Taler Energy

Climate change no longer allows us to treat energy as a given. One might say that is quickly becoming a precious asset. Especially the limited and irregular supply cause some trouble. Taler Energy is designed to accelerate sustainable energy by more liquid trading, whereas strict energy markets tend to give pushback to providers of sustainable energy.

Background: This is inspired by the Dutch/international energy market, currently (2024) the solar deployment leader, but we expect other countries to fall into the same trap soon. The Netherlands is seeing problems due to the irregular yet concerted patterns of sustainable production. Energy market pressure works to reduce trading liquidity, which Taler Energy tries to revitalise.

Compensation for Sustainable Energy

Traditionally, the Dutch energy system was accounted for on an annual basis, and producers could consume up to the same amount that they produced for free. After decennia, this finally gave a surge to solar panel deployments.

Strange in this setup was that any energy could be used in return for the moody solar energy produced. This is problematic for electricity, as that is difficult to store and the Netherlands had never invested in such infra.

After decennia, solar panels become cheaper to have than not to have, and suddenly a surge of new users added their supply, causing an unbalance on the net. When many offload their solar production the prices on the energy market drop, and fixed-price energy providers had to pushback by making solar suppliers pay for the energy they provided (...)

The missed opportunity in this system is that different kinds of sustainable energy have the same unison-delivery problem. It is not currently possible to curtail these forms by reconcialiation between the forms (or between areas with different conditions). Specifically wind and solar form a good pair, because one is especially potent in Summer and the other in Winter, effectively combining to balanced delivery.

The idea here is to replace the original system of broad compensation through energy with energy from any sustainable source. This would suggest a market of energy providers that seek compensation from partners supplying at other times to get a rough balance. Such mechanisms add to the liquidity of energy trading.

Trading with Taler Energy

This is how Taler Energy is constructed; when sustainable energy is supplied to a demand, then a trade is made. Energy flows in one direction and the corresponding units of Taler Energy flow in opposite direction. This is done via a FIX Trading Exchange, where individual energy providers engage for a 1:1 exchange, compensating in Taler what their energy metering pulls or pushes. The trading is done in units of energy, not a monetary valuation, to focus on the actual business. Participants are expected to prefer the certainty of their overall generation to match their overall use over an opportunity of profit, which comes with a risk. This will be more so as the energy providers consist of small-scale generation owners.

Trades can only be coupled when an offer meets a demand. The market can try to spread the risk evenly, but it cannot store energy for longer than the physical reality. For instance, electricity must be used immmediately, heat cannot hang around for very long and gas can be stored for fairly long times. (Actually, heat can also be stored in endothermic salt reactions for cross-season cycles. But the general rule still holds.)

Taler Energy is a fully-backed currency; there is no trading without actually provinding the energy. But it can be difficult to predict ahead of time, and to compensate for that, a number of fallback options could be tried:

  1. Propose a lower amount post-trade; the peer has the right to decline.
  2. Take out unsatisfied deliveries from the provider's Taler Energy currency.
  3. Take out unsatisfied deliveries at market cost at the provider's expense.

Note that option 3. may lead to speculative trading. It is probably better to stick to 1. and 2. where the latter can always work if the energy provider has in his account at least the requested amount of Taler Energy.

Implications for Energy Trading

There is, perhaps surprisingly, no impact no the energy market.

The total amount of energy traded does not change. The idea of energy trading is to match supply and demand, and when a supplier and demander are taken off the market with the same amounts, the market situation does not change at all. This is also due to trading being a marginal process, so not even the change of ratios on both market ends has an impact (and, if all is well, the amounts are the same and so are the ratios, but that doesn't matter).

What does change, is that the reconciliation of supply and demand outside the energy market has an impact on the sale and purchase of energy. Where the total metering is normally used determine how much energy is sold or bought on the energy market, these values are now better-aligned and so there is less overall trading on the energy market. The bypass channels this amount, which is a reduction on energy market trading.

Formal regulations permitting, it would even be possible to trade after the time slot about which trading takes place. The relation to the trading slot and the metering remains of importance.

Implications for Transport

The point of Taler Energy is not directly to avoid transport expenses but rather to avoid the jumpy behaviour because of sustainable energy prices as a result of having to trade via a generic market without valuation of the mutual help between forms of sustainable energy.

