Electricity trading among neighbours

In the Schwemmiweg neighbourhood in Walenstadt, electricity was traded - automatically via a blockchain. A total of 37 parties had joined forces in Schwemmiweg to form what they described as "Switzerland's first local electricity market" - 28 producers with their own solar power systems and 9 pure consumers. And this is how the blockchain-based electricity exchange worked: The local energy supply company Wasser- und Elektrizitätswerk Walenstadt made its distribution network available and bought or supplied electricity when there was just too much or too little being produced in Schwemmiweg. Consumers, for their part, indicated their price preferences via a web portal. The producers, who also acted as consumers, indicated on the portal the conditions under which they wanted to sell their surplus solar power in the neighbourhood. The rest was done fully automatically via the blockchain: special electricity meters - so-called smart meters, which can send and receive data digitally and serve as interfaces to the blockchain - measured the electricity consumption and production of the parties involved and sent this information to the blockchain, which connected all participants with each other. Via smart meters and web portals, all information - from electricity levels and the preferences of the participants to the quantities of electricity traded and the corresponding prices - was written to this data chain, a kind of decentralized digital logbook. The blockchain then reconciled the parties' information with each other, brought the appropriate parties together and finally released the electricity sales.

Successful pilot test Last January, the field phase of "Quartierstrom" came to a successful end. "The system was stable," concluded Irene Bättig, media spokesperson for Quartierstrom. The final report on the project, which was funded by the Swiss Federal Office of Energy as part of the pilot, demonstration and lighthouse programme, will be published soon. This was the only way it was possible to test such a local electricity market in practice at all, as the law does not yet permit this. Various organisations were involved in the project - including the University of St. Gallen with its Bosch IoT Lab, ETH Zurich and the companies Supercomputing Systems and Swibi.

Interconnection for own consumption

Since 2018, residents of a building or an area have been able to organise themselves into a self-consumption association (ZEV). If the private solar electricity producers produce more electricity than they consume in the ZEV, they can feed it into the local distribution grid. In return, they receive compensation from the respective local energy supplier. However, these compensation tariffs for energy fed into the grid from a photovoltaic system with a capacity of 10 kVA vary greatly depending on the energy supplier. "The remuneration for this surplus electricity does indeed vary from region to region," confirms Irene Bättig of Quartierstrom. "The aim of a local electricity market such as Quartierstrom is for solar power producers to obtain a higher return for their surplus electricity, thus making the construction of solar plants more attractive."

Blockchain in use

When the Quartierstrom project in Walenstadt came to an end at the beginning of this year, a ZEV in the canton of Aargau was able to celebrate its first self-sufficient hours. Blockchain technology is also being used in the "Im Erlifeld" development in Unterentfelden near Aarau, but only in the electricity billing process. Electricity is not traded at Erlifeld. The nine apartment buildings with a total of 90 apartments are equipped with air, water and heat pumps for heating, cooling and hot water. Photovoltaic systems are installed on all roofs. Landlords and tenants settle their electricity transactions fully automatically via the Ormera platform, which runs on the private blockchain of PostFinance and Swisscom.

"If parties have decided to share solar power, Ormera offers them a platform that makes it easy for them to bill each other for the solar power," explains Angela Bönzli, Marketing Manager at the start-up Ormera AG. The platform does this by automating the entire billing process - from reading the electricity meter to calculating the tariff and deducting the amount from the account. "For Ormera users, the entire administrative effort is eliminated. They can simply track production and consumption data, as well as calculated tariffs, on a dashboard to optimise their consumption behaviour. "Like Quartierstrom, Ormera aims to promote decentralized electricity production: Ormera's simplified billing solution should encourage more people to ZEV. "We help them to overcome the administrative hurdles," says Bönzli.

According to Fabian Baerlocher, co-CEO of Ormera, the spread of ZEVs depends not least on the local energy suppliers themselves: "Generally speaking, any developer can set up a ZEV. However, some grid operators offer innovative and, above all, simple and direct support for the formation of ZEVs, while others are more conservative, which can lead to greater administrative challenges."

Opening up the electricity market?

But why should energy suppliers be interested at all in local electricity markets such as neighbourhood electricity or ZEVs like the Erlifeld housing estate? Is it not detrimental to the electricity business if many small private electricity producers also offer electricity? "Energy trading is already no longer interesting for us - it brings zero added value ", answers Christian Dürr, Managing Director of the Walenstadt Water and Electricity Works, the crucial question in an interview published on the Quartierstrom blog. He sees his role in the future increasingly as an infrastructure operator - not only of the local distribution networks, but also in buildings. "In doing so, we can also act as an energy service provider, monitoring and optimising systems and providing holistic energy management."

The question remains whether in future all consumers will be allowed to trade electricity freely via platforms such as that of the Quartierstrom project. "In Switzerland, the electricity market is not yet open to all consumers, but only to the big players," says Matthias Galus, Head of the Digital Innovation Office at the Swiss Federal Office of Energy. The ZEV does offer limited interaction between local producers and local small consumers. However, the energy supply company remains the intermediary - outside of self-consumption - as long as the electricity market is not fully liberalised.

However, with the revision of the Electricity Supply Act, the Federal Council intends to open up the electricity market to all customers soon. According to the Federal Council, this can increase decentralised trading and thus decentralised electricity production from renewable energies, while at the same time better integrating it into the electricity market. "However, this is likely to take a few more years," Galus said. "So compared to the rapid development of digital solutions, rather long." In the meantime, he said, the Digital Innovation Office will continue to support the further development of blockchain solutions in the energy market so that the parties involved will be able to interact better in the future.

Suitable business model

Meanwhile, the local electricity market in Schwemmiweg continues to run in the follow-up project Quartierstrom 2.0, with automated pricing and without blockchain. An application for a scientific follow-up project is on the way.

Further legal impetus towards a decentralised energy supply would be sorely needed both for "Quartierstrom" from Walenstadt and for other future local energy markets, because: "Under the current legal framework conditions, an attractive business model for local energy markets is hardly possible", says Irene Bättig from Quartierstrom. This was shown by the various attempts to develop possible business models for local electricity markets in the Quartierstrom project.