Essentials of Local Energy Decision-Making for Communities

Welcome, Net Zero News readers! Today, we delve into an insightful perspective on our energy system’s future, courtesy of Kristian Lande from UrbanChain. With the pressing need for a transition to sustainable energy solutions, Lande argues for a paradigm shift from a centralised model to one that empowers local communities. Let’s explore the nuances of this shift and its potential to revolutionise our approach to energy management.

The Flaws of a Centralised Energy System

Our existing energy framework was conceived in a bygone era, characterised by the dominance of a few large fossil fuel plants, where electricity was transmitted in a linear fashion from these centralised hubs to homes and businesses. At the time, this model appeared logical. However, in today’s context, it has become increasingly apparent that this approach is outdated and inefficient.

With the rise of renewable energy sources, such as wind and solar, we are witnessing a significant shift in how energy is generated. Unlike traditional fossil fuels, renewable energy is produced in a distributed manner, with generation taking place at thousands of locations rather than a few large facilities. Yet, despite this transformation, we find ourselves attempting to operate our energy system as if nothing has changed, leading to higher costs, inefficiencies, and lost opportunities.

The Financial Burden of an Outdated Model

The centralised decision-making approach has resulted in a significant disconnect between energy generation and consumption. Power is often produced far from where it is needed, necessitating the construction of extensive infrastructure to transport it. This not only escalates costs but also leads to substantial energy losses during transmission.

Moreover, this outdated model creates peculiar market distortions. Take, for instance, the erratic fluctuations in electricity prices. Just yesterday, one could purchase power for £100, only to see it sell for £3,000 a few hours later. Such volatility is indicative of a failing system that struggles to align supply with demand effectively.

In a further irony, we are spending approximately £1 billion annually to curtail wind turbine production because the grid lacks the capacity to accommodate their output. This means that clean, affordable energy is being wasted, not due to a lack of resources, but because our infrastructure and market regulations are not designed to utilise it efficiently.

The Grid’s Struggles in a New Era

Our grid is simply not equipped to handle the modern flow of energy. The traditional system was predictable, relying on coal and gas plants to provide consistent power output. However, with the proliferation of solar panels on rooftops and wind farms dotting the landscape, energy now flows in multiple directions.

This shift has resulted in transmission bottlenecks, congestion, and local overloads. Prices are determined on a national scale, rather than being responsive to local conditions, which means that while some regions may enjoy an abundance of renewable energy, others experience shortages. Unfortunately, we lack the necessary flexibility to respond to these disparities effectively.

The Constraints of Corporate Power Purchase Agreements (PPAs)

One of the mechanisms designed to facilitate funding for new renewable energy projects is the Power Purchase Agreement (PPA). Under these agreements, companies commit to buying electricity from specific sources over a period of 10 to 15 years. While this concept appears promising in theory, in practice, it is limited to approximately 350 companies globally, predominantly comprising tech giants and heavy industries. The stringent financial requirements—where companies must hold up to 70% of the contract value in cash—make this model impractical for most businesses, thus hindering the transition to a cleaner energy system.

Energy suppliers are not exempt from struggles either. The recent past has shown that over-insuring each megawatt multiple times over can still lead to bailouts, as witnessed two years ago. This raises the question: is there a more effective alternative?

Advocating for Local Energy Decision-Making

Rather than relying on top-down control, we must shift towards a system that empowers local communities to manage their own energy resources. This approach not only addresses the challenges posed by climate change but also bolsters national energy security. This isn’t merely an innovative concept; it’s a matter of common sense.

By granting individuals control over their energy consumption—coupled with real-time pricing and local trading—we can foster smarter energy usage. Imagine the benefits of delaying your washing machine cycle or electric vehicle (EV) charging until energy prices dip, or selling surplus solar energy to a local business instead of exporting it to distant markets for a fraction of its worth. Such a system would encourage local economies and promote sustainable practices.

Localised decision-making starkly contrasts with the centralised projects that have historically failed. For instance, during the 1980s, three states in the US faced near bankruptcy due to nuclear plants that were ultimately never constructed. Similarly, the UK encountered crises in the 1950s with overly complicated Magnox nuclear reactors. Yet, despite these lessons, we continue to repeat the same mistakes.

A Vision for a Smarter Future with UrbanChain

At UrbanChain, we are pioneering a platform that facilitates local energy trading, enabling communities to buy and sell renewable power directly. By harnessing blockchain technology, we ensure transparency, traceability, and significant cost savings. Our model allows individuals to access more affordable energy while simultaneously reducing waste and bolstering their local economies.

Our founders, Mo Hajhashem and Somayeh Taheri, embarked on this journey from an academic background rather than the traditional energy industry. This fresh perspective has empowered them to rethink the energy system from the ground up, focusing on how energy can serve people rather than merely benefiting large corporations.

The transition to a decentralised energy system is not just a possibility; it is a necessity. By embracing local decision-making, we can drive down costs, minimise waste, and cultivate a more resilient and sustainable energy future.

The power to change our energy system lies within our hands. Let’s harness it!

Kristian Lande, Director – PPA & Storage Origination, UrbanChain