Blockchain in the Energy sector

Renewable energy creates new challenges for utilities and energy companies. Blockchain technology could potentially address these challenges and in the process become the foundation for the efficient, distributed, renewable energy production of the future.

A future I believe is much closer than most people may think based on the pace of innovation we have seen even in the last few years.

Energy companies are combining blockchain and renewables technology. Research data from Statista show that almost 100 million households will have off-grid solar power systems installed by the end of 2020. More than double the number installed by the end of 2017. At the same time, the amount of energy generated by renewable technologies like wind turbine generators and photovoltaics is growing rapidly, continually outperforming the projections of energy analysts.

A growing percentage of the production takes place in microgrids. In other words, blocks, streets, neighbourhoods and towns will become their own, small energy grids and potentially producers as well as consumers of energy.

While this potentially is good news for consumers, it presents challenges for existing energy suppliers. For example, how do you link microgrids to the main grid? Or how do you streamline the certification of green energy coming from small producers? Both microgrids, renewable energy producers and utilities are asking can blockchain technology provide answers to these questions.

This creates challenges and opportunities for energy grid companies. For example, Centrica, Shell, Statoil and Tepco, recently joined the Energy Web Foundation donating $2.5 million in the process. The foundation aims to bring blockchain technology to the grid. However, it may well find itself outpaced by the many companies and start-ups that are actively delivering solutions aimed at addressing the challenges facing the energy industry.

I would like to turn our attention to three challenges energy companies are facing:

1: Working with microgrids  

There is an explosion in the number of microgrids. there are many reasons why microgrids make sense. Some of the biggest are listed here by Interesting Engineering.

Sharing locally generated electricity between households, not to mention finding out who owes what to who is challenging. However, energy companies can leverage the economy of scale to solve these issues, but the same does not apply to, say, a handful of home. Then there is the added issue of physically connecting a microgrid to the overall grid, and making sure that power can flow both ways between the two.

One good example of how this can work, thanks to blockchain technology, comes from LO3 Energy. Its Brooklyn Microgrid project, built in collaboration with Siemens, uses blockchain technology to keep track of energy sales. The energy in question comes from solar panels installed in the local area. If you add batteries to the mix it has the potential to have a standalone, disaster-proof microgrid.

2: Tracking your green suppliers

More and more customers – including enterprises – want to buy green energy. Traditionally, utilities and other energy producers have never had to put a ‘list of contents’ on the power they supplied. Doing so involves a laborious process. Furthermore, the process makes it a battle for smaller producers to get green certifications, often known as Renewable Energy Certificates (RECs), that prove the energy they produce is renewable.

The sales process for renewable energy varies from country to country. Most place the process is complex and involved. As an example, meters connected to renewable energy sources record production onto spreadsheets. That information is then shared with regulators who transfer it into a different database, which issues the RECs. Intermediaries then connect buyers and sellers interested in the validated green energy.

In short, the process is expensive, laborious and time-consuming; especially when comparing it to how blockchain technology can automate or wholly do away with many of the steps above using smart contracts. Meters at the production point can feed production data directly to a distributed blockchain ledger. The shared, public ledger validates where the energy is produced, automatically creates the green certificate and makes it instantly available to potential buyers.

Volt Markets, which uses Ethereum blockchain technology to create an ‘energy origination, tracking and trading platform.’ Is an example of one organisation that is helping to offer such a solution.

3: Challenges as consumers become producers

A distributed network of organisations and households that are potentially both energy producers and consumers make it a challenge to track energy production and consumption when connected to the grid. The same goes for customer, energy production and consumption data. Going from central energy production to a distributed production network could also increase administrative burdens.

There is a need for a secure way to store and share data to generate insights and efficiencies from the new data. Blockchain technology as it uses military-grade cryptography in a distributed manner to handle data looks to offer promising opportunities in the energy sector. Volt Markets, LO3 and other start-ups like Power Ledger and Electron are implementing potential solutions at a microgrid level.

Blockchain technology is still in its infancy as it needs to overcome speed and scalability challenges, but these are being addressed. If Ripple can crush the estimated $1.6 trillion friction costs of transferring money between banks who handle $3trillion day, there ought to be some confidence that blockchain will help to revolutionise in the energy sector too!

There has been an explosive growth in interest and funding, which can be  summed up by Greentechmedia

“The first blockchain in energy transaction took place in April 2016 in Brooklyn, New York. Today, less than two years later, there are 122 organizations involved in blockchain technology and 40 deployed projects. Between Q2 2017 and Q1 2018, over $300 million was invested in the blockchain in the energy industry.”

A number of the above-mentioned companies have used the mechanism of Initial Coin Offerings (ICOs) to help finance themselves. However, using “Tokenomics” to raise capital is just the tip of the iceberg. Encouraging consumers to change behaviour by rewarding them with Crypto-assets, similar to Airmiles, as these consumers become micro producers or use energy at off-peak times or use green energy, holds many interesting possibilities to solve the global energy challenges we are facing.

Jonny Fry

CEO Teamblockchain