Grid-interactive Buildings

What is peer-to-peer? Peer-to-peer energy trading, commonly referred to as P2P, is the buying and selling of energy (often solar) between two or more entities on the same grid.

Think of P2P as the Etsy of clean energy: a marketplace where buyers can buy energy directly from sellers, with laws of supply and demand governing both prices and quality. In P2P environments, those selling excess energy usually make more than the grid would pay them, and those buying it usually pay less. This is because they split the savings they create for the grid when they reduce its burden to generate and transmit energy.  

Prosumer: in the context of energy trading, a prosumer is an entity that both generates and buys energy. A prosumer can be a company with on-site renewable energy generation that, at times, produces excess that is injected back into the grid and, at other times, tops its supply from the grid.

While microgrids readily support P2P, they are not required. Where clean energy is at play, energy storage (i.e., batteries) are a key P2P asset because they allow sellers to charge up when, say, solar is abundant, and dispatch it when it is not. However, P2P does not have to focus on clean energy to advance the clean-energy future: local energy markets reduce demand on today’s overwhelming dirty centralized utilities, inherently reducing carbon emissions. Furthermore, market demand will dictate how clean the energy on offer.

A microgrid is an independent energy system serving a local area. Microgrids often aggregate several clean energy assets and can operate both as part of the traditional grid and autonomously.

Importantly: a P2P participant does not have to bring any renewable energy to the table: even those who enter P2P exclusively as buyers support local energy markets.

Here is a business case for P2P through a conservative Australian example.

• Selling price to grid (via feed-in tariff): 7 cents/kWh.

• Selling price to participant: 8 cents/kWh

• Buying price from grid: 21 cents/kWh.

• Buying price from participant: 19 cents/kWh (incl. 11 cents/kWh network fees for that location).

Selling within P2P earns 1 cents/kWh more, and buying within P2P saves 2 cents/kWh, adding up to a small fortune over the course of each year.

The benefits of P2P: Win x 5

The reason that peer-to-peer is at the core of clean-energy markets is because it delivers benefits at every turn.

1. The owner of a renewable energy asset effectively sits on a source of liquid funds, able to sell energy whenever the neighbors have demand.

2. The buyer gets to decide where their energy comes from - how clean they need it to be - and usually still get it for less than the grid rate.

3. The community wins on at least 3 levels:

   • The extra income to the seller and the savings to the buyer land within the same community. At scale, boosting each community’s buying power by 1 percent makes a material difference in economic terms; the kind of difference that is made possible in the clean-energy economy.

   • Equity and environmental justice gains, especially if it decides to offer P2P discounts to the disadvantaged.

   • Increased local resilience and self-sufficiency.

   • Improved grid reliability (e.g., reduced risk of black-outs).

4. The planet wins through reduced greenhouse gas emissions.

5. The grid benefits from P2P because without effective P2P, distributed renewable energy assets can feel like a poisoned chalice: they create grid congestion at peak production times without solving the peak demand problem. In geographies suitable for renewable energy generation, P2P can nearly eliminate the need for transmission infrastructure as well as for peaker plants (which come on for the few hours of the worst peaks and are ludicrously expensive and often incredibly polluting), saving millions of dollars in both investment and maintenance as well as reducing the risk of black-outs. It is like the relief parents feel when siblings sort out their squabble on their own.

What can P2P do for real estate?

In a P2P environment, the owner of the energy assets (generation or storage) has more choices:

• Use the clean energy.

• Sell the clean energy to the members of the P2P community.

• Use the energy but sell its “cleanness” (such as through renewable energy certificates).

• Donate excess clean energy to local schools, non-profits, etc.

• Export excess clean energy onto the grid; even where that means selling, the price is usually lower than what a member of the P2P community would be willing to pay.

• Sell excess energy to the grid during peak for several times its usual cost (the term for this is arbitrage).

Importantly, through P2P, any real estate asset can directly advance the clean-energy future, regardless of whether it has on-site generation or storage. Even when a building participates in P2P exclusively as a buyer, it makes a profound difference. Add EV charging stations to the mix, and a precinct can use its EVs as “batteries on wheels,” storing excess by encourage, via price signals, EV charging in times of plenty – aka, when the prices are low – and discharging when needed.

