Energy Trading: The Newest Threat to Utilities

With the proliferation of distributed energy resources (DER) penetration, utilities are faced with the difficult task of adapting to a quickly changing energy landscape. While this industry shakeup presents challenges, it also provides opportunities for new players and products to enter the market. One company hoping to take advantage of this opening is German battery supplier Sonnenbatterie through its recently introduced energy trading platform called sonnenCommunity. This platform is an innovative trading scheme aimed at directly connecting distributed energy producers and consumers throughout Germany.

This system will be made up of primarily PV panels, battery storage systems, and a digital control software platform to facilitate energy transactions. Homeowners’ PV arrays and associated battery systems will be linked to an intelligent software platform that will monitor real-time usage patterns as well as weather conditions to efficiently balance supply and demand. The ultimate goal is to create a network that will integrate DER into the electrical grid and allow members to benefit from direct sales to one another. This form of peer-to-peer sales could have far-reaching implications, as it removes the traditional utility from the equation.

Sonnenbatterie is not alone in this newly created market. In the Netherlands, the Vandebron platform has attracted over 38,000 subscribers and allows for consumers to contract directly with a DER provider while at the same time allowing that provider to set its own price, forming a more market-based system. Likewise, the United Kingdom’s Open Utility program also connects DER producers and consumers, though it is currently limited to commercial users. Here in the United States, Boston, Massachusetts-based Yeloha pairs its subscribers with solar array owners looking to unload some of their energy. Such programs offer the potential to not only incentivize renewable energy adoption but also to alleviate some of the problems associated with DER integration by efficiently managing supply and demand.

Utility Challenges

While these types of platforms may be well-received by the general public, they may present some critical challenges to conventional utilities. By creating an independent marketplace, the role of the utility in facilitating DER connections between producers and consumers is left obsolete. According to Sonnen executives, lessening this role is actually a stated goal as they aim to bring their product to other active markets (including Australia, Italy, Switzerland, and the United Kingdom) as soon as possible.

This divestment from central power stations toward self-supply shouldn’t come as a surprise but may force utilities to adjust their business model and start searching for alternative revenue sources. Large utilities are already voicing concerns regarding DER penetration as they face declines in their customer bases and retail sales. One of the major concerns is the effect this will have on their fixed operations and maintenance costs, as these costs must now be shifted primarily to non-solar customers. While most DER producers still rely on utilities for backup power and net metering, the introduction of a direct producer-to-consumer relationship presents a potentially daunting situation for the traditional electricity supply chain. The future of DER could soon be up for grabs.