Solar power directly from the neighbor

In December 2018, the starting signal was given for a solar power experiment that is unique in Switzerland: In the Schwemmiweg neighborhood in Walenstadt, 37 households have joined forces to form a local electricity market. Owners of photovoltaic systems can sell their self-generated electricity to their own neighbors, without going through the energy supplier. Households without solar systems can purchase clean electricity from close by. The price is determined by the participants themselves, via supply and demand.

If electricity is generated and distributed within the neighborhood, less has to be purchased from outside. And electricity trading between households offers other advantages: "For example, producers can achieve prices that are clearly above the grid feed-in tariff and thus amortize their systems more quickly," says Sandro Schopfer from ETH's Bits to Energy Lab. He heads the "Quartierstrom" project, which involves the University of St. Gallen and other partners as well as the local energy supplier, the Walenstadt Water and Electricity Works, which is making its distribution grid available for local trading during the pilot test. The Swiss Federal Office of Energy is supporting "Quartierstrom" as part of a pilot, demonstration and lighthouse program.

Incentive for private producers

The project is testing what the electricity market of the future could look like. This is because the energy transition is bringing with it an increasing decentralization of electricity production - away from centralized large-scale power plants and toward many small, often private producers. "Today, these hardly have any opportunities to freely market their electricity," says Schopfer. They usually have to sell surpluses to the energy supplier at the feed-in tariff, and the electricity flows into the public grid. The paradox: Physically, this electricity already ends up with the neighbor, since electrons always seek the shortest path. "But the market doesn't reflect that," Schopfer says. Involving private producers in trading could provide financial incentives and promote the sale of locally generated, clean energy.

The neighborhood electricity project is intended to show whether this is actually the case. Of the participants, 28 have their own solar power system, nine are pure consumers, including a retirement home. The systems supply around 300,000 kWh of electricity annually; the community's actual demand is around 250,000 kWh. Several battery storage units serve as buffers. Specially installed smart meters - a variant of the low-budget Raspberry Pi computer - continuously measure the production and consumption of individual households. Specially developed software installed on the devices handles trading directly on site. This is based on blockchain technology, which is used for tamper-proof transactions within networks.

Lucrative for both sides

In an app, participants set price limits: producers set their offer price, consumers set their purchase price. Every 15 minutes, an algorithm determines who can buy from whom. It pairs the cheapest supplier with the highest bidder. Those who cannot find a trading partner buy electricity from the utility at the local rate.

The prices of the neighborhood electricity market fluctuate with supply and demand. Experience so far shows that they settle between the feed-in tariff of 4 centimes and the utility's electricity price of 20.75 centimes per kWh. "This is lucrative for both producers and consumers," says ETH doctoral student Liliane Ableitner, who is studying user behavior and acceptance in the project. She is very pleased with user participation in trading. "Many log into the app more often than expected."

Although detailed results will not be available until the project is completed in January 2020, it is already apparent that trading is increasing self-consumption within the community. For example, in the first two weeks of February 2019, more than 80 percent of the solar power produced was consumed by the neighborhood itself. By comparison, without interconnection, an individual household can only use about 30 percent of its generated electricity itself.

Energy supplier as insurer

But despite the higher degree of self-sufficiency, the neighborhood is still dependent on the local energy supplier. The utility not only takes surplus electricity, it also supplies it when the sun is not shining and demand is high. "In this scenario, the energy supplier will take on the role of an insurer in the future," Ableitner says. She is convinced that the change in the electricity market cannot be stopped. Those responsible at the Walenstadt water and electricity utility, who have been recruited for the project, see it the same way. They hope to gain insights into new business models and to be involved in their development from the very beginning.

In a next step, the researchers will investigate how battery storage and flexibly deployable loads such as heat pumps or electric cars can be used to balance out production fluctuations. "This is much more feasible within a community than in an individual household," says Schopfer. Moreover, by storing surplus electricity on site and using it again later, the degree of self-sufficiency can be further increased. "Our goal is to have as little electricity as possible flowing out of the neighborhood."

This text is published in the current issue of the ETH magazine Globe published.