Blockchain – Putting Power in Your Hands
June 23, 2018, 10:38 am
Blockchain has been a buzzword for cryptocurrencies since 2015, but with more research into the uses of the distributed ledger technology, energy industry analysts now believe that blockchain technology can resolve data management issues, and errors that are faced by energy producers, and put the power of generation directly into the hands of independent power producers.
Electricity is produced by fossil fuels, wind, water, or other renewable sources, and one electron of energy is indistinguishable to the energy grid, so, to track the production of renewable power, the energy industry and governments developed a series of certificates which can be traded. However, the management of these certificates is currently archaic and can easily be wrong, through a simple mistake, or outright number manipulation.
Enter blockchain. Instead of basing the energy produced on certificates, what if we used blockchain to manage and keep track of these certificates, and how much renewable energy is produced? The use of blockchain in applications such as this would reduce errors, and improve efficiency dramatically, benefitting everyone in the value-chain. Many experts believe that in the long-term blockchain will help transform the rather archaic architecture of the actual energy grid.
Let’s look at what blockchain actually is. A blockchain is a shared, encrypted ledger maintained by a network of computers, which verify transactions. To use cryptocurrency as an example, blockchain verifies the transfer of a cryptocurrency between individuals. Each cryptocurrency user can access the ledger, and there is no single authority. On a basic level, blockchain turns currencies and commodities into a digital form, owned by no-one.
So, how does blockchain relate to energy grids? Currently on a renewable energy grid, a meter registers how much power is produced by a renewable power plant, this is plotted onto a spreadsheet. The spreadsheet is sent to a registry provider where the data gets input into their system, and a certificate is created. Yet another company takes those certificates and brokers deals between buyers and sellers. The certificates are then verified after purchase. As you can imagine this process, involving so many steps, is prone to user error and is not transparent – putting off many potential investors.
Because of the distributed ownership of blockchain, and the ability to share blocks of data, blockchain would allow a network of peers – for example independent power producers and consumers – to feed energy to a grid and be able to track its usage. Blockchain would allow the meter to write the amount of electricity produced – by an individual or company – directly to the blockchain system. This would avoid user error, cut out several middlemen, and improve transaction speed, verification, and efficiency.
Right now, energy grids are based around centralised, costly infrastructures who manage pricing, and distribution. Blockchain would enable the ever-growing number of smaller players in renewable, essentially you, and me, and any size rooftop project – to connect to a grid and leverage the green electricity it generates directly with peers on the network interested in purchasing its renewable rights.
Currently cost is limiting the development of smaller power players, the fact that in many countries it can take months for a power producer to get paid using the standard certificate system, as you can imagine with the complexities of the process that is currently in place. However, with a system based on blockchain, producers can be paid immediately, because exact production can be immediately measured and verified. This freeing up of capital allows much smaller players to enter the power grid, because they will need less capital to start and run a power generation business.
Let’s take it one step further. What if everyone with a solar panel or power generation capabilities could be a green provider?
This is where the microgrid and peer-to-peer comes in. A microgrid is where neighbours, businesses, business parks, and villa complexes, for example, share resources. This allows for efficiencies such as any EV charger can be powered by a solar rooftop project and shared with my neighbor and we both economically leverage each other.
The start-up changing the game
Australian-based start-up Power Ledger, has created software to allow consumers in groups of apartments or commercial properties to share excess energy from their solar systems to their neighbours, enabled by blockchain, using cryptocurrencies. There are no middlemen. The start-up raised AUD 34 million in just six weeks. To take part in the Power Ledger blockchain, you must own cryptocurrency
“Blockchain and cryptocurrency really makes the concept of peer-to-peer and the ability to support distributed renewables a global possibility,” said Power Ledger co-founder David Martin told BAC News in Australia. “By opening it up to a cryptocurrency, it allows us to make the applications interoperable – so a peer to peer application in Australia may over time be interoperable with an EV charging application in America or an asset germination event in India.”
There are many other immediate benefits such as being able to select a clean energy source, receive more money for green power, benefit from transparency of all trades on a blockchain and very low-cost settlement costs all leading to lower power bills and improved returns for investments in distributed renewables, according to the Power Ledger website.
Blockchain software leverages a concept of digital ghosts, where software reads the outputs of electricity meters and can measure the amount of energy that is consumed or generated. Those two pieces of information are then recorded on the blockchain and used to move the rights of green from one person to another, which is a digital representation of energy.
The buyer receives the green credentials and the seller banks payment almost simultaneously – which means once the coin lands in the seller’s digital wallet, they can then convert them to currency.
Platforms like SolarCoin and Power Ledger are currently operating projects across the globe. If this technology is starting to become available, this allows the consumer to choose what kind of power they want to use.