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Direct Linking of Renewable Energy to Local Demand

The following local supply models offer ways for community groups to gain value from generating and using energy locally. For a more detailed analysis of these models, read Regen’s Local Energy Supply guide.

 

1. Local Generation Tariffs

Local generation tariffs provide a virtual link between local generation and consumption. In this model, the supplier measures customer energy usage in real-time via smart meters and virtually pools and shares the local generation between all customers using power at the time of generation. This allows the supplier to offer a local generation tariff to encourage customers to match their consumption to times of local generation.

 

Pros

  • Customers can reduce their bills by using power when the local generation is generating and local tariffs are in effect.
  • Supplier can pass on savings to customers in return for the opportunity to recruit and retain more customers who could offer greater demand flexibility.
  • The generator can increase their revenue and, if the generator is community-owned, the revenue is retained in the local economy.

Cons

  • The model relies on a partnership with a fully licensed supplier that is willing to change its PPA, metering and billing arrangements, as well as offer an attractive tariff.
  • Customers with more flexible load will benefit from a time of use tariff more than those with less flexible load.
  • The right balance needs to be achieved between the generation capacity and number of customers – if there is more demand than generation, the cost saving for customers will be lower and when there is more generation than demand, income reduces for the generator and supplier.
 

Projects That Have Implemented Local Generation Tariffs

 

2. Microgrids

Private wire networks (a common type of microgrid) provide a direct physical connection between a generation asset and a localised grid, bypassing the distribution network. While they can operate independently of the grid network, most maintain a connection to provide the option of exporting excess local generation or importing when generation can’t meet demand.

Supplier can set tariffs based on the cost of local generation, use of the private wires, balancing and import from the public network via a licensed supplier. There is potential to incentivise local matching through a ToUT or automation of demand to keep the tariffs low.

 

Pros

  • Most PWNs do not have to pay standard use of system charges as they generally provide less than 2.5 MW of power to domestic customers. This means that both the generator and consumer benefit from shared savings by avoiding grid charges associated with electricity imported from the grid.
  • If generation and demand are well matched (potentially through a time of use tariff, automated demand or storage) the amount of power imported and exported can be minimised, therefore reducing the cost to consumers and maintaining a good price for the generators.

Cons

  • Tends to work best with new build developments rather than retrofitting in areas where there is an existing electricity network, to avoid duplicating assets.
  • There is a cost to building a private wire network and setting up metering and billing systems.
  • Protections available to consumers are not as comprehensive as those available under the licensed regime.
 

3. Peer-to-peer Trading

Peer-to-peer (P2P) energy trading is the buying and selling of power directly between generators and end users. Transactions can take place over trading platforms which means that anyone who owns generation or storage assets or can offer flexibility services, can participate.

 

Pros

  • Allows the consumer to choose where their power comes from and can increase competition and choice for consumers.
  • Can enable generators to sell power at a better price.
  • Can help reduce pressure on the networks by helping with load balancing negating the need for expensive network reinforcement works. This could lead to reduced costs for all customers.

Cons

  • The licenced supplier is required to pay the relevant use of system charges and meet the social and environmental obligations.
  • A lack of engagement from most consumers in the UK suggests a cultural shift would be required to enable P2P trading to become mainstream.
 

Power Ledger has developed a blockchain-enabled P2P renewable energy trading platform. The platform facilitates the buying and selling of renewable-generated electricity in real time, enabling users with solar panels to trade their excess solar energy with their neighbours.

 

4. Aggregation

Aggregators are companies that combine and sell flexibility services on behalf of multiple consumers. These services can include demand flexibility (DSR), storage flexibility and generator flexibility (ramping generation up and down as needed). The aggregation market for domestic customers is still very limited but this is likely to change as local flexibility markets emerge.

 

Pros

  • Could allow individual households and communities to engage in flexibility markets
  • Can provide a source of income for those with flexible load or generation.

Cons

  • Currently limited access to the aggregation market for small and domestic customers and uncertainty about when this markets will emerge.
 

To learn more about the role that community aggregators might play in the energy market, read Carbon Co-op Energy Community Aggregator Service (ECAS) model in their Local Flexibility Markets guide.

 

Aggregation is not just a flexibility enabler - it can also be used as a collective bargaining tool. Tower Power is a project which aims to pool together the energy demand of blocks of housing and achieve savings for residents through local supply and collectively negotiating energy deals.

 

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