kind of emerging energy market.

3. Improved public awareness and adoption of the environmental benefits afforded by localised micro-generation and consumption of energy. As HoSEM is actively encouraging renewable-based, localised generation and trading of energy there are obvious environmental benefits to be derived. Additional financial and autonomy benefits for the households can be realised where P2P markets are adopted. HoSEM will research both the appetite for and the viability of such a market by engaging with energy communities (Energy4All, Exeter Energy Community) and EDF Energy's own energy consumers and household-producers. The project will also work with other small-scale generators, e.g., farmers who own wind turbines, or communities that strive for energy self-sufficiency. Through such engagement, the project will both obtain research data, and also educate the (potential) household-level energy producers on P2P trading opportunities. Further information on the findings of this project will be disseminated through relevant social media channels (e.g., Twitter, Facebook, and newsgroups with energy, renewables, blockchain, and climate change interest topics) as well as white papers.

4. Strong academic and knowledge transfer impact. To foster closer collaboration and knowledge transfer in this multidisciplinary project, all project staff will undertake cross-institutional visits (including and especially visits to EDF Energy's site). Publications will be submitted to the major academic conferences and journals, and several panel discussions and workshops will be organised.