Sensible 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 brings new challenges. Sensible Energy is designed to accelerate sustainable energy by more trading motility, whereas strict energy markets tend to give pushback to providers of sustainable energy.

Background: This is inspired by the Dutch/international energy market, for some time (2024) the solar deployment leader, and we learned early about a few challenges that come with sustainable energy. The Netherlands has problems from irregular yet concerted patterns of sustainable production. Energy market pressure works to reduce trading liquidity, which Sensible Energy tries to revitalise.

Sustainable Bypass Energy

Sensible Taler Energy is always energy from sustainable sources. This means that the processes are cyclical, and that the payment takes responsibility for the full cycle. In other words, there is no high-energy input (such as fossil fuels), nor a low-energy output (such as greenhouse gasses, dust or slack). Also, there is no burning of natural resources with vague reliance on some undetermined part of nature that is assumed to work it back up to a higher energy state.

Sustainable, under this definition, includes solar and wind energy, as well as green hydrogen.

The idea is that sustainable energy sources are productive at different times and, because not everyone will be able to produce all forms, it is helpful when sustainable energy can freely flow between their various producers. Because of the time variation between technologies, producers are likely to find it profitable to sell at a zero rate as long as they can buy energy back at a zero rate. And it only seems reasonable that this trade must be between (surplus) sustainable energy forms.

Formally, this means that a bypass is created for the (default) energy market. To the energy company, this means that some energy is not charged on one endpoint but on another. And for energy producers, it means that they have collect Sensible Energy coins when they are productive, and can spend them when others are forms of sustainable energy are productive.

Sensible Energy Unit Energy form
Sensible Electric Energy kWh Electricity during a time slot
Sensible Heatint Energy MJ Added thermal energy
Sensible Cooling Energy MJ Removed thermal energy
Sensible Combustion Energy TODO Green hydrogen combustion energy

The assumption here is that the production of these energy forms coincides with their consumption, and that the payment pays for the exchange. There may still be (fixed or variable) transport charges and taxation.

Physical Backing

The purpose of Sensible Energy is the immediate distribution from an energy surplus to an energy demand. This means that a transport network imposes boundaries on energy exchanges. And it offers no physical storage support; the idea is that market prices rise to cover for the losses that are invariably connected with storage; the reality is probably that this is not the case, but increasingly so when coupling between sustainable production and consumption do not play along in the market pricing scheme.

The physical exchange is commonly metered at network endpoints. This may be accumulated over time periods to match the energy market schedule. Usually, the trading of an amount will be over such periods, though nothing stops a bypass system from trading before, during or after a metering period. The energy market and metering logic may however impose rules.

The idea is that metered consumption (production) at an endpoint must be met by the sum of Sensible Taler spending (acceptance) and energy market consumption (production). In the traditional scheme, the exchange of Sensible Taler is zero, so the metering directly relates to energy market trading. Note that this is not automatic; it needs to be regulated in collaboration with the energy network.

Mutual Accounts

Without physical energy storage, there is no use case for mutual accounts between parties, as those would locally store energy on behalf of others.

Minting Taler Energy

When a party delivers energy to the network, then he can be paid in Sensible Taler Energy currency. This may be a choice that the producer makes with the energy provider, for instance in relation to energy market price levels. In general, a producer will either be paid the spot price on the energy market or the respective amount in Sensible Energy currency.

Energy sold via the Sensible Energy bypass will yield the currency which can be deposited into the producer's wallet. Energy sold to the grid can be paid out in Sensible Energy currency, which willl then have to be minted. The energy provider makes a profit on this transaction, which it may accumulate for that producer or a larger whole to offset expenses for Sensible Energy trading at a later time.

When a consumer desires to use energy, he can pay it with Sensible Energy currency. The normal constraint to this is availability of energy via the Sensible Energy bypass in the same time slot or, if the energy market price level is below the offset and/or configuration settings, then possubly purchased via the energy market. In the former case, payment is done with Sensible Energy currency; in the latter case, the used Sensible Energy currency is destroyed and the offset may be adapted to the price level on the energy market.

