Blockchain Energy

There are two ways you can get the electricity you need for your homes: purchase it from your local energy utility — or generate some of your own.

The latter is being made increasingly possible with the expansion of household rooftop solar owing to falling solar panel prices (and helpful government policies). However, as the usual refrain goes, the sun doesn’t shine at night — and when it does, you may not need to use all the electricity you generate from it.

This is where energy storage comes in: you can choose to have batteries in your home that stores the extra energy generated in the middle of the day and lets you use it in the night, when none is being generated.

However, energy storage is expensive, which is why many households choose to sell their excess electricity generated back to the grid (where local regulations permit it). The energy utility pays them for these units, and these households can consume normally from the grid when there isn’t enough sunshine (or when the batteries run out).

But what if you wished to divorce your energy trade entirely from the utility? There’s a small scale experiment in New York that is making it possible to do so. A company named LO3 Energy has launched the Brooklyn Microgrid that relies on peer-to-peer transaction systems to sell and buy electricity in that community of users.

This system uses “blockchain”, which is the same technology behind Bitcoin. How blockchain works is immaterial for the purposes of this discussion; the key point is that it does not require a centralised authority to enable transactions.

In other words, in such a model, there is potentially no central utility that “controls” your energy activity — in terms of billing, regulations, tariffs and so on. The community of energy providers (i.e. households with solar panels) and consumers can trade electricity with each other without involving a third party.

This technology and framework could find support in many regions of the world where communities seek greater control over their energy. Rural German communities, for instance, have long fought (quite literally) to wrest control away from the utilities — including a hostile takeover of an energy utility company by a small group of “concerned parents”!

However, the proliferation of such a technology will not mean the end of utilities. Hardly. They still play an important role in the energy economy and will continue to do so, even if their business models will have to evolve with time.

Importantly, until such a technology can prove work in larger swathes of land, and by including a variety of energy producers, the reliance on centralised utilities will remain.

But the evolution of such technologies and systems is furthering the great energy transition currently taking place globally. This transition is not merely the decrabonisation of energy systems, but also of the democratisation of energy.