Blockchain, solar and reinventing the grid
Professor John Thwaites’ Review of Electricity and Gas Retail Markets, released last month, calls for re-regulation of the Australian retail electricity market as a way to address the anti-competition sentiment that has become rife here in Victoria. The Thwaites report identifies consumers’ inability to exit the market and the cost associated with marketing and customer retention as key reasons why the mechanisms of competition and innovation have failed.
By providing an essential service, competition in the energy market is more convoluted than any other industry. While consumers are faced with a plethora of deals on their energy bills (in fact, more than 4,000 when we last checked), it can be extremely difficult to negotiate the best rate. Thwaites even identified that Victorians are paying on average $294 more than the ‘best’ available price on their quarterly bills.
There are more than 4,000 offers available to consumers looking to get a better deal on their electricity bill.
The electricity market has failed and more than Thwaites’ proposition of a regulated basic service offer, we need innovation. This is where things get interesting.
Digitalisation is starting to occur in our energy sector. A sector that is begging for more reliability, efficiency, transparency and security. Electronic bills and smart metering are only the beginning as blockchain technology is emerging as a revolutionary and innovative solution to our energy trilemma.
Think of blockchain as a decentralised database that records transactions of almost any type in a ledger and enforces contracts related to them automatically, based on the conditions defined by the participants. All participants share the responsibility of governing the system, eliminating the need for third parties such as banks or energy distributors and retailers. Between 2014 and 2017, the venture capital community has poured more than $1 billion into blockchain related startups and it’s best known for its application in crypocurrencies such as Bitcoin. It could be revolutionary for all manner of sustainable business applications.
Critically, blockchain is a way for us to shift from a top-down energy system of big power plants to a two-way system of local control and greater self-reliance.
In today’s centralised grid, power only flows in one direction and the system is dated, poorly maintained and is vulnerable to hacking and blackouts. Blockchain has the potential to be the best way for consumers to exit the traditional electricity market or at least significantly reduce their reliance on the grid. They can do this by investing in solar and other renewable technologies and using blockchain to facilitate the trading of energy on a micro-grid (like this one in Brooklyn). For example, if one solar building produces more energy than it can use, it can allow its neighbours to consume the energy and control the transaction using blockchain.
Blockchain should be used to rethink how energy is priced and sold, transforming the role of all players in the market and giving the power back to consumers. Watch this space.