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You Don’t Need An Energy Company When You Can Buy Power From Your Friends

Utility companies are getting disrupted as people sell each other their energy, without the middleman.

You Don’t Need An Energy Company When You Can Buy Power From Your Friends
[Illustration: Tony Win for Fast Company]

While communication networks have evolved a lot over the last century, the electricity grid has hardly changed at all. The system still uses the same basic technology and has the same general form: big power plants delivering electrons over long transmission and distribution lines. Thomas Edison built America’s first power plant in New York in 1882. And as power industry folk like to say, “he would probably still recognize the grid today.”

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Not for much longer. With thousands of people now installing solar panels and selling power back to utilities, the grid is changing from a one-way, top-down network to being two-ways and bottom-up. In the future, the transformation is likely to progress even further, with more of us participating, and some of us even collaborating in “peer-to-peer” relationships. The future grid could be like an “energy Internet” where the traditional hierarchies are overturned. Instead of a hub-and-spoke system of utilities to consumers, power and associated services will be transacted between individuals.

Here are some of the ways that could happen:

Buying power on an energy Airbnb

Today, when people sell solar power to the grid, they have to accept the price utilities are willing to offer. That may not be a great deal because utilities have little incentive to encourage people to sell power, because each kilowatt generated at home is one more they can’t sell themselves. An open market for rooftop energy might benefit producers and allow people who don’t have their own solar panels to share in some of the advantages.

These Dutch farmers sell their wind power directly to other consumers, with no utility in the middle.

There are examples of this happening already. In the Netherlands, a startup called Vandebron allows independent power producers to sell direct to everyday consumers. For example, farmers with wind turbines in their fields set rates on the site, inviting households to bid for contracts of various lengths. Vandebron (“from the source” in Dutch) charges a subscription fee but doesn’t take a cut of the transaction. The producers make more money than they would selling to a utility, and consumers pay exactly what producers charge, with no mark-up. When we spoke to the company last summer, one farmer had made $12,700 more revenue than he would have otherwise.

Not just energy

Matthew Crosby at the Rocky Mountain Institute, an energy think-tank, reckons we could see Airbnbs and Ubers in the energy space–in other words, hubs where individuals sell power to each other, much like people now sell spare rooms and taxi rides to each other. His reasoning: Sharing companies make money by making use of under-utilized, or under-valued, assets. Distributed energy resources like rooftop solar panels are also under-valued, he argues. First, there’s the power itself. Second, there’s the value of a solar panel in reducing load on the grid and balancing supply-and-demand, avoiding transmission and distribution costs, and cutting carbon emissions. Potentially, all these things could be valued, bundled as services, and monetized, if companies worked with producers to set up marketplaces.

“I think what you’ll see is companies that are invested in the Internet of things wanting to leverage the value of those services to the grid, and trying to create value out of them,” he says. “Essentially, you would operate auctions for distributed energy resources and attract a lot more investment [for renewable energy].”

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Our homes would be fitted with smart meters or other sensors that measure our energy generation and consumption, and take stock of our wider impact on the power infrastructure. If we’re helping to relieve pressure on utilities to balance supply-and-demand, that demand reduction could be sold as a service to others. Google, Apple, or some other service company, would act as intermediaries on our behalf.

Shared investments

These marketplaces would also allow people who don’t own solar panels or wind turbines to participate in home-produced energy. Many people can’t install solar because their roofs face the wrong direction, or there’s too much shading, or they rent rather than own. An Airbnb for energy would allow a home-owner to rent out part of their roof to a neighbor, so the collaborators could share in both the upfront cost of the equipment and the derived power. If regulations allowed it, those two people wouldn’t even need to be in the same street. You could set up a sort of crowdfunding page for your system and ask people to contribute from across the state or country.

Again, this is already happening, at least sort of. Investment platforms like Mosaic allow people to contribute to renewable energy projects and make a fixed return. Similarly, “community solar” companies like Colorado-based Clean Energy Collective let people who can’t install their own solar panels buy into a farm in a more suitable location. These ideas both have peer-to-peer elements and open up the market to more people.

“When you can unbundle the value of distributed energy resources from the physical electrons you provide back onto the grid, you can start to trade it with anyone who wants to invest in solar without having to physically own and operate the system,” Crosby says.

Of course, it may be some time before we see a truly peer-to-peer energy market with individuals playing a full role. For one, there are a lot of regulatory hurdles to overcome, and utilities would need to be incentivized to facilitate the shift, not get in the way, as they sometimes do now. (In most states, utilities are paid based on how much power they sell. Reformers would like to move to a system where they’re paid for efficiency, as New York is now exploring). But advances in solar, the collaborative economy, and basic computing, mean it’s feasible. In a few years, Edison may no longer recognize what he started.

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About the author

Ben Schiller is a New York staff writer for Fast Company. Previously, he edited a European management magazine and was a reporter in San Francisco, Prague, and Brussels.

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