Fu­ture of the en­ergy sec­tor may be in blockchain tech

The Sunday Guardian - - & Comment Analysis -

Re­new­able en­ergy crea t e s n e w chal­lenges for util­i­ties and en­ergy com­pa­nies. Blockchain tech­nol­ogy could po­ten­tially ad­dress these chal­lenges and in the process be­come the foun­da­tion for the ef­fi­cient, dis­trib­uted, re­new­able en­ergy pro­duc­tion of the fu­ture—a fu­ture, I be­lieve is much closer than most peo­ple may think, based on the pace of in­no­va­tion we have seen even in the last few years.

En­ergy com­pa­nies are com­bin­ing blockchain and re­new­ables tech­nol­ogy. Re­search data from Statista show that al­most 100 mil­lion house­holds will have off-grid so­lar power sys­tems in­stalled by the end of 2020. More than dou­ble the num­ber in­stalled by the end of 2017. At the same time, the amount of en­ergy gen­er­ated by re­new­able tech­nolo­gies like wind tur­bine gen­er­a­tors and pho­to­voltaics is grow­ing rapidly, con­tin­u­ally out­per­form­ing the pro­jec­tions of en­ergy an­a­lysts. A grow­ing per­cent­age of the pro­duc­tion takes place in mi­cro­grids. In other words, blocks, streets, neigh­bour­hoods and towns will be­come their own, small en­ergy grids and po­ten­tially pro­duc­ers as well as con­sumers of en­ergy. While this po­ten­tially is good news for con­sumers, it presents chal­lenges for ex­ist­ing en­ergy sup­pli­ers. For ex­am­ple, how do you link mi­cro­grids to the main grid? Or how do you stream­line the cer­ti­fi­ca­tion of green en­ergy com­ing from small pro­duc­ers? Both mi­cro­grids, re­new­able en­ergy pro­duc­ers and util­i­ties are ask­ing if blockchain tech­nol­ogy can pro­vide an­swers to these ques­tions.

This cre­ates chal­lenges and op­por­tu­ni­ties for en­ergy grid com­pa­nies. For ex­am­ple, Cen­trica, Shell, Sta­toil and Tepco re­cently joined the En­ergy Web Foun­da­tion, do­nat­ing $2.5 mil­lion in the process. The foun­da­tion aims to bring blockchain tech­nol­ogy to the grid. How­ever, it may well find it­self out­paced by the many com­pa­nies and start-ups that are ac­tively de­liv­er­ing so­lu­tions aimed at ad­dress­ing the chal­lenges fac­ing the en­ergy in­dus­try.

I would like to turn our at­ten­tion to three chal­lenges en­ergy com­pa­nies are fac­ing: There is an ex­plo­sion in the num­ber of mi­cro­grids. There are many rea­sons why mi­cro­grids make sense. Some of the big­gest are listed by In­ter­est­ing En­gi­neer­ing.

Shar­ing lo­cally gen­er­ated elec­tric­ity be­tween house­holds, not to men­tion find- ing out who owes what to whom, is chal­leng­ing. How­ever, en­ergy com­pa­nies can lever­age an econ­omy of scale to solve these is­sues, but the same does not ap­ply to, say, a hand­ful of homes. Then there is the added is­sue of phys­i­cally con­nect­ing a mi­cro­grid to the over­all grid, and mak­ing sure that power can flow both ways be­tween the two.