In this case, P2P casts a wider net than RECs. Not only does it allow those with no renewable energy generation to contribute, but it further expands the options for the owners of clean-energy assets.

P2P is a game changer because they can

• Turns any clean-energy asset into a revenue center.

• Activate self interest in pursuit of win-win-win.

• Boost both grid and community resilience.

Using clean energy when and where it is generated maximizes the benefits because it eliminates transmission losses or the need to maintain (or develop more) traditional, dirty centralized power plants, with its embodied and ongoing carbon footprint.

What is under the hood?

Most likely, it is blockchain technology. That is because achieving real-time tracing of energy providence, dynamic price signals, infallible validation of asset legitimacy, one-click contract execution, instantaneous settlement of transactions, and absolute transparency are not cost-effective without blockchain even where it is possible. Back to the Etsy analogy, blockchain technology eliminates the “middle man,” putting all the power (and the savings) into the hands of the transacting parties.

The blockchain is a digitized, decentralized, distributed ledger recording all energy transactions taking place on a P2P network.

Thankfully, understanding blockchain is not a prerequisite for unlocking P2P benefits any more than understanding a smartphone’s operating system is to use it.

P2P sounds great, but where is it all?

Both the technology and the systems required for thriving P2P environments are tried and proven. There are few reasons that FMs have not encountered P2P:

Awareness

Buildings have remained a largely passive consumer of energy: they use the electricity they need whenever they need it, disconnected from the rhythms of renewable energy and blind to the stress inflexible loads create for the grid. The passive approach impedes the transition to the clean-energy future and misses significant opportunities to engage customers and to align operations with organizational commitments to climate action. Moreover, it leaves money on the table: P2P offers both savings and new revenue streams.

Institutional inertia

Most utility companies are huge institutions led by conservative investors who, if for no reason rather than their proximity to retirement, rarely prioritize future-proofing today’s operations. Curiously, this may be why P2P is so well embraced across the developing countries that have the chance to leapfrog centralized solutions and go straight to decentralized, resilient, clean grids.

“Peer-to-peer energy trading frees emerging economies like Nigeria from dependency on the entrenched, inefficient, often corrupt institutions of colonialism. It puts power into the hands of the people, people who want to have a better life - a great motivation to invest into clean energy you can convert into value with a single tap.”

Jude Ogene

Founder and Chief Executive Officer at Charles Winnsboro Corporation

Regulation

In most places in the world, P2P is not allowed yet. There, neighbors couldn’t trade with each other unless the energy retailer facilitated it. However, this is not as big an obstacle as it appears.

What can FMs do?

• First and foremost, identify your behind-the-meter opportunities for P2P. Even where regulation is unfavorable to P2P, it is no obstacle to what can happen within a development. This means that the benefits of P2P are already within reach for office buildings, business parks, campuses, airports, shopping centers, and any other types of real estate where different entities co-exist.

• Become (or enlist) a clean-energy asset developer to activate a P2P environment. That is exactly what BCPG did in the T77 project.

• Track relevant P2P regulation, as it is rapidly evolving. P2P is already prolific in Australia, and in the U.S., American PowerNet is a scalable use case. More recently, countries within the European Union are required to allow peer-to-peer as of July 1, 2021. Also, a pilot project with Powerledger, the world’s leading technology company in energy trading, has led to P2P being allowed across Uttar Pradesh, India’s most populous state. This change extends affordable clean energy to millions more people across unelectrified rural areas, and has garnered the prestigious World Summit Award for Powerledger’s demonstration of “how content-driven digital solutions decisively support societal challenges and assist to achieve the UN Sustainable Development Goals (UNSDGs).”

“Aggressive distributed renewable energy targets such as India's 40 GW require incentives to make them a reality. Blockchain enabled P2P market mechanism shakes off the split incentives and activates local energy markets to deliver the clean-energy future where everybody benefits.”

Vinod Tiwari

Global Head of Business Development & Partnerships at Powerledger