Locality matters in electricity markets, but it matters to some of the participants more than it does to others.
Producing and consuming electrical energy are physical things that happen at locations in physical space. We have electricity transmission and distribution just because the generation and consumption don’t usually happen at the same location. There is not perfect proximity of sources and sinks.Almost all the participants in electricity markets are located at single points in physical space. Households, schools, hospitals, small businesses: the consumers and the prosumers: almost all of these are at just one place each. For them, locality matters. The companies that they buy electricity from, and sometimes sell it to, are big businesses with many sites. For them, locality matters less.When the national transmission networks were created: for example the British national grid, it seemed that, the challenge of locality had been overcome. It didn’t seem to matter where the consumers and the suppliers were located. The grid made distance vanish and location become immaterial, like the internet does for some things now.But now once again, locality is becoming critically important for electricity supply.The local feeders which supply our homes were dimensioned for the household needs of last century.Already, local feeder capacity is unable to handle quite modest levels of photovoltaic generation. In Great Britain, some distribution network operators have to forbid the installation of more than a certain amount of photovoltaic plant on each local feeder.In the other direction, if home-charged electric cars become normal, or electric heat pumps, the local feeders’ capacity will not be enough to meet the demand.No amount of reinforcement of the national network will address the problem. The wires in the local feeder are of a certain thickness and a certain length, and that’s very difficult to alter. Moving electricity around has become a very local problem.In contrast, today’s electricity markets are mostly national. In Great Britain, householders buy electricity from suppliers which serve the whole country. The suppliers buy wholesale from generators which can be almost anywhere. The market is controlled by businesses that are mostly national in scale. A British prosumer can only trade with a handful of national businesses. The British government regulates the market in ways that keep it like that.It’s not at all clear that our present market structures, or the Government’s top-down approach to addressing our future energy shortages, will be able to engage with the very local challenges that the limitations of low-voltage feeder circuits present. A liberalization of the energy market would enable small prosumers to negotiate local supply arrangements that accommodate the limitations of their local feeders, to almost everybody’s benefit.Some of this material was presented at the LocalRenewables 2012 Conference, Freiburg, October 2012.