Transformation of the energy market is not a quick fix
The energy industry is going through a massive shift driven by green energy solutions and new energy policies. The concept of local energy communities, which enables individuals and small organisations to become producers of energy instead of just being consumers, will also have a big impact on the energy sector. Some actors may become less dependent on power from the electrical grid. Moreover, alternative market arrangements, such as digital peer-to-peer platforms that connect green energy producers directly with those in need of energy, could challenge traditional electric utility business models. But there are significant thresholds. According to a survey of the 30 largest energy companies in Sweden, the three greatest challenges are 1) Political long term agreements for the energy market, 2) New legislations and laws for the existing energy system and 3) How to remain profitable in big energy production facilities.
Local Energy Communities in the EU
In the FED Journal #1 from UIA we can read that Magnus Brolin from RISE says “The EU has established the concept of Local Energy Communities (LEC), which in many aspects reflects the development of local energy systems and markets, such as FED. However, it is not clear as of today how these LEC should be interpreted or implemented in national legislation. There are a number of question marks and challenges that need to be resolved before this can be rolled out on a larger scale. Examples of the challenges in relation to LECs relates to the ownership and operation of grids and the role of balance responsible parties in relation to aggregators."
Magnus Brolin, RISE
The FED project can show the way
The FED market design includes an energy market as well as a market for system services. The energy market enables local stakeholders to trade energy with each other through a platform that provides adequate economic incentives. The system service market allows local stakeholders to offer system services to the local distribution system operator. One unique feature of the FED project is that it allows for simultaneous trading of three different energy carriers; electricity, heat and cooling. The FED market has a low threshold to for market entry, allowing small-scale producers and consumers to participate. The project has been introduced to and attracted interest from the Swedish energy industry as well as government and legislative bodies.
The simultaneous trading with several energy carriers in the FED market is ground-breaking. When the operation of such a new marketplace can be proved in the FED project, it should also be communicated to external actors with an interest and power to change the current structure of the energy system.
Replicate with care
When replicating the FED solution to other cities or future development projects involving end users, the social aspects must be taken into consideration. Local decision-makers are central actors that must be made aware of the importance of social acceptance. Implementing Fossil-free Energy Districts will be easier in some cities than others. Cities that take energy system development into consideration in the city planning might be more open to implementing a FED solution than those that don’t. Even though the environmental benefits of a FED solution are most likely larger in completely fossil-based energy systems, implementation might be more difficult in a context without access to sustainable products to be traded on the local market. Finally, finding cities with actors who are open for collaboration, enthusiastic and engaged regarding the concept of local energy markets will make a successful replication more feasible. Why not start with the City of Gothenburg?