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As the adoption of renewable energy sources like solar panels continues to grow, more individuals are embracing a neighbor-to-neighbor approach for energy needs. Peer-to-Peer (P2P) energy trading represents the latest advancement in the sharing economy. This model allows residents to harness benefits from local energy production and storage systems, enhancing community resilience and supporting the digitization of energy grids. Consequently, a new type of energy user, termed a “prosumer” – part producer and part consumer – is emerging.

Optimizing Energy Economics

The integration of P2P networks can unlock greater value from Distributed Energy Resources (DERs), increasing earnings for asset owners while reducing expenses for consumers. For instance, in 2017, PowerLedger, an Australian P2P trading platform, reported average savings of $424 per year for residential consumers on their electricity bills. Simultaneously, owners of rooftop solar panels experienced a doubling of their usual savings from PV systems.

Comparatively, purchasing electricity from the grid typically incurs higher costs than the rates received from selling surplus energy back to the grid. However, these prices fail to account for reduced emissions, congestion alleviation, and minimized transmission losses.

According to the International Renewable Energy Agency (IRENA), approximately 41% of electricity costs relate to maintaining and managing utility infrastructure facilitating energy transfer from generators to consumers.

Empowering Prosumers with Blockchain and Smart Contracts

Consequently, if electricity travels shorter distances, it logically follows that prosumers should benefit from reduced prices. P2P energy marketplaces leverage smart sensors and blockchain technology to enable individual energy end-users to engage in direct selling and purchasing of electricity from each other. Blockchain ensures secure and transparent tracking of energy contracts and transactions, critical for confirming the origin of purchased electricity, such as from a neighbor’s solar panel setup.

Smart contracts play a vital role in these blockchain networks, automatically executing transactions based on specific times or market conditions. Presently, potential P2P markets can operate in isolated microgrids or interconnected grids. In isolated microgrids, the P2P platform must also act as a system operator to maintain grid stability by balancing supply and demand through mechanisms like smart contracts and automation.

When P2P marketplaces function within distribution networks, factors like power flow between participants, interaction with system operators, and managing excess demand from upstream generation need consideration to ensure smooth operations without disruptions. Efficient operation, maintenance, and fair compensation for local distribution networks are also essential components within this setup.

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