Energy Access Markets and the Future of Electricity Networks

In 2015 the energy access movement received a significant boost when the United Nations agreed to bring affordable, reliable, and modern energy to all by 2030. Currently, 1.1 billion are without electricity, most of whom are in rural areas. The International Energy Agency believes that “decentralized systems, led by solar PV in off-grid and [microgrid] systems, will be the least-cost solution for three-quarters of the additional connections needed, but that grid extension will still have a role to play, especially in urban areas.” 

Marketing managers at blockchain vendors should salivate at the prospect of a new market for distributed PV either off-grid or in a microgrid for 1.1 billion people. Low cost transactive energy platforms could have a huge role to play in energy access. However, energy access also shines a light on how electricity markets have changed and begs the question: if we were to build the grid from scratch, how would we do it?

Centralized or Decentralized?

Cragside in Northumberland saw the creation of the first hydroelectric power plant in 1870. The first coal power plant was built in London’s Holborn Viaduct in 1882, which powered street lights and private residences. In the following century-and-a-bit, centralized thermal, hydro, and nuclear dominated the way electricity is generated around the world, primarily because no economic alternative existed.

Fast forward to the present day and electrification projects in rural areas focus on decentralized generation. The cost of solar PV per watt has fallen dramatically and placing generation at the point of consumption means no expensive networks need to be built, at least not yet.

However, there are many barriers to electrification in the developing world, particularly in how to finance the deployment of solar panels to a poor population who are largely unbanked.

Blockchain for Energy Access

Step forward a number of blockchain startups, with business models that range from distributing cryptocurrency for free (although we are still unsure exactly how this creates value), crowd-funding platforms, or—arguably the most interesting—a peer-to-peer energy trading platform. I would normally avoid the use of the term peer-to-peer energy trading, because I would be referring to existing power grids, where true peer-to-peer will not work. However, in developing countries, the markets will truly be peer-to-peer.

Creating local energy markets will help solar owners make an economic return on their PV, and make power available to those without solar. Homes will have to be connected to create a microgrid, but rather than in the 19 century when power networks were built from central hubs out, distribution networks will instead be built from individual points of consumption.

In a similar vein, microgrid-connected distributed solar and storage have been proposed as a way of making the Puerto Rican electricity network, devastated in 2017 by Hurricane Maria, more robust.

The Future of All Energy Markets?

If a highly distributed, renewable energy market is the most sensible approach for greenfield electrification projects, then what does this say about the energy transition in developed countries? Well, a similar approach to powering residential homes may not be too far away. Energy Networks Australia’s Electricity Network Transformation Roadmap proposes a similar approach for the future of Australian electricity markets. The question that remains is how soon?