Transport expenses may be charged on the metered amount, and this would be irrespective of any trading on the energy market or its bypass. Metering is likely to be seperate for incoming and outgoing electricity.

While traditional delivery of electricity happens like a distribution tree from power plant to end users, this changes with sustainable energy, where the end users suddenly take on the producer role. Initially this off-loaded the local energy transport, but this may change when there is an effective upflow of energy. But even then, there would be places where the original transport expenses reverse.

A realistic computation of transport expenses then becomes advantageous, and in a transparent system this would be at the benefit of the producers (because they cause the reduction of losses / expenses). At the same time, there may also be legs in the electric grid where additional expenses arise. The total transport expense would ideally be made to capture the practical situation.

An explicit trading system of sustainable energy, especially when it cares for time slots, has the potential of making it accountable what losses are saved where in the electric grid, and perhaps where they go up. This information must be reported to the transport company in any case, because the bypass forms an offset to the metered account. This allows transparant computations of transport expenses to be made.

The overview of all the locally transported energy serves to find the shortest paths for energy exchange. A generic approach however, would analyse the grid as a whole and find the effective transport between end points. This would be a task of the transport company, in line with the transparent expense computations; this will be an innovation, but it is a reasonable request to file, especially if the transport is government-owned. Since there are usually saved expenses, chances of earning back on transport are quite likely, at least outside peak production hours. This will generally motivate producers to develop sustainable production outside of peak hours.

Implications for Taxation

Selling energy that was produced by an individual is difficult in terms of VAT taxation. Double taxation must be avoided, so countries often have rules to allow purchases by companies from individuals, where only the added value (or the sales margin) is heightened by VAT. Of course, if a cooperative were to pass on the energy as-is, then the margin would be zero, as is VAT.

Transport expenses may or may not be paid. it depends on the local system.

Energy taxation may or may not apply. It depends on the local system. If the intention of energy taxation is to lower energy use, and if produced energy only benefits when it meets a demand, then it could be said that it is reasonable to nullify this form of taxation on the energy sold back.

Auditing

Participants will want to talk back to their upstream energy providers (or the energy markets) that they have bypassed the energy market, and that metered consumption and production is not to be seen as direct use of the energy market. Instead, any bypass-purchased amount must be taken off the metered consumption (and from the amount to buy through the energy market) and any bypass-sold amount must be added to the metered production (and subtracted from energy market sales). (TODO)

In practice all parties involved in the bypass market must publish auditable results no this, and at least one side of each transaction will be motivated to report concisely, presenting evidence on both ends from the trading exchange. Based on this information, the transport company can reconstruct what transport it has had to do and how much the energy market should be put to use.

Auditing rules in kWh for every metering / energy market period:

  • total transport consumption = total end-user metered consumption
  • total transport production = total end-user metered production
  • total energy market (buys) + total bypass market (buys) = total end-user metered (consumption)
  • total energy market (sales) + total bypass market (sales) = total end-user metered (production)
  • TODO:MIN/MAX total end-user payout + total Taler Energy (created) = total end-user metered production - bypass market (sales)
  • TODO:MIN/MAX total end-user charge + total Taler Energy (destroyed) = total end-user metered consumption - bypass market (buys)

The auditing rules per metered end-user and per metering period:

  • individual transport consumption = metered consumption
  • individual transport production = metered production
  • energy market (buy) + bypass market (buy) = metered (consumption)

  • energy market (sell) + bypass market (sell) = metered (production)

  • TODO:MIN/MAX individual payout + wallet Taler Energy (added) = metered production - individual bypass market (sell)

  • TODO:MIN/MAX individual charge + wallet Taler Energy (removed) = metered consumption - individual bypass market (buy )

Care should be taken that there cannot be a negative amount of Taler Energy, so a reserve amount must be held for end-user production that is anticipated and offered for sale, but not yet accounted for.

TEST: Einstein said $E=m\cdot c^2$ only by approximation.

$$ E=m\cdot c^2 $$

Forms of Taler Energy

Limiting to strictly sustainable energy (from an environmental perspective, so not counting exemptions or other counter-productive ploys) we define the following units for Taler Energy:

  • TODO: These are just a few possible ideas for units. We need to understand the energy market to test ideas. In fact, units for energy markets exist, but no Taler counterparts.