Trading with Coins

Energy itself cannot crossover between networks or time, but the currency of Sensible Energy can make such crossovers. This means that coins may be spent that were obtained elsewhere. In such cases, an Exchange of another party must be relied upon to validate the payment. An alternative implementation would be to allow the transfer from one network to another by destroying the Taler Energy currency on one system and creating fresh currency in another. During this transaction, any remaining offset on the destroyed currency may be passed into the account that will hold the fresh currency, by way of a money transfer.

This transfer mechanism allows people to switch between providers, but also to have a windmill on another network connection, possibly shared with others, and use its energy production to pay for energy use at home. This kind of flexibility helps to strengthen participation in sustainable energy systems.

Since energy paid for in Sustainable Energy currency has no monetary side (it does not increase the energy bill), it is more attractive to an end user. This is why they may be willing to schedule their consumption at times when energy is more abundantly available. This is in the interest of the sustainable transition, and energy providers can promote this by sending notifications of the times over which the energy may be consumed. There are processes that may be run in response to this, such as laundry, boiler heating and vehicle charging. The most flexible systems could include an anxiety level (between 0.0 and 1.0) rising up to the time when the energy is really needed; perhaps because one is running out of clean underwear, or because Legionella measures demand a boiler heatup, or because the car needs to be charged at 8 o'clock. This anxiety level can help the energy provider plan a limited supply of energy more socially in light of competition. It also helps the energy provider choose the cheapest available rate when energy needs to come off the energy market. Having more plannable data like this allows maximum flexibility to the energy provider, and give the best possible service to their clients.

FIX Trading

The allocation of Sensible Energy is done via FIX Trading. This can be done by making reservations during a metering time slot. Depending on the rules of the energy market it may also be possible during or even after a time slot. This can be used, as seen fit, to accommodate situations that work out differently from planning.

Trades are always for a given amount, not for a possible ranges. But an order may be modified when both parties agree. Inasfar as trading is possible during a time slot, and certainly afterwards, an option arises to initially trade a certain amount, and use rising certainty during the time slot to adapt the trade to new (usually higher) amounts. Both the producer gains certainty as he sees the energy flow out, and the consumer as energy flows in. During the time slot, the standard deviation in the statistics drops, all the way to zero at the end of the time slot. This means that an option to trade afterwards can be done in full certainty. The shared free software of Sensible Energy allows a strong statistical basis for all this, allowing both sides of a trade to be as sharp as necessary, and leading to maximum energy market bypass trading with Sensible Energy and, as a result, the optimal facilitation of sustainable energy.

Parties selling sustainable energy must be prepared to purchase it if anticipated deliveries do not work out as planned. This can be done by having Sustainable Energy currency available, and purchasing the amount not delivered with those. TODO: Abuse practices?

The predictions are more difficult for an individual energy supplier than for the statistical aggregate of an energy providers's total customer base. This may be used to predict (and sell) more sharply, to the benefit of producers.

The pricing in FIX Trading is a fixed ratio to the energy, because the currency is expressed in energy metering units (a fxied 1:1 ratio) or a multiple (for instance a fixed 1:1000 ratio).

Auditing Bypass Trading

The audit trail of each party must reveal the amounts produced and consumed, as well as transfers from and to customers, as well as bypass energy trading. Other energy providers can use this to verify that their trade was processed correctly. In the end, a signed statement from either end convinces the metering company about a claimed modifier on metering amounts.

Trading offers for a time slot must be pulled out from the system before reporting the metering amount with Sublime Energy modification to the network owner. If the network owner reads the metered amount directly, then it will set a final reporting time for any bypass trading with Sublime Energy. Time slots are expressed in FIX Trading by TODO: Maturation time? Trading could close at the start, end or after the time slot. It is possible that the network owner pulls the audit trails of energy companies to compute the adaptations to metered amounts from that. This can be used to verify the correctness of the totally reported trading, as well as to signal failures that parties need to correct among themselves.

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 Sensible 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.

TODO:FROMHERE:NOTES:IDEAS:OPTIONS

Forms of Sensible 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 Sensible 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 Sensible 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.

Trading Rules

  • Sensible 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 Sensible 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 Sensible 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 Sensible Energy/ELEC), and [later, pro-actively] per FX pair (probably useless) and per instrument/venue (Sensible 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 Sensible Energy is not such a strange idea at all
    • In fact, it might be possible to use the existing market to offer/demand using Sensible 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 Sensible Energy