Decentralizing the Energy Sector using Blockchain Technology

Recently I read a nice quote “The world runs on energy, not on money!” and it seems sometimes a little forgotten that energy, whether being renewable or not, makes the world go round.

When we have a closer look on cost for renewable energy production, battery storage and lighting, we can see a steady decrease in cost and therefore we will soon hit the price parity between e-cars and gasoline-cars. This will in turn not just create a more sustainable electrical power supply, but also allow more communities and single households to play a major role in the energy grid as producers & consumers (prosumers) and power storage providers. More on developments in the energy sector you can find in the elaborate article from Joe Romm.

DOE data replotted via Rabett Run. Price decreases have been fit to straight (dotted) lines.

With the emergence of public Blockchain based networks like Bitcoin or Ethereum and improvements like the Lightning Network and the Raiden Network it becomes very obvious that payments between participants can be fully automated in a decentralized, open network. If these functionalities for payments are used for the participants of a power grid, everyone could become a member so far unknown new economy.

Right now big utilities and government regulators have a close grip on the way electricity is supplied for the masses and how the grid is stabilized. But the above trend in costs and technological advancements of Blockchain networks likely leads us to a situation where it is economically feasible and technically possible for everyone to be a real active member on the power grid.

But why should it be better to have a more decentralized power grid? Isn’t it better to have a central control for generation, storage and security?

Central, tight control is the dominant approach of companies to maximise revenue from its customers and if possible they will always resort to that. This happened also in the early days of the internet where we had companies like Compuserve or AOL providing and defining the content. Today this sounds kind of silly that a single company wanted to define all the content for their customers, but it was the usual paradigm at the time. The internet transformed very heavily from mainly viewing and e-mail sending, to mass content creation where everyone is equally able to contribute. Power grids work still like Compuserve and AOL, so there is definitely room for improvement.

If you look at the internet — or better the world wide web — or the Bitcoin network, you will notice that those networks are fairly dumb. They move information or document money transfer from A to B, not questioning who is allowed to access. This important point was highlighted very well by Andreas M. Antonopoulos during his talk about “Dumb Networks, Innovation, and the Festival of the Commons” at the O’Reilly Radar Summit, SF, Jan. 2015.

It is this particular feature of a dumb, decentralized networks, that boosts innovation at the edges. Consequently, the power grid with it’s very centralized structure and highly regulated access is therefore very slow in innovation.

For example: In many countries the installation of smart meters is still not finished, data exchange on the grid is missing the required hardware, regulated feed in tariffs are preferring big utilities and net-metering is causing an unfair situation for those who have to maintain grid stability.

All this won’t help us to speed up the departure from a fossil powered age to a renewable powered age allowing us to combat CO2 emissions and contain global warming. But when the power grid is transformed towards an open structure, we will see an influx of new ideas and high investment into renewable power production and storage capacities.

To get us one step closer towards a decentralized power supply and storage the currently running Blockchain — Startup Contest #BCSC16, initiated by the BlockchainHub Graz has posted four possible startup ideas you might be interested in:

  1. Charging Station Provider — to make this a global attractive solution, it must include a crypto-payment solution and an easy way for everyone to connect to the local grid and provide power for everyone without signing a contract.
  2. Peer-2-Peer Energy Trading Platform — while it is right now only possible to trade energy if you are licensed, the real breakthrough could be a transition to a completely decentralized trading, opening up the market to every producer and consumer on the grid.
  3. EnergySwap between Prosumers — the energy exchange between participants should be easily done and measured, so that the regular payment for net-consumer or net-producer is possible. It could even include incentives for high/low demand times to affect end device innovation.
  4. Microgrid Solution Provider — cyber-attacks on electrical power grids can have dramatic consequences and to foster innovation on the edges (e.g. households or single devices) the network of the future needs a robust value and data exchange and yet open access for everyone.

The interesting part for those example startup ideas is, they are partially already shown in prototype applications such as the Transactive Grid solution or the Scanergy prototype simulation. We could say, the feasibility studies are done now let’s get into production and talk with the regulators.

LO3 co-founder, Lawrence Orsini, center, applauds on Monday, April 11, 2016 as Bob Sauchelli, far left, using Transactive Grid technology to buy green energy credits from Eric Frumin.

This develpment will help the economy as well because we will see completely new ways of networked devices finding ways how the power consumption could be balanced and the grid stabilized.

We could maybe earn money when electricity is filling our e-car battery, because production is just in excess. Or our freezer cools automatically a little more when the power is cheap and does less cooling the rest of the day. Also completely new sensor networks for weather predictions could evolve due to the need of a reliable power production forecast on a local level.

You see there will be a lot of very interesting developments and great use cases in the energy market and I am looking forward to see them coming, rather sooner that later.

Disclosure: I do promote Blockchain technologies because of my excitement that this can have a major impact on society. The BlockchainHub Graz is a not-for-profit organization aiming to translate Blockchain technology for non-techies, reaching out to connect various organizations and networks to promote the benefits of the technology and discuss possible use cases.