Encyclopedia
Please note this is a comparison between Version 1 by Arne Surmann and Version 2 by Conner Chen.
Energy communities are on the rise globally, as they enable electricity consumers to advance the decarbonization of the energy system, while benefiting economically. Thus, they can involve the collaboration of individual consumers within residential buildings, as well as several neighborhoods, for the common purpose of expanding renewable energy and increasing their own share of locally generated renewable electricity. To reduce the entry boundaries for such a system of cummunity owned renewable energy (RE) plants and to enable trading of RE shares smart contracts within a community governed blockchain can provide a solution. In such a system prosumers could jointly buy real world PV assets and implement a digitial representation using tokens or utilities could offer token rewards for energy system beneficial behaviour thereby gradually increasing their customers' RE shares and enabling the evolvement towards active prosumership.
- photovoltaic energy
- energy communities
1. Introduction
The transition of the German energy sector towards small-scale, distributed electricity resources has led to the strong growth of renewable energy prosumership over the past decade [1][2][1,2]. According to [1], a large proportion of the more than 1.6 million installed PV systems is made up of systems with less than 10 kilowatts of peak (kWp) installed generation. The potential for further development is even greater, since more than 3.8 million apartments within residential buildings are suitable for equipment with building-integrated PV systems [3]. Despite their importance and future potential, the expansion of PV systems within renewable energy communities (RECs) is currently proceeding at a slow pace [4]. In addition to the legal framework, this is mainly due to the difficulty of individual residents to acquire shares of PV systems without major organizational or technical effort, and to differentiate the distribution of the generated electricity on a verifiable basis [2]. So, instead of buying individual PV shares, consumers have been sharing PV systems in RECs via so-called "third party ownership” (TPO) models [5]. This can be designed as a “lease” or a “power-purchase agreement” (PPA) [5]. A lease involves the consumer paying the owner of the PV system a fixed monthly amount, regardless of the PV system’s energy production. In a PPA, the consumer pays the owner a predefined fixed price per unit of energy produced [6]. In both cases, however, ownership of the PV system does not transfer to the consumer. Consumers only receive rights of use. This only partially fulfills the goal of an inclusive energy transition according to the UN Sustainable Development Goals [2], as residents are given access to renewable energy, but are denied active participation through the purchase of PV shares.
2. Energy Communities
Energy communities are on the rise globally, as they enable electricity consumers to advance the decarbonization of the energy system, while benefiting economically [2][7][2,7]. In contrast to microgrids, energy communities do not necessarily have to be physically linked, i.e., via a grid infrastructure [8]. Thus, they can involve the collaboration of individual consumers within residential buildings, as well as several neighborhoods, for the common purpose of expanding renewable energy and increasing their own share of locally generated renewable electricity. For example, [9] examine how the expansion of residential PV systems affects electricity self-consumption rates. [1] extend this approach by combining a PV system with a storage system, and calculating the achievable annual savings of residents in energy communities. A similarly designed research issue is investigated by [8][10][11][8,10,11]. Approaches to optimizing energy flows within energy communities are also being developed, studied, and tested in scientific literature [12][13][14][15][12,13,14,15]. Legal frameworks as well as challenges are explored by [9][16][9,16]. Indeed, the lack of sufficient legislation to ensure viability is one of the reasons for the delayed further development of energy communities [17][18][17,18]. In addition to these specific research questions, [7] provides a very comprehensive study of energy communities. The study examines not only the social interaction of their members, but also the technological feasibility of such communities, as well as social and technical implications. In this context, [19] perform a techno-economic analysis focusing on the Japanese energy system. An examination of whether RECs, as defined under the European Union’s Renewable Energy Directive (RED II), can be a useful facilitator for future energy systems is provided by [4]. According to Article 22 of RED II, an REC is a community in which consumers can produce, consume, distribute, and trade renewable energy, and in which every member must be able to access and acquire renewable assets co-ownership [4]. In addition to the REC defined in RED II, with the citizen energy community (CEC), the directive on common rules for the internal electricity market [20] provides another construct for energy communities. The main differences are that RECs include all forms of energy and demand within a spatial proximity of the RE project, while CECs only consider electricity, while having no spatial limitations. For this study, we focus on the REC, since it offers the most benefits for the electricity grid when applying a local energy management, however, the structure can be applied on multiple forms of ECs. In a broader sense, our model can be interesting for ECs in rural areas by enabling the members there to first obtain transparency on generated and consumed energy quantities, to obtain ownership of small-scale energy assets, and finally, to build up a local energy market [21].
The way in which renewable energy is generated and distributed within RECs, the benefits for their members and legal challenges, as well as social implications, have already been studied. What is missing, however, is an easily accessible way towards the co-ownership of shared PV systems for consumers within an energy community, as the evolvement of consumers to become prosumers is relevant for the success of a sustainable energy system design [21][22][23][24][22,23,24,25].
