Why is Blockchain NOT the challenge but the SOLUTION to sustainable energy
By: Americana Chen
Tags: Energy, Blockchain, Technology, Sustainability, Renewable Energy

1. Decentralized energy supply system and household participation

One of the most special opportunities that Blockchain brings to the energy sector is that it encourages the growth of electricity ‘prosumers’. Prosumers refers to households that are able to generate electricity or become the supplier of electricity, for example, by having a solar panel installed in their buildings. By putting consumers at the heart of the system, both renewable energy consumption and production can be enhanced, creating a positive feedback loop that accelerates the transformation of society from non-renewable to renewable energy in a self-sustaining way. In order to bring such a system to reality, there need to be an incentive mechanism, for instance, prosumers should expect to be rewarded with positive return from investing in installing a solar panel. However, in the current electricity supply system, the challenge is not only that there isn’t a trusted platform to facilitate household electricity transactions, but also the fact that multiple intermediaries and complexity in regulatory compliance cuts the potential income for households from engaging in electricity trades. Many governors and scholars in this field have recognized the need for changes, in 2017 the European Union’s Clean Energy Package was implemented, with a set of rules on household energy producing, storage and trading, aiming to encourage consumers to actively participate in electricity trading. Academic literature has extensively focused on improving the market design by establishing local storage systems into national operations of power systems, nevertheless, progress is slow and we haven’t seen significant changes in the past few years.

This is where a decentralized Blockchain system could come into play.

Firstly and most importantly, Blockchain Technology could create a trustless network to encourage Peer to Peer (P2P) electricity transactions. In any P2P transaction, trust between parties are extremely important. If we think about how Uber, Airbnb have built up their P2P exchange system, parties involved in the transaction have trust in the paring and verification mechanisms of the platform, for example, the registration process to become a Uber driver. Blockchain technology provides an even stronger ‘trustless’ system, where you don’t have to trust the counterparty, but only the technology. By offering cryptographic ways of tracking transactions, the transparency in terms of transaction records and anonymity in terms of personal information are both enhanced. Without a centralized control, identical databases that records each and every transaction ( in an encrypted form) are stored in the device of every player involved, and in order for a transaction to be recorded, all parties need to reach consensus and validate the transaction.

image source: unsplash

“Historically, although there are some exceptions, people tended not to share with strangers or those outside their social networks. Sharing was confined to trusted individuals such as family, friends and neighbours. Today’s sharing platforms facilitate sharing among people who do not know each other, and who lack friends or connections in common.” (Frenken and Schor, 2017).

Furthermore, through the use of a distributed ledger system, many intermediaries are removed from the transaction, a pure peer to peer transaction is possible to achieve. This reduces cost and time of transaction, increasing the “profit margin” and incentive for households to engage in energy trading activities.

We have already seen practical implementations in many countries around the globe, both startups and traditional large energy suppliers are actively pushing for such a revolution. For instance, in 2018, Centrica- the owner of British Gas worked with a American startup to initiate an energy sharing project for their Local Energy Market. The project aims to enable trading of energy between local businesses, consumers, the national grid and other participants in the UK.

Another well-known case is the Australian startup “Power Ledger”. It uses a blockchain-based network to establish a peer to peer energy trading platform. Some of its key benefits include real-time payment, automated low cost settlement, neighborhoods trading, transparent trading information and much more. One of the most interesting features of Power Ledger is that it comprises of both a permissioned and a permissionless blockchain infrastructure. The permissionless blockchain operates on a global scale to allow international market trading, whereas the permissioned blockchain operates among local trusted peers. The platform also uses two tokens as assets: one called “POWR” — which is used to access the global P2P trading market, while the other one — “Sparkz” usually functions in the local network as the trading currency, representing the electricity price and the local “real-world” currency. In combination, the system ensures value via “POWR” tokens and facilitates exchange through “Sparkz” .

Other P2P electricity trading startups and projects you could explore include:

Apart from solar panels, another active field is electric vehicle charging. Sales of electricity vehicles is increasing dramatically year on year. Overall sales of Tesla’s Electric vehicle is expected to surpass 10 million by 2025, and responding to such a trend, the demand for charging stations will scale up exponentially. This puts pressure on the national electricity grid as millions of drivers demand for energy flows to charge their cars at the same time. The idea of ‘distributed’ charging stations matches well with blockchain’s characteristics, it could play a key role in improving the coordination of a distributed charging network by allowing any owner of EV charger to be a supplier. The use of blockchain smart contract enables trusted payment and transaction to be made between individual EV owners and EV charger providers who are unknown to each other.

image source: unsplash

The Share & Charge project initiated by Slock.it is an example of P2P EV charging station project, allowing households owning charging stations to provide charging services to drivers. It could benefit the ‘suppliers’ by recouping the cost of their investment, while broadening the geographical coverage of EV charging stations to benefit the drivers. The app has been available since the 28th of April for charging stations located in Germany.