Equipping a home with solar panels and batteries reduces reliance on the main power grid by meeting consumption during nighttime hours with battery back-flow, thus negating out the daily cyclicality of grid consumption. After an upfront installation cost, the house is more individually sustainable through exploitation of the infinite solar resource. To an extent, the homeowner is exempt from the energy market and the pricing strategies imposed by power grid operators in the face of energy scarcity. Beyond the empowerment of independence, this “wire cutting” is an amazing feeling stemming, I believe, from living in a sphere free of the commodification of energy, market-induced scarcity, and exposure to the profit incentive of private power companies. Although, as stated above, this dynamic only stretches as far as the property line.
What happens when solar panels and batteries are wired up between multiple houses across property lines, forming a network at the community level? The foremost benefit is even further resilience and self-sustainability. Successful energy allocation within the network, accommodating for different individual usage patterns and energy production capability, would maximize independence from the grid. This independence would be mutually enjoyed by participating neighbors. De-commodifying electricity within the cooperative would then lead to an increased sense of communal pride and ownership; “every man for himself” no longer.
Leaning on Effective Governance
In today’s neoliberal world, we are stuck in a mindset that if we give more, we should expect equal or more in return. That our society is a zero-sum game and your gain is another’s loss, and thus, you cannot afford to be overly generous. This mindset is at odds with the smooth operation of a local energy cooperative, and must be minimized. However, we cannot expect the complete absence of self-prioritization to be a prerequisite for joining. Through effective governance of energy sharing, there should be a way to create adequate ongoing incentive for participation, without any members feeling fleeced.
At the bottom line, participation in any resource sharing must not impose inequitable pain or loss. On the other hand, incentives are ideally aligned such that participation guarantees a level of benefit that is linearly correlated with level of contribution. This dynamic must exist within the context that individuals can afford to bring different amounts to the table. Individual need is variant as well. Moreover, the incentives for contributing more and subsidizing the usage of others to a higher degree must be well defined and mutually agreed upon through democratic process, then continually re-formalized to prevent gaming of the system at the expense of others. It’s a lot of push and pull to manage, so what can this incentive system look like for a energy cooperative?
Strict Tracking to Full Communism
On the spectrum of potential incentive systems, one end of the spectrum is just strict tracking of input and output. The community network is essentially a distributed energy bank – you put in energy to withdraw later, no more no less. You are able to reduce your exposure to the main grid by sharing your surplus to meet the needs of others in the moment, thus storing up credit for future use when the network is running a surplus and your need spikes. The benefit of this system is that it is extremely fair, with no member unduly supporting the needs of another. The downside is that this inability to overdraw reduces the self-sustainability of the cooperative as a whole. Furthermore, low producers have little incentive to participate – if your production rarely exceeds your usage, why share your battery for other’s use?
The other end of the spectrum is what I’m calling “full energy communism”. In other words, sharing surplus when you can, while being able to pull from the grid at any moment, in any amount, until the bank is dry. Surplus is spread amongst the participants in proportion to need, with no tracking of contributions. The benefit of this system is that this is about as far away from the commodification of energy as you can get – there is zero usage tracking and the system runs on benevolence. The downside is that this usage pattern is highly susceptible to the tragedy of the commons, and rampant feelings of inequity. High producers have little incentive to participate – if your usage rarely exceeds your production, why subsidize other’s consumption?
The Middle Way
In the middle of the spectrum lies dynamic, mutually agreed pricing strategies. If pulling from your own energy bank is free, and pulling from the external grid incurs a certain cost, then there is an arbitrage opportunity which an energy cooperative could exploit. When your own energy bank is full, you can store extra energy in the community’s collective bank to be pulled at a future date, at a cheaper price. This price should be dynamically set at the the time of use, considering current external grid pricing, demand level, reserve levels, and individual historical contributions. Moreover, the price should always be available to members of the collective in real time, to enable smarter individual decision making.
For example, at a time of low collective demand and high collective reserve levels, a household would have the option to pull from the collective reserves at a cost far below the current external grid price. This discount will diminish as reserves decline or simultaneous demand from other households rise. Households who have contributed a fair amount in the recent past would be able to unlock further discounts.
Technology Needed
What are the technological tools needed to implement this pricing scheme, beyond tracking reserve and usage levels? There are three main components:
- A contribution tracking system
- A pricing algorithm which sets the current price for each household
- A ledger system tracking costs incurred per household, to be cleared at end of month
Operational transparency, as well as an avenue for adjusting operational details based on community feedback, would effectively curtail exploitation of the system by individuals and ensure ongoing incentives to participate for all. The revenue generated by the cooperative could go towards paying server costs, grid maintenance costs (i.e. solar panel or battery replacements), and subsidizing the construction and introduction of new nodes into the collective.
If the collective runs a profit, then members could either receive dividends at the end of year or revise their pricing strategies to further decrease monthly cost. With fine-grained operational data over the previous year, pricing revisions can even be back-tested and year-end profits redistributed in a data-driven manner.
Andy Horng 