Could home energy producers get a better deal for the power they sell to the grid if they worked together? At the moment, they work independently. Home producers with a 5MW panel on their roof have no bargaining power with utilities who set the rates.
But perhaps thousands of producers in concert could hold more sway.
Two London students want to bring crowds of small producers together in order to win better prices from utilities in the U.K. “To the big six [utilities], these small generators are a bit of dust in a pile of sand, but if you combine them you can aggregate all of the electricity capacity,” explains James Winfield, co-founder of the Crowd Power Plant. “Then we can sell that in bulk to the energy supplier. That’s how we’re going to get a good price.”
When home energy producers sell power back to utilities, they receive payments, or credits, for the kilowatts they return. The exact amount depends on the program the utility has in place. In the U.K., utilities pay “feed-in tariffs”–which are fixed rates based on 15- to 20-year agreements. Crowd Power Plant plans to bundle the producers and then go to utilities to strike better deals.
The idea does have precedent. Co-ops in Britain already negotiate group deals with utilities for electricity consumption. The biggest question is whether Winfield and his partner Dominic Jacobson can persuade regulators to allow it. Winfield and Jacobson are gathering together producers without gathering any actual energy. They’re virtualizing or commoditizing energy on the generation side, parceling it up and selling it.
Winfield and Jacobson are finishing up masters courses at Imperial College, a highly regarded technical university. They’re planning to apply for a brokerage license, so they can form and trade the contracts. “The legal side of things is the main issue, to be honest with you. You can imagine the red tape involved,” Winfield says.
A crowd-funding campaign is set for later this year, ahead of a launch in January (they need to raise a good amount of money to cover legal fees). “Conceptually, it’s very different and very new. And that’s hopefully where we’re going to make the biggest difference in this industry,” Winfield says.
Presumably the idea could work other places as well. Six U.S. states also require utilities to pay “feed-in tariffs”–which are fixed rates based on 15- to 20-year agreements. (Others mandate “net metering,” where utilities reimburse at the current retail rate for power.)
More broadly, it shows how virtualizing and commoditizing electrons opens the door to new types of trading opportunity. If small producers are selling on an open market–say, as groups and funds–it would de-localize and potentially empower small suppliers. After that, you could imagine other types of informal market where buyers, sellers, and brokers can seamlessly transact virtual electrons.