Energy industry case study: LO3 Energy and the Brooklyn Microgrid

Creating a blockchain-based virtual microgrid for clean energy
“The Brooklyn Microgrid reimagines the traditional energy grid model, with the concept of a communal energy network. While the utility provider still maintains the electrical grid that delivers power, the actual energy is generated, stored, and traded locally by members of the community, for a more resilient and sustainable clean energy model.” — Brooklyn Microgrid website

The Challenge
Advocates of a shift to cleaner energy have been stymied in part by a hard reality: it’s difficult to reinvent the electricity grid when the infrastructure is controlled by large, entrenched utility companies. For example, beyond using rooftop solar-generated electricity for your own home or electric car, the only way to share any excess or unused energy is to send it back into the utility-owned grid.

Under an alternative system — a microgrid — a group of people could interconnect their homes, businesses and other buildings and distribute the energy they generate amongst one another according to supply and demand. Doing this would require a system that could ensure consumers’ usage is properly tracked and producers are fairly credited for the energy they share.

The Project
A New York-based startup called LO3 Energy began working with Siemens Digital Grid and next47, Siemens’ venture capital firm, to develop a sustainable energy network powered by community residents’ rooftop solar installations.

“In April 2016, the first transactions occurred among neighbours who didn’t have their own solar systems and those who produced excess solar electricity,” Siemens reported. “With the help of LO3 Energy, residents of Park Slope and the adjacent neighbourhoods of Gowanus and Boerum Hill founded the Brooklyn Microgrid.”

The Brooklyn Microgrid project uses Exergy, LO3 Energy’s permissioned blockchain platform, to enable a small group of local energy producers to automatically conduct transactions with local energy consumers in near-real time.

The Results
In a July 2018 report on ‘Applying Blockchain Technology to Electric Power Systems’, the Council on Foreign Relations described the Brooklyn Microgrid project as follows:

“The initial version of the Brooklyn Microgrid is a far cry from LO3’s ultimate vision. The pilot project comprises fewer than 60 prosumers. A larger number of participants can virtually trade electricity with one another, but they are not physically connected by a microgrid. Rather, most of the project’s participants simply continue to use the main grid. When two participants ‘trade’ electricity and one pays the other, the physical flow of electricity remains unchanged — for example, one participant feeds excess solar power back into the distribution grid, and the other participant consumes electricity from the grid. In fact, the participants cannot even transact electricity, because the utility has a monopoly over electricity sales, and instead can only trade renewable energy certificates.”

Over the longer term, however, the Brooklyn Microgrid aims to expand its current capabilities — for example, by adding grid-based energy storage that could provide greater resilience during storms. It also hopes to work with utilities and regulators to eventually build an actual physical, as opposed to virtual, microgrid in the community.

Key Benefits
Using its blockchain platform, LO3 Energy can accurately and securely document every transaction that takes place on the Brooklyn Microgrid. The system also enables Siemens to easily trace and supply replacement parts for microgrid participants.

Furthermore, the Brooklyn Microgrid provides a testing ground for future energy resilience projects that could help prevent a repeat of the community power outages and damage that occurred during 2012’s Hurricane Sandy.

“A microgrid is a nucleus that sets the stage for an energy future consisting of networks of energy cells,” Siemen’s Stefan Jessenberger said in a February 2018 news feature. “Blockchain also supports this process, because it makes it much easier to conduct energy trading within cells.”

Final Thoughts
“In October 2017, LO3 Energy was awarded a Series A investment from Braemar Energy Ventures and Centrica Innovations to further develop our blockchain platform for new markets and services,” the company said in its Exergy business whitepaper. “With a functioning proof-of-concept in Brooklyn, Series A investments from leading energy investors, and groundbreaking conversations happening around the world, LO3 Energy is poised to disrupt the global energy economy and rewrite the rules for how energy can be generated, distributed, and put to use.”