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DERs and the Rise of the Peer-to-Peer (P2P) Energy Marketplace

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Guillermo Sabatier's picture
Director of International Services HSI - Industrial Skills Training

Seasoned training and compliance specialist with over 23 years of experience in the electric utility industry and a successful track record of designing, implementing and managing training...

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  • Oct 28, 2020

This item is part of the Distributed Energy Resources - Fall 2020 SPECIAL ISSUE, click here for more

As the electric utility industry prepares for changes ushered in by FERC’s approval of order 2222, a great deal of attention seems focused on the management of distributed energy resources and  (DER) aggregators. Though the aggregator concept is not new, the debate on how those resources will be managed is becoming far more complex and interesting.  According to order 2222, aggregators will be able to compete in all-regional, organized wholesale electric markets.  While this benefits competition, there is significant research currently underway to expand the reach of this initiative and bring market accessibility to the microgrid level or individual prosumers.  This could potentially circumvent the aggregator market and engage in a peer-to-peer (P2P) environment, thus enabling a completely new energy marketplace to emerge. 

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The National Renewable Energy Laboratory (NREL) is conducting research in partnership with BlockCypher to pioneer the application of this P2P technology on energy transactions.  According to their vision of this energy future, homeowners can sell excess power generated from rooftop solar to others in their community.  The next question raised is how it will impact reliability, resiliency, and security for the power grid.  Their solution relies in part on the use of blockchain cryptography, which according to NREL, “ensures security and cryptographically signs meter readings to prove energy was generated, then embeds them to the blockchain.”  In simpler terms, this creates a virtual ledger that accounts for transactions, data exchange and security.

Of course, NREL’s research is taking place in a lab setting far removed from regulatory and policy concerns with the opportunity to resolve technical issues.  Inevitably, regulation will be needed,  affecting and possibly shaping these markets. If done well, these changes could  benefit electric utilities.  According to Michael Khachiki, Co-Founder of Atlantic Power Exchange, “these opportunities reframe the grid operation from unilateral to bilateral operation.  Furthermore, grids which have smart metering deployed can maximize their benefits from DERs.”  Khachiki goes on to say, “this could reduce peak demand on the grid and lessen the need for increasing capacity and investment in upgrading assets with less than optimal utilization.”

All these multifaceted benefits aside, there is still the challenge to develop a regulatory framework that ensures fair competition, reliability, resiliency, and cyber security.  FERC Order 2222 sets up that expectation in the United States.

With these attractive market opportunities, research is also taking place globally in areas like Malaysia, where recent trials had some interesting lessons.  One of the biggest takeaways from the P2P energy trading research is as the cost of renewables continues to decline and DER penetration increases, the most pressing challenge is the fast, secure, and reliable exchange of data along a common platform.  Currently, few of these applications share compatibility. 

Inevitably, as the bigger players in the wholesale energy markets begin to extend their reach into this burgeoning ecosystem, a common platform will emerge.  The hope is for a convergence of needs by the prosumers, regulators, electric utilities, and grid operators towards a common solution. 

As the cost of renewables continue to decline, residential energy consumers will increasingly become prosumers, and P2P energy trading seems poised to become the next big leap in utility industry.

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Matt Chester's picture
Matt Chester on Oct 28, 2020

One of the biggest takeaways from the P2P energy trading research is as the cost of renewables continues to decline and DER penetration increases, the most pressing challenge is the fast, secure, and reliable exchange of data along a common platform

Do you see regulators or operators themselves taking this issue seriously, or will it really be the third parties platforms that drive this conversation and fill in that need? 

Guillermo Sabatier's picture
Guillermo Sabatier on Oct 28, 2020

It seems all sides are taking this seriously or at least seeing opportunites and threats. The ideal case would be for all parties working together on this since there are considerable benefits for all sides. 

According to a report by GridWise Alliance and EY Global Services, Barbara Lockwood, VP, Regulation, Arizona Public Service Company, says: "We need to be in partnership with companies providing behind-the-meter services and facilitating, enabling and optimizing those resources for the benefit of all. With partners, we can satisfy customers in ways that we cannot achieve individually.”

Unsurprisingly, the technoloy seems to be developing quickly and is only a matter of time before a common protocol emerges.  The real challenge would be to regulate what happens behind the meter with hardware and software and its effect in the distribution system.

Matt Chester's picture
Matt Chester on Oct 28, 2020

Thanks for the additional insights, Guillermo. Will be compelling to keep an eye on, for sure. 

Stephen Browning's picture
Stephen Browning on Nov 13, 2020

In a system with engagement of the considerable capacity of Flexible DER the whole lot needs (automatic) management at distribution level and then, via the interface to the Main System Operator to ensure overall integrity.  And if we flex appliance demands to cover the impact of variable demand and renewables, we actually destroy the basis of conventional 'Top Down' Forecasting.   Head to FPS 20 and 21 plus the Strategy note as regards comms etc.

Noting that EVs now have 100kWh batteries and in the UK our average journey is 7kWh (20 miles) per day there is considerable scope for V2G G2V.  But, with 7.2kW domestic and larger fast chargers every 1 million cars on domestic is 7GW capacity.  Therefore the whole lot has to be managed through Distribution to Sys Ops.


Guillermo Sabatier's picture
Guillermo Sabatier on Nov 18, 2020

I completely agree with your vision, but how will all this be coordinated? Common protocols are still being developed and lagging begind while micro grids are popping up everywhere.  Some entities use net metering, but that is only modeled as negative load in some cases. 

At least the conversation is taking place and there are already major players looking to dominate this market much like they have done with energy trading and electronic tagging software.  

If that happens, they may have a very impactful role in the creation of new regulatory standards?

Bart Miller's picture
Bart Miller on Nov 13, 2020

I don't see this being an issue at our utility as we have so few customers with DER that end up receiving a check in April. When you couple that with the fact that RMP/PacifiCorp just prevailed at the Utah PSC to reduce the amount of value on the net meter payback, I really don't see it creating much of a market in Utah for P2P. That being said, this is definitley an issue that needs to be watched.

Guillermo Sabatier's picture
Guillermo Sabatier on Nov 19, 2020

I agree, and in certain regions, there are certain cost thresholds that either act as barrier to entry or just make that investment unattractive.  That being said, once that threshold is crossed, they will make those investments.

William Thai's picture
William Thai on Feb 5, 2021

There definitely seems to be a shift into this direction.  There has been technologies and projects underway to support this change.  Utilities have been working with each other and industry and regulatory bodies to develop and implement software, network communications, and standards to support a P2P energy market.  As you mentioned, there are a number of barriers to overcome such as cyber security and the maturity of the technology to support scalability and automation based on the different Utility standards and regulatory environments. 

Open to discussing more, if you like.  Feel free to reach out to me at .

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