Microgeneration and Power Trading – Will it work for India

Microgeneration and Power Trading - Will it work for India

At the outset let us define what is microgeneration. In simple terms, it is defined as the small-scale production of electricity from a low carbon source. This includes the design and installation of advanced distributed generation systems using traditional or renewables technologies. Given that traditional power systems are efficient only at scale, they typically do not lend themselves to micro generation. Cases like Diesel Generators do qualify as micro generation units.

Maxson Lewis, Managing Director Magenta Power Pvt. Ltd.

Maxson Lewis, Managing Director Magenta Power Pvt. Ltd.

The new concepts of micro generation now include complex systems for production and storage. The new renewable production systems now encompass hydrogen, hydro methane (hydrogen and methane mixture), and biogas other than the often-spoken wind and solar.

To manage the fluctuating characteristic of renewables, an energy storage system interconnected to the grid becomes a key component. Every energy microgeneration system connected in a microgrid, requires a technology layer to simulate, optimize and manage operations as a function of both surplus renewable energy source as input, storage capacity and end energy uses as output. The aspect to deal with is the management of the system

Now what is power or energy trading? How is it regulated? What is the role of Blockchain in this? Is India ready for this change over?

As renewable power, especially solar & battery storage systems increase, peerto-peer electricity trading , also known as p2p trading, is a term often discussed. This system allows consumers to buy power from other users who produce and store more energy than they need. Those consumers can sell their excess power for profit and the buyers can access power at a cost lower than the traditional power generators. The main advantage of this platform is the win-win-situation for both buyer and supplier since no middleman is involved and everyone saves money. Peer-to-peer energy trading is a logical development in the same way shared driving (Uber and Ola), shared housing (AirBnB), shared cars (Zoom Cars), shared Bikes (Bounce) shared cycles (Yulu) are disrupting and redefining the ecosystem. Business is moving from large commercial enterprise to consumer to a model of person to person.

So, a retail power trading platform can help micro generation players sell or trade their energy to potential buyers.
Buyers can choose to buy power from a neighbour or a local solar farm, or a distributed rooftop solar systems or home battery banks.

But consumers in India can do this only if the Central Electricity Regulatory boards treat it as such. There are power exchange boards which operate only in the wholesale power space. The Indian Energy Exchange (IEX) set up in 2008 and regulated by the Central Electricity Regulatory Commission (CERC) was one such attempt. But this was ;limited to bulk consumers and not in the retail trading space.

The idea that electricity is a basic commodity and a basic right is passé. The idea that electricity is a free system is gaining ground. An electron is an electron regardless of its source and its ability to power devices at home. People can choose how and when they use it and who they do business with. This is the same way data is treated on the internet highways. People generate data, people consume data, the internet provides the platform for transmitting, managing it and business models to fall in place. The same analogy can be considered true for power.

But before we say we can go to power trading right away, there are some important frameworks, technologies, infrastructure, business models and the biggest piece of the puzzle – regulations which need to fall in place.

Peer to peer trading for electricity needs a Smart grid with a streamlined energy delivery system which is providing information on a microsecond basis. It requires implementations of innovative products and services with intelligent monitoring, control and communication. While work started decades ago, India is far away from such a smart grid.

But as new technologies emerge and the grid becomes smarter as we progress, householders can identify potential sellers or buyers. This is already happening albeit in the non-power space. Think of Amazon and eBay where users trade with others on their own terms.

For a platform to support peer-to-peer energy trading, users setting their own terms is the main benefit and the net outcome is competitive price. But this requires contracts and agreements on when and how much electricity they deliver. These agreements may be for one-off, instant transactions or longer term agreements made over weeks, months or even years.

And this bring us to the concept of Blockchain for this trading platform to become real.

Blockchain allows digital information to be shared but not copied. Originally devised for the cryptocurrency Bitcoin, the information is public so no one can hack it and that is what helps power contracts and buy and sell. Blockchain is also more efficient and transparent.

While the idea of a Blockchain is old, its use to regulate energy has already started. Countries like Australia is already put pilots in place. ARENA (Australian Renewable Energy Agency) is working on a trial for power-trading between neighbours. It uses blockchain to help households and business to trade or share power with one another. AGL Energy Limited is working on a project to evaluate a virtual trial at Melbourne homes. It mixes solar panels, batteries to store electricity, and ‘smart’ air conditioning.

Sonnen is working on a different approach in Germany, the details of which are not fully available, but the focus is on a virtual plant, a real alternative to the grid.

As far as regulations are concerned, it will take some time for India to move from a centralised power market to a decentralised one. Wary of losing lucrative non-residential customers, state electricity boards (SEBs) impose open access charges, keeping them away from spot electricity markets. Given that SEBs have more than adequate longer duration power purchasing agreements, the first preference is to fully utilize them. Only the incremental demand is met through short-term markets.

With the advent of the blockchain era, a future with micro-grids, an energy distribution network set up with the help of local energy producing systems is now possible.

To conclude, as new technologies emerge, customers can find more ways to free themselves from utility and discom inefficiencies and rising prices. Solar and battery storage customers are best positioned to be leading this new digital era revolution in power by embracing peer-to-peer energy trading. The shift is inevitable, if not imminent.