One good ex­am­ple of how this can work, thanks to blockchain tech­nol­ogy, comes from LO3 En­ergy. Its Brook­lyn Mi­cro­grid project, built in col­lab­o­ra­tion with Siemens, uses blockchain tech­nol­ogy to keep track of en­ergy sales. The en­ergy in ques­tion comes from so­lar pan­els in­stalled in the lo­cal area. If you add bat­ter­ies to the mix it has the po­ten­tial to have a stand­alone, dis­as­ter-proof mi­cro­grid. More and more cus­tomers— in­clud­ing en­ter­prises—want to buy green en­ergy. Tra­di­tion­ally, util­i­ties and other en­ergy pro­duc­ers have never had to put a “list of con­tents” on the power they sup­plied. Do­ing so in­volves a la­bo­ri­ous process. Fur­ther­more, the process makes it a bat­tle for smaller pro­duc­ers to get green cer­ti­fi­ca­tions, of­ten known as Re­new­able En­ergy Cer­tifi­cates (RECs), that prove the en­ergy they pro­duce is re­new­able. The sales process for re­new­able en­ergy varies from coun­try to coun­try. Most place the process as com­plex and in­volved. As an ex­am­ple, me­ters con­nected to re­new­able en­ergy sources record pro­duc­tion onto spread­sheets. That in­for­ma­tion is then shared with reg­u­la­tors who trans­fer it into a dif­fer­ent data­base, which is­sues the RECs. In­ter­me­di­aries then con­nect buy­ers and sell­ers in­ter­ested in the val­i­dated green en­ergy. In short, the process is ex­pen­sive, la­bo­ri­ous and time-con­sum­ing; es­pe­cially when com­pared to how blockchain tech­nol­ogy can au­to­mate or wholly do away with many of the steps above us­ing smart con­tracts. Me­ters at the pro­duc­tion point can feed pro­duc­tion data di­rectly to a dis­trib­uted blockchain ledger. The shared, pub­lic ledger val­i­dates where the en­ergy is pro­duced, au­to­mat­i­cally cre­ates the green cer­tifi­cate and makes it in­stantly avail­able to po­ten­tial buy­ers.

Volt Mar­kets, which uses Ethereum blockchain tech­nol­ogy to cre­ate an “en­ergy orig­i­na­tion, track­ing and trad­ing plat­form”, is an ex­am­ple of one or­gan­i­sa­tion that is help­ing to of­fer such a so­lu­tion. A dis­trib­uted net­work of or­gan­i­sa­tions and house­holds that are po­ten­tially both en­ergy pro­duc­ers and con­sumers makes it a chal­lenge to track en­ergy pro­duc­tion and con­sump­tion when con­nected to the grid. The same goes for cus­tomer, en­ergy pro­duc­tion and con­sump­tion data. Go­ing from cen­tral en­ergy pro­duc­tion to a dis­trib­uted pro­duc­tion net­work could also in­crease ad­min­is­tra­tive bur­dens. There is a need for a se­cure way to store and share data to gen­er­ate in­sights and ef­fi­cien­cies from the new data. Blockchain tech­nol­ogy, as it uses mil­i­tary grade cryp­tog­ra­phy in a dis­trib­uted man­ner to han­dle data, looks to of­fer promis­ing op­por­tu­ni­ties in the en­ergy sec­tor. Volt Mar­kets, LO3 and other start-ups like Power Ledger and Elec­tron are im­ple­ment­ing po­ten­tial so­lu­tions at a mi­cro­grid level. Blockchain tech­nol­ogy is still in its in­fancy as it needs to over­come speed and scal­a­bil­ity chal­lenges, but these are be­ing ad­dressed. If Rip­ple can crush the es­ti­mated $1.6 tril­lion fric­tion costs of trans­fer­ring money be­tween banks who han­dle $3 tril­lion a day, there ought to be some con­fi­dence that blockchain will help rev­o­lu­tionise the en­ergy sec­tor too. There has been an ex­plo­sive growth in in­ter­est and fund­ing, which can be summed up by Green­tech­me­dia: “The first blockchain in en­ergy trans­ac­tion took place in April 2016 in Brook­lyn, New York. To­day, less than two years later, there are 122 or­ga­ni­za­tions in­volved in blockchain tech­nol­ogy and 40 de­ployed projects. Be­tween Q2 2017 and Q1 2018, over $300 mil­lion was in­vested in the blockchain in en­ergy in­dus­try.” A num­ber of the above men­tioned com­pa­nies have used the mech­a­nism of Ini­tial Coin Of­fer­ings (ICOs) to help fi­nance them­selves. Jonny Fry is the CEO of Team­blockchain

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