The spread of renewable energy has changed the way that our grids operate. Variable energy sources such as wind and solar require major upgrades to the existing power grid that would allow for increased efficiency and flexibility. And it’s not just mass-scale solar and wind farms that are complicating the functionality of the grid. Energy generation is becoming increasingly decentralized and localized as people install residential solar panels, batteries, and other grid-connected residential infrastructure, creating challenges as well as opportunities for local and regional power grids. These individuals who provide energy to the local grid as well as consume energy from it are known as prosumers, and they are disrupting the energy grid as we know it.
The energy grid can be thought of as a massive ecosystem with a huge variety of organisms – asset owners, manufacturers, service providers, and government officials at Federal, state, and local levels – and now decentralized and variable prosumers. And right now that ecosystem isn’t doing so hot. The grid in the U.S. is wholly unprepared for the renewable energy revolution. The International Energy Agency estimates that annual investments in energy sector infrastructure and technologies will need to increase four-fold from current levels to reach $4 trillion by 2030 in order to achieve net-zero emissions by 2050. It’s a tall order, to say the least. In fact, it’s not even performing well in the current moment, as a higher frequency of extreme weather events attributed to climate change are causing increasingly frequent and long-lasting blackouts across the country. But updating the grid is far easier said than done. In fact, it’s a massively expensive slow-moving bureaucratic nightmare. Related: UAE’s ADNOC Eyes Expansion Of Downstream Activity In Europe
This roadblock has been the jumping off point for many innovative ideas for alternative ways of interacting with the grid, or of avoiding the grid entirely. New and imaginative energy systems such as decentralized microgrids, use of the blockchain to regulate and manage prosumer markets, and local energy communities have received increasing attention from private investors and public figures alike. One of the most promising ideas to arise from this hotbed of innovation is the concept of local energy markets (LEMs).
LEMs would allow prosumers to buy and sell energy amongst each other based on their individual needs via a trading platform managed by a local utility, which takes a percentage of every transaction. Advocates of LEMs praise this market-based approach. As Forbes recently reported, “This market layer ensures stability in frequency, voltage and other crucial power system attributes. Rather than relying on manual interventions, a sophisticated market-based system allows for price setting within predefined constraints, creating a self-regulating energy ecosystem.” The targeted outcome is a system in which diverse production and consumption needs can be accommodated while simultaneously stabilizing the power grid.
The idea is that LEM integration won’t only benefit the prosumers using the trading platform, it will benefit the grid as a whole. Forbes proclaims that LEMs “can facilitate the efficient utilization of local renewable resources, reduce strain on the grid during peak demand periods, help remove renewable subsidies like net metering and support the integration of distributed energy resources in an orderly fashion.” On top of all of those promising claims, a recent Guidehouse report touted LEMs’ ability to support the expansion of renewable energy uptake while creating a more flexible and stable grid.
While the conceptualization of LEMs is new, the idea is quite promising. A European LEM pilot project found that the system can indeed contribute to grid stability at the same time that increased renewable energies are integrated. But there are also some major barriers to LEM implementation. The current power system is not designed to facilitate such decentralized market trading – in many jurisdictions, the introduction of LEMs would require a major regulatory overhaul. In others, however, an incremental integration of LEMs within the existing framework could already be feasible.
By Haley Zaremba for Oilprice.com
More Top Reads From Oilprice.com:
- Iran’s Booming Oil Industry Adds Urgency To Nuclear Negotiations
- Are Oil Prices Set for A Rally?
- China’s Imports Of Russian Crude Oil Hit A Record High
