The distributed generation of renewable energy plays an increasingly important role in meeting the goals put forward in the Swiss Energy Strategy 2050 and to cover future electricity demand while reducing greenhouse gas emissions. Local energy markets may increase local balancing, enable consumers to actively influence energy sourcing, and provide incentives for investments in renewable generation. Advances in distributed ledger technologies have spurred ambitions to create such decentralized energy markets in which prosumers can directly sell excess renewable energy from peer to peer. However, only a limited number of projects have been implemented successfully in practice, as peer-to-peer (P2P) energy markets face challenges on multiple fronts, including technical complexity, the availability of suitable infrastructure, questions regarding the market design, user behavior and acceptance, data privacy, potential business models, and regulatory hurdles.
The Quartierstrom project (proposal titled “PowerID”), which has been supported within the flagship program by the Swiss Federal Office of Energy, is among the first to create and examine a real-world P2P energy market. In close cooperation with the local utility company EW Walenstadt, the project team has implemented Switzerland’s first peer-to-peer energy market based on blockchain technology with 37 participating households and a retirement home in the town of Walenstadt (Canton of St. Gallen). Prosumer households, who already owned a PV-panel, could sell their excess solar production directly to neighboring households without interference or reliance on a trusted third party. Via a user interface, both prosumers and consumers were able to indicate prices at which they were willing to sell / buy locally produced solar energy. The transactions were automatically calculated, managed and stored on a blockchain system in real time. If energy demand or supply could not be traded within the local community, the local utility provider, EW Walenstadt, served as backup to fill excess capacities at fixed tariffs.
The distributed system secured data integrity and conformity with the rules of the local energy market without requiring a centrally managed database. This ensured that the stored data could not be tampered with by one malicious actor and provided the necessary trust within a network of peers, who do not know each other. Such consensus-based trust establishing is particularly beneficial in large, open communities, where an absence of corresponding legal settings or enforcement thereof exists. Furthermore, a distributed ledger can provide higher security, as there is no single point of failure. Another benefit of the introduced solution is related to data privacy and compliance with the General Data Protection Regulation (GDPR) of the European Union: No personal data was published on the blockchain; no association between the public key and the household’s true identity that holds the private key was published on the blockchain at any point in time. Through the use of self-sovereign identity, in which private data remains stored on the device of the peer and access-control is provided over a distributed ledger, anonymity and the right to forget/revoke are provided as basic functionalities to all peers within the network.
After the prototypical system had been designed and implemented by an interdisciplinary team of researchers and members from industry led by the Bits to Energy Lab at ETH Zurich, participants were trading on the system for a period of an entire year. The system was thus tested under seasonal variations and user behavior was observed over a period of 12 months. During the one-year field phase of the project, the solar panels in the Quartier have produced over 250 MWh and the participating households have consumed almost 470 MWh, 70MWh were sold from household to household within the community.
More in detail, the Quartierstrom project has investigated
A) the technical feasibility of a blockchain-based community energy system with a particular focus on the local utilization of solar energy,
B) the optimal market design and resulting prices over time,
C) user behavior, in particular interaction with the user interface, price preferences and participants’ motivation for participating in the local energy market and has explored
D) privacy aspects, the technical scalability of the solution, the regulatory environment, and potential business models.
The findings of this project are manifold, but most notably, the acceptance among the participants as well as the public interest that the project receive were outstandingly positive. The project received extensive and positive media coverage including in outlets like SRF, CNN Money, Blick, and the World Economic Forum blog. The technical implementation and design of the system represents pioneering work and demonstrates the technical feasibility of a P2P energy market using modern smart metering and communication infrastructure. In the conception phase of the project, the identification and implementation of a suitable market design revealed itself as fundamental for the proper operation of the P2P energy market; consequently, substantially more work than originally anticipated was dedicated to these aspects. Market prices for trading energy within the Quartier (resulting from the participants’ bids in the user interface) fluctuated between the feed-in tariff as the lower bound and the residential retail tariff as the upper tariff. Participants’ interaction with the user interface exceeded the team’s expectations and the vast majority of participants seemed to understand the fundamental mechanics of the auction mechanism implemented, despite its complexity. Although many participants stated an appreciation for their ability to directly influence the price they paid/received for local electricity, towards the end of the project, a majority of them expressed a preference for a system with a higher degree of automation. At the same time, the project also revealed operational difficulties in deploying such a transactional system on existing smart meter infrastructure and in identifying a promising business model for a blockchain-based system, in particular under the current Swiss legislation for self-consumption communities.