As new technologies make alternative sources of energy more readily accessible, the future of the traditional energy grid is uncertain. With cities, villages, and even individual homeowners investing in wind turbines and solar panels across Europe, there is a growing question of what to do with the extra energy generated. If the storage capabilities aren't yet available, aren't people more likely to sell any excess energy to a neighbour for less than the fixed national grid price?

According to the European Commissions forecast, about 35% of our electricity bill is not for the energy itself, but rather for taxes and distribution costs. By 2050, a third of the average electricity price will be for grid costs alone. But there is an alternative to paying the prices for inefficiencies in the system. Potential energy costs could drop dramatically for households if energy were to be generated and consumed locally - the cost of locally generating sustainable energy is forecast to drop to about €0,13/kWh. To be able to compare energy costs between approaches and demonstrate the value of smart grids, we propose a new metric: Local Levelised Costs of Energy.

As new technologies make alternative sources of energy more readily accessible, the future of the traditional energy grid is uncertain. With cities, villages, and even individual homeowners investing in wind turbines and solar panels across Europe, there is a growing question of what to do with the extra energy generated. If the storage capabilities arent yet available, arent people more likely to sell any excess energy to a neighbour for less than the fixed national grid price?

Mini markets might well emerge, as people become increasingly interested in the idea of a local, community-based, eco-friendly energy system. But while the energy transition is quickly gaining momentum but the jury is still out on an appropriate strategy. In a heavily regulated market, different stakeholder groups lobby politicians. Many stakeholders are calling for clearer regulatory principles in this emerging market. Meanwhile, entirely different strategies are also being proposed. Some stakeholders are highlighting the benefits of generating the most geographically relevant type of sustainable energy: hydropower in Norway, solar power in Spain, etc.

We believe a new metric is needed - the Local Levelised Cost of Energy (LLCOE). It covers the lifetime costs of energy generation and distribution in a system, divided by energy production. This measure shows the present cost of total energy system costs for the community it serves. This enables the comparison between different system designs and local energy generation systems, including lifespan, size, capital costs, etc.

Based on an initial estimation, the impact of taking the LLCOE into account could save the interested party up to 10-15%, corresponding to €0,03€-0,04€/kWh, due to avoided transmission costs and distribution costs associated with the MV level.6 The avoidance of national and local taxes would lower the price even further. A preferable alternative to the status quo, as the expected average electricity prices across Europe in 2030 are set to keep rising.

Together with our partners in industry, and with energy communities, we will be exploring methods to help communities accurately compare options and ultimately inform their decisions on moving towards sustainable energy systems.