2018, and the word ‘blockchain’ is still on everybody’s lips. This transparent, secure, information storage and transmission technology, which works without any central control, is gradually gaining a foothold in many different sectors. Looking for a solution for spreading knowledge? Try the blockchain. For streamlining mobility? Same thing. The same also goes for reimbursing airline company customers hit by excessive delays – the list goes on. Somewhat removed from the frenzy surrounding bitcoin, other blockchain-type protocols are now enabling new ways of doing things to emerge, not least in the field of GreenTech. This was demonstrated during the session on this topic at the latest Cleantech Forum in San Francisco on 22 - 24 January. According to the experts, the affinity between the blockchain and the energy sector is only just warming up. No, we’re not talking about the huge energy consumption of some (though not all) blockchains – the Bitcoin blockchain for instance consumes a hundred times more power than all Google’s servers put together. The point is that this technology has the potential to bring considerable added value to the energy world. Below we take a look at some of the initiatives taken in this field and assess the current hopes for blockchain technology.
Brooklyn Microgrid – a promising start
“In 2016, we saw the first announcements of blockchain applications in the field of energy,” recalls Jules Besnainou. The Director of Product Development at the Cleantech Group in London has seen the energy path converge with that of the blockchain, giving rise to some promising ventures. The (New York City Borough) Brooklyn Microgrid is one of these. Spearheaded by Siemens and LO3 Energy in New York, this initiative, which was launched in April 2016, aims to enable residents who own solar panels to sell their excess electricity to their neighbours via a microgrid and peer-to-peer transactions using blockchain technology.
The advantage of the technology is that is works without the need for third parties, cutting out the intermediary role traditionally played by electricity distribution companies. The blockchain is also reputedly secure – i.e. it should be able to protect both consumers and traders. These advantages have undoubtedly contributed to the success of the Brooklyn Microgrid and similar ventures. “Everyone cites Brooklyn’s pilot project, and rightly so, but there are other ventures currently taking shape such as Power Ledger in Australia and Innogy and Co-Tricity in Germany,” points out Jules Besnainou.
We use the blockchain to semi-automate some project functionality. For example, we use smart contracts to automatically execute collections and payments from accounts
Two years ago a number of startups began to build bridges between the blockchain and the electricity business. This was probably sometimes in order to benefit from the media hype around the technology, but no doubt just as often so as to benefit from its brand-new highly practical functionality. This is what happened with The Sun Exchange – “a marketplace for those who like the idea of solar energy, clean energy, and like the idea of having some social or environmental impact with their investments,” as CEO Larry Temlock describes it. The South Africa-based US startup provides the means for those who, instead of having their own solar panels, wish to invest in a share of a solar panel installation abroad and obtain a return by “renting them out to a house, or a school, or a business, or somebody who needs the power but doesn't have the money upfront to buy the system”. Two factors differentiate The Sun Exchange from other businesses in the solar sector with similar goals: the very affordable initial investment and the use of digital technology. “We accept payment in bitcoin and other digital currencies for the project – which enables us to target a different audience – and we use the blockchain to semi-automate some project functionality. For example we use smart contracts to automatically execute collections and payments from accounts. Smart contracts also enable users to transfer their investments, to trade them peer-to-peer. The blockchain inspires confidence because the contracts automatically execute the instructions,” underlines Larry Temlock.
SolarProject is another organisation that uses the blockchain in order to encourage the transition to a more sustainable energy system. SolarCoin illustrates another application of the technology, a green cryptocurrency created to reward solar energy producers. In fact The Sun Exchange is partnering with this blockchain venture. Last but not least, another way of using the blockchain is also worthy of mention: associating the Internet of Things (IoT) on the one side and the blockchain on the other in the energy field. This is an older approach, but Larry Temlock regards it as one of the most interesting. “Billions of connected objects – from smartphones to sensors – are currently in use, and the number keeps rising. Today, firms are faced with the daily challenge of ensuring these devices are both productive and secure. The blockchain and other decentralised technologies enable connected objects to be directly integrated into decision-making and communications systems. That changes the whole situation.” The distributed ledger approach adopted by the Berlin-based Iota Foundation is a good example of this. The aim of this marketplace is to enable the exchange of data – particularly regarding energy – gathered by sensors, which would otherwise remain unused. US company Filament and German Slock.it work with a similar model.
2017, a year of investment and partnerships
“Instead of a flow of VC funding in 2017, there was a surge in the number of ICOs, which enabled several startups, such as Grid+ and PowerLedger, to raise large sums.” These two startups, which develop platforms for buying and selling electricity, have raised a total of $27.7 million and $26 million respectively. According to figures from press agency Reuters, fledgling companies in the energy sector have raised close to $200 million through ICOs last year alone.
blockchain UNDERPINNING green energy DEVELOPMENT
Various consortiums have been set up with the aim of expanding the use of the blockchain in the energy sector. They start out from the basic principle that modern digital technologies can reduce transaction costs and encourage active market participation by a larger number of players, thus speeding up the transition to cleaner energy and a more efficient system. Energy Web Foundation, represented at the Cleantech Forum by Jesse Morris, is building the 'App Store for the Blockchain in the energy sector’. The Energy Web Foundation was set up as an alliance between the Rocky Mountain Institute – a research centre focusing on energy – and Grid Singularity – which is developing a decentralised energy data exchange platform. The mission of the not-for-profit organisation EWF is to develop a public, open source blockchain, on to which different applications can be grafted. In the same vein, the Enerchain Project is bringing together electricity, gas and water suppliers, as well as other utility sector players, so as to test and promote energy trading via the blockchain and hold deliberations towards building a workable regulatory framework.
of the energy market in 2025
will be decentrali-sed
A plethora of initiatives is thus encouraging the growing use of blockchain technology in the energy sector. Since 2017, firms have moved from pilot projects to actually marketing their offerings. However, there are many problems still to be overcome. There are cultural issues holding back large-scale deployment, basically due to the mindset of the players and the difficulty of finding the right business model. There are also, given that blockchain technology is less than a decade old, some technical problems as well. “At the beginning of 2017, some of the problems seemed to be insurmountable. But the will and the skills of the community of blockchain developers have silenced more than one sceptic!” underlines Jules Besnainou, adding: “In 2018, we’re now expecting the technology and the market to mature. I believe the blockchain is here to stay, and that it will actually become omnipresent in the coming decade, but by then we probably won’t even notice the infrastructure is there, a bit like the Cloud today.” If we accept the predictions of the World Energy Council, what they call ‘distributed’ (i.e. decentralised) energy systems should in any case rise from the 5% market share they currently enjoy to as much as 25% by 2025. The affinity between the blockchain and the energy sector looks as if it is only just warming up...