  • KWH-EL is a kilo-Watt-hour, or 3,6 MJ, of electric energy. Trading is only permitted within an accounted time slot. Nested time slots are possible, with preference to innermost ones. Whether trading is only possible up to, or also after the moment of generation, is an implementation issue.

  • MJ-HEAT is 1 MJ of heating energy. It must be metered in the indicated period, which is to be short enough to warrent use of the heat before it cools down.

    There may need to be classes of various temperature grades.

  • MJ-COOL is 1 MJ of cooling energy. It must be metered in the indicated period, which is to be short enough to warrent use of the heat before it warming up.

    There may need to be classes of various temperature grades.

  • More can be imagined, and would be expected.

Energy providers will usually accumulate this data from various users, make use of statistics on the predictions of their users to get an optimal guess, and trade with cumulative quantities. The more users generate energy, the smaller the variances in their trading will be. It is probably useful to predict output on the basis of wheather reports (and please don't say AI; basic statistics will do the job quite nicely so there's no added value for knowledge-unaware recognition of unpredictable bias patterns, let alone to wate the energy on such unreliable course of action that could only be excused with unwittingly the computer told me so defenses).

Such energy providers may place a reserve on the Taler Energy for a user willing to sell, and afterwards add the amount that is actually sold, but not returning the amount that was traded but not actually delivered. When sales are incomplete, it is probably a good idea to spread sales evenly over customers to the ratio at which they wanted to sell energy; this will evenly disadvantage those customers when not all could be sold; their energy is sold on the energy market.

Rules of Taler Bullion

  • fully backed: TODO: actual production from consumer's controlled meters
  • guaranteed: TODO: auditing of relation between production/consumption, metering, sales, and Taler Energy
  • ownership TODO: right of consumption/production without pricing the energy
  • bootstrapping TODO: mint Taler Energy for offered production at non-negative market price that was realised but not bypass-traded, sales value retained by energy provider of producer (usually to benefit the consumer later when giving up the Taler Energy, or to benefit the total consumer base, or to benefit the energy provider)

Trading Rules

  • Taler Energy entitles to energy without paying
  • selling yields Taler, buying consumes Taler
  • transport expenses? energy taxation?
  • aim is to trade the highest possible amounts
  • trading after a period
  • trading for a limited time
  • suppress market disadvantage
  • fairness through even distribution
  • evenness w.r.t. traders or w.r..t. production quantities?

  • wind turbine coops may distribute Taler Energy among members

  • AssetClass and AssetSubClass and AssetType and perhaps AssetSubType can be set to energy commidities, 1938=2 and 1939=15

    • For electricity, 1940=ELEC and one of 2735=BSLD, 2735=PKLD, 2735=OFFP for base load, peak load, off-peak.

  • CurrencyCodeSource and Currency are set to uee Taler Energy; 2897=5 and 15=<FIGI:TBD> which should be registered with OpenFIGI for free, under allocation rules where 2.14 details how crypto-currencies are allocated, with separate FIGI codes for the asset (like Taler Energy/ELEC), and [later, pro-actively] per FX pair (probably useless) and per instrument/venue (Taler Energy/ELECT on the proposed market bypass).

  • SettlType is set to cash for T+0 instant payment, enforcing full coverage and celebrating electronic payment processing, 63=1

  • There is a Settlement Period, namely the period from the trade date that initiates the trade to the settlement date that ends the trade; electricity needs smaller slots, so time will need to be added. Trading closes when the period opens (at least in GB).

    • TradeDate is set, 75=<YYYYMMDD,LocalMktDate>
    • SettlDate is set, 64=<YYYYMMDD,LocalMktDate>
    • For GB trading, "Gate Closure" falls one hour before the start of the Settlement Period; each party announces intended production or consumption; based on this, on-demand trading can be proposed on the market as a bid or call.
    • Metered production and/or consumption is post-calculated at the energy market price level
    • This means that planned-ahead behaviour is useful to reduce energy cost (but that can easily be abused)
    • Offsetting these values with Taler Energy is not such a strange idea at all
    • In fact, it might be possible to use the existing market to offer/demand using Taler Energy as the settlement currency

  • PROBABLY NOT COMMON: MaturityMonthYear can be set, 200=<YYYYMMDD>; also, MaturityTime can be set, 1079=<TZTimeOnly> to indicate when trading ends; these are independent of the period over which energy is swapped for Taler Energy