3. Novel Energy Business Models and Co-Ownership of PV Assets
In the past, energy utilities made profit by primarily selling electricity and recovering the cost of their investment from standard electricity-tariff consumers [25][26]. Since RECs are on the rise and electricity self-consumption rates are increasing, less and less electricity will be consumed via standard electricity contracts. Thus, energy utilities are rethinking their business models towards becoming electricity service providers [26][27]. In this context, the installation of PV systems and the marketing of the electricity generated via TPO is becoming increasingly important [27][28], both in the commercial and residential sectors. In the commercial sector, for example for industrial customers, there are currently two options: direct ownership (DO) of a PV system or TPO. In the first case, companies purchasing PV systems for industrial buildings, for instance, may receive government subsidies and feed-in tariffs [27][28]. However, the initial investment and the cost of maintenance and repair can be substantial. This financial risk is considerably reduced by TPO for corporate customers, who either pay a monthly amount and are allowed to use the PV systems (“lease” model, see Section 1), or pay a fixed price per energy generated (PPA model, see Section 1) [5][27][5,28]. In a commercial context, the number of PPA-based PV systems is growing steadily [6]; PPA approaches are also beginning to appear in the private sector as part of the installation of PV systems in RECs [5]. However, the creation and execution of PPAs and lease contracts for PV systems are complex and do not meet the requirements of RECs from two perspectives: (1) a transfer of ownership of the PV system between system owner and resident does not take place. While the consumer can increase the share of renewable generated energy, becoming a prosumer is not feasible. (2) Within an REC, changes of residents/consumers within a residential building occur frequently. An administratively and technologically easy and quick transfer of electricity usage rights from PPAs is not possible. To address this problem, the concept of “co-ownership” has evolved [4]. According to [4], “consumer co-ownership” within RECs is understood as “participation schemes that (..) confer ownership rights in [RE] projects (..) to consumers (..) in a local or regional area”. An important criterion of the RED II of the European Clean Energy Package is that individual shareholders may not own more than 33% of the PV system in co-ownership within RECs [4]. One possibility is for members of an energy community to join together at the outset and jointly purchase plant shares in PV plants [28][29]. However, this is a one-time transfer of ownership that is detached from the future electricity consumption of the members. A possibility for the gradual tokenized transfer of the ownership of PV shares based on electricity consumption is currently lacking, as the technological and administrative implementation of such a stepwise sale and co-ownership is cumbersome [4][4].
Following the call of [7] for ways of how Energy Communities “consider the procurement of (..) energy infrastructure”, we developed a system for the small-scale, fast and easy purchase of PV assets for residents within energy communities, based on blockchain technology.
4. Blockchain in Energy Communities and Use of Tokens
Storing data from distributed PV assets in blockchain networks, which are also organized in a distributed manner, seems to be an obvious approach, and is one of the reasons for the already numerous pilot applications of the use of blockchain technology in the energy industry [29][30][30,31]. According to [29][30], the applications to date can be divided into eight areas, with “decentralized energy trading” making up the largest in terms of the number of applications. For example, [31][32] are investigating the design of a “local electricity market” built on a peer-to-peer trading mechanism. In the context of an energy community, such a mechanism was studied in [32][33]. The topic of data security was investigated in [33][34], resulting in the development of a trading mechanism optimized for security. The use of so-called smart contracts and tokens plays a role in almost all peer-to-peer use cases. A smart contract is a computer program or a transaction protocol which is intended to automatically execute, control or document legally relevant events and actions according to the terms of a contract or an agreement. According to [34][35], smart contracts are: (a) programs, but not contracts in the legal sense (b) tamper-proof after deployment (c) deterministic. In Germany, smart contracts are considered to follow the expression of a human will that has been anticipated by their programming. Therefore, it is accepted that legally binding agreements can be concluded as smart contracts by automated devices [35][36][37][36,37,38]. As there is currently no standardized definition of tokens [38][39], we usinge the term "token" as a representation of electricity usage and asset ownership rights within an energy community [38][39][39,40]. Table 1 provides information about the general properties of tokens.
Table 1.
Classification of blockchain token.
| Description | Native Token | Application Token |
|---|---|---|
| Token transmission | linear or circular | linear or circular |
| Available Quantity | unlimited or limited | limited |
| Fungibility | fungible | fungible or non-fungible |
| Duration of Validity | unrestricted | restricted |
| Transferability | transferable | transferable or non-transferable |
A distinction can be made between native tokens and application tokens [29][30]. A native token (e.g., Bitcoin or Ether) is a platform’s own currency, and serves its network as an economic incentive to achieve a higher common goal and to sanction manipulation attempts economically [38][40][39,41]. Application tokens represent ownership or access rights to digital and physical assets [41][42]. Within an energy community, native tokens may represent electricity usage rights, while application tokens represent PV asset ownership rights.
The offer of a token can be designed in limited or unlimited quantities, so that the stability of the token value can be regulated. The token transmission can be categorized as linear or circular. A token with a linear transmission will expire after a single use. A token with a circular transmission can be used as often as desired, and expires only when the asset that it represents no longer exists. Furthermore, the validity of a token can be limited in time. To reduce the complexity of creating application tokens within the developer community, numerous de facto token standards (such as ERC 20 and ERC 777) have been created in recent years.
The existing literature focuses on the use of tokens as specific features of blockchain-based energy markets, such as crypto-currencies [42][43] or data protection measures [43][44]. The implementation scope hereby ranges from small power markets in private blockchain applications [44][45] to markets for anonymous emissions trading between independent actors in public blockchains (peer-to-peer trading) [45][46]. Regardless of the scope and size of the projects, tokens are predominantly used in the form of native tokens (e.g., one kWh corresponds to one token), especially in the peer-to-peer sharing context. The use of utility tokens to represent the ownership rights of PV systems and the exchange of native into utility tokens, however, has not yet been sufficiently addressed.
