Energy flow optimization between neighbours that generate and consume

Electricity is one of the cornerstones of modern society. Specifically, the market of renewable energy is developing quickly due to the growth of the energy demand and a greater awareness of climate change. So, new and interesting opportunities show up.

The energy production of the present electrical system is based on large fossil fuel plants and some large renewable energy plants. However, the requirement for a greater presence of renewable energy sources is going to open the system to other generation model: distributed generation. Likewise, in regions where large electrical transportation and distribution infrastructures are not present, an electrification model different to the one that exist in developed countries will be implemented.

Distributed generation consists of the generation of electrical energy using a lot of small generation sources, installed near the consumer that is connected to the electrical grid. Distributed generation reduces energy losses in the transportation grid and, as there are small generation sources —micro-generation— spread out in a territory, if a source fails, it is not a big problem for the electrical system, so, reliability, quality and safety of the electrical system are improved. Distributed generation is based in renewable energies and advanced automation and control systems. It is a main part of electrical microgrids that smartly integrate the electrical grid with the users connected to them —generators, consumers and those who are both— to get an efficient, safe and sustainable electrical supply (B. Hamilton and M. Summy, Benefits of the smart grid).

An example of an off-grid electrical microgrid is Norvento Enerxía Innovation Centre. The energy demand of the building —electricity, heat and cold— is completely meet using different on-site renewable energy sources. So, the building works autonomously and completely disconnected from the electrical and gas grids.

These microgrids will use innovative equipment and services, together with new communication, control, monitorization and auto-diagnose technologies that will allow them to achieve the following aims:

  • A strong and automatic grid, improving the quality of the grid operation and reducing losses.
  • Optimization of the connection of renewable energy sources. Optimization of their connection capacities and minimizing their connection costs.
  • Development of decentralized generation architectures, that will allow the installation of smaller installations —distributed generation— in harmony with the system.
  • Improvement of the integration of intermittent generation and new storage technologies.
  • Advances in the development of the electricity market, creating new functionalities and services for distributors and consumers.
  • Active management of the demand so consumers can efficiently manage their consumption and improve the energy efficiency.
  • Penetration of the electrical vehicle: adjusting these new mobile and dispersed charges, minimizing the development of new infrastructure and using their energy storage functionalities.

Figure 1. Generation, Storage and Consumption Elements in an Electrical Microgrid – Own Source

Microgrids, together with the Internet of Things and Blockchain peer-to-peer technology, allow companies and individuals to manage, store and monetise their own energy. Figure 2 shows a practical case of energy transaction between neighbours where there are several logical steps to successfully fullfil the transaction:

  • Step 1: An individual, company or institution has a photovoltaic energy installation in its roof —or any other energy generation source—. As energy generators —prosumers—, they are interested in selling the energy surplus of their installation to third parties.
  • Step 2: an individual, company or institution wants to buy —consumer— energy to their neighbour —prosumer—. So, using a mobile app, the consumer buys a token that represent a fixed energy quantity —kWh—. The price of the token would be similar to the price of the traditional kWh, if not the consumer would not buy the token and would opt for the traditional electrical market. This purchase can be carried out manually or using an automatic management system to guarantee a competitive purchase price.
  • Step 3: the prosumer’s electrical meter will store the electrical energy surplus of the installation —kWh—, storing the value as tokens.
  • Step 4: the prosumer now can sell the token to the market, and would earn the money proportional to the energy generated —store tokens in their electrical meters—.

Figure 2. Energy transaction between neighbours, prosumers and consumers of electrical energy. Source: LO3 Energy

This is a simplified example of an autonomous, smart and sustainable energy transaction between neighbours. It allows users of microgrids or distributed generation installations to share their self-generated electricity, exchanging their surplus and maximizing their savings. The first pilot project of this kind was the Brooklyn Microgrid, where neighbours connected to an existing grid infrastructure successfully carried out energy transactions between themselves.

The world is facing a change of the energy model. We are evolving form a pyramidal and unidirectional system made up of centralized generation, transportation & distribution, commercialization and consumption to a new organic and bidirectional model where centralized generation will coexist with distributed generation and storage. A model where final users will actively manage their own demand, gaining responsibility on how they generate and consume their energy.

The penetration of this technology in the market is backed up by the European energy objectives to decarbonise Europe. We need to take steps towards a more efficient and sustainable energy model to reduce our foreign dependence and to contribute to fight climate change. But also, a model that can meet in a sustainable way the growing global energy demand foreseen for 2050 (International Renewable Energy Agency IRENA).

However, this technology is facing several obstacles such as the management of the billing between self-consumers and between companies involved in the process such as distributors. Moreover, the complexity of the management of the system changes depending on the different scenarios, so, specific and advanced control and management systems are necessary for single family homes or for more complex cases such as a large shopping centre with batteries or such as the project Power Ledger, where a peer-to-peer transaction platform was used to collect the transactions of electrical vehicles recharges in Santa Clara, Silicon Valley.


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Giannakopoulou, E. & Henbest, S. (2016). New Energy Outlook 2016.

International Renewable Energy Agency (n.d).

IPCC, 2014. Panel Intergubernamental sobre Cambio Climático. Climate change (2014).

Massachusetts Institute of Technology (2016). Utility of the Future.

  1. Hamilton and M. Summy, “Benefits of the smart grid,” IEEE Power Energy Mag., vol. 9, no. 1, pp. 104–102, Jan.–Feb. 2011.

Mitt, S. (2018). Blockchain Application – Case Study on Hyperledger Fabric. Tesis doctoral no publicada, University of Tartu, Estonia.

Zhang D., Zhang Z., Chen L., Li S., Huang Q., Liu Y. (2018). Blockchain Technology Hyperledger Framework in the Internet of Energy. IOP Conf. Series: Earth and Environmental Science 168 (2018) 012043  doi :10.1088/1755-1315/168/1/012043

Grid Singularity (n.d).

LO3 Energy (n.d).

Power Ledger.

La clave del nuevo modelo energético. El Economista

Brais Varela Romero

bvarelaBrais is an Industrial Engineer by University of León. He forms part of Norvento’s Electricity & Control team. Contact Brais