From the outside, Elmore House in Brixton, south London, looks like a fairly typical social housing estate.
But the 62-flat block will be the site of an advanced energy project to test whether households in Britain could in coming years reduce their reliance on large utility companies and buy and sell their electricity to neighbours.
“Peer-to-peer” trading is already well established in other industries, such as financial services. But Britain’s energy system is still based on households buying their electricity or gas from one supplier, with limited control over how to reduce costs other than to shop around for better deals.
That is likely to change in coming years, according to analysts, who say households will increasingly buy their energy from local sources, such as neighbours or local businesses that generate their own electricity via solar panels or wind turbines. Or they will purchase it as part of a bundle of services, such as through a home assistant device or when they buy an electric vehicle.
“We may not have much contact with our energy supplier in a few years’ time, as energy becomes a byproduct of another purchase, like an electric vehicle, or ordered via your Alexa or Dot [home assistant device],” said Simon Virley, UK head of energy and natural resources at KPMG, the consultancy.
“Peer-to-peer, and other forms of local energy market trading, will also dilute the relationship we have with conventional utilities.”
Electric vehicles to drive change
Local power generation is expected to become more widespread, as increasing numbers of households, businesses and local authorities seek to cut their costs and take advantage of advances in battery technology to store electricity generated from low carbon sources such as solar arrays or wind turbines.
Electric vehicles are also predicted to play a big role as households will be able to use their car batteries to store electricity and potentially sell it on when demand is high.
The greater number of households generating their own electricity and using their car batteries to store and sell power will, however, pose fresh challenges for local energy networks and National Grid, which will have to manage greater two-way flows of electricity, making the balancing of supply and demand across the system more complex.
Solar panels currently supply communal areas at Elmore House in Brixton
Early trials of peer-to-peer electricity trading, such as the one at Elmore House, are attracting the interest of some of the biggest energy companies in the UK, including BP, Centrica and EDF Energy, as they try to understand changing trends.
At Elmore House, residents who choose to participate in the project will simulate trading electricity that is generated by solar panels on the roof of the block. The panels, which were funded via a community share offer, currently supply communal areas.
The electricity from the panels won’t directly supply participants’ homes but they will be able to see what the potential cost benefits would be if they chose to either use an allocation of the solar-generated electricity themselves, or sold it on to their neighbours.
Companies test new business models
The trial, which uses blockchain technology, will run from March to October and is being carried out by EDF Energy, the utility company, researchers at University College London and Repowering London, a not-for-profit organisation. It is one of several peer to peer trading experiments launching in the UK in coming months.
Xavier Mamo, director of research and development at EDF Energy, said the project would “show how small communities in dense urban areas could benefit from a low carbon and local energy system in a new and transformative way”.
Centrica, the owner of British Gas, is also involved in a scheme at a social housing development in Hackney, north-east London, that will examine what customer bills would look like if they were able to able to trade electricity with their neighbours.
An energy project in Hackney, which is also involved in the trial
“The way you manage your energy yourself, whether that is as a business customer or consumer, we think, is going to change massively over the next few years,” said Jonathan Tudor, director of technology and innovation strategy at Centrica.
BP, which like other oil majors has been investing in low carbon technologies in recent years, is also planning to recruit up to 250 households in England and Wales early this year for a peer-to-peer electricity trading trial. It said participants are likely to have solar panels, battery storage or electric vehicles and will be able to trade excess power among themselves using a secure online tool.
“By testing out these new technologies and business models we can learn fast and scale up where we believe there are opportunities,” a spokesperson for BP said.
Although peer-to-peer trading would be a threat to their traditional business models, utility companies are hoping they can provide services to households and businesses interested in local energy supply by helping them to manage their consumption and production.
The companies involved in the trials have sought permission from Ofgem, the UK’s energy watchdog, as under current regulations households aren’t able to buy their electricity from other consumers.