Blockchain in the Real World #3: Redistributing Energy

Oct 8, 2018

So far in this series, we’ve covered how blockchain can be used to solve global counterfeiting and showed you a real use case of blockchain tech being used to solve ticket scalping at some of the worlds biggest sporting events. In this edition, I want to cover the use of blockchain tech in developing smart energy grids, redistributing and storing this energy, as well as how it can be used to establish better payment channels for energy.

Energy Security- A Global Problem

The global population is expected to reach 9.5 billion people by 2050. That’s more than 2.5 billion people in the next 30 or so years. Of course, as the population increases, so to will our demand and reliance on energy supply and production, especially as developing nations become more enabled. In 1990, the total energy demand stood at a collective 9 million Kilotons (Ktoe) of Energy, and this figure had climbed to 13.5 million Ktoe as of 2014.

As it stands, we define and create energy from the following sources:

  • Primary and Secondary Oil reserves
  • Biofuels / Waste
  • Renewables, including geothermal, solar and hydroelectricity
  • Nuclear Energy
  • Natural Gas
  • Coal

It is also important to note that energy production and supply has two parts. First, the extraction of materials used for energy generation, and second, the supplementary supply chain that takes the raw material, turns it into energy and supplies it to us- the consumer.

Moreover, access to a stable energy supply isn’t just important in running devices and making sure our homes are comfortable. It is crucial to national security and can be used as ‘bargaining chips’ on a geopolitical stage.

Energy security: The ability of a nation to secure sufficient, affordable and consistent energy supplies for its domestic, industrial, transport and military requirements, irrespective of economic or political instability. — Andy Day

It’s no secret that we are on a time clock. In 2011 it was estimated that 82% of the world’s energy was produced by fossil fuels. At the time, this number was expected to fall to 78% by 2040, and recent investments in renewable energy across the world seem to reflect this sentiment. In 2016, renewables accounted for almost two-thirds of net new power capacity, with China responsible for almost half this amount.

However, we still hold an incredible reliance on fossil fuels for energy production, an issue that can effectively stop the developing world in its tracks. Moreover, although there is increased investment in renewable energies, the supplementary supply chain of energy is incredibly inefficient, with many hands involved, and we believe it is another issue that blockchain might just be able to solve.

Using Blockchain to Create Smart Grids

As it stands, energy production happens in one location and is then sent via long lines to a central distribution/substation, before being redistributed into our homes and devices. This process not only bleeds energy due to the length of transmission (often over hundreds/thousands of miles) but also requires incredible amounts of infrastructure, manual labour, and other resources which tend to be overlooked in the scheme of energy production.

Coal mining is a huge drain on resources

Distributed ledger technologies can completely change the way energy is distributed, as well as allowing for more localised energy trading between communities, without the leverage currently held by big power companies.

Blockchain can allow for the optimisation and network of local power supplies, in a sharing (peer-to-peer) economy. For example, you might own land with a solar grid which produces surplus energy, and you can then sell this energy to your neighbours in a more efficient system for a fraction of the price. This would also reduce the need for 3rd party energy brokers (the middlemen) who sell energy from the producer to the consumer.

“Instead of the command-and-control system the utilities have now where a handful of people are actually running a utility grid, you can design the grid so that it runs itself.

The network becomes far more resilient because all of the assets in the grid are helping to maintain and run the utility grid.” —Lawrence Orsini

The automation of energy grids becomes possible using an internet-of-things model (automated, distributed systems using blockchain to record data), and smart contracts to govern energy distribution and storage. These can be programmed with pre-determined rules to ensure that all energy transfer and storage is controlled automatically, fairly, and regulates supply and demand.

This can also create a dynamic pricing system, as we can now make micro-payments using cryptocurrencies, and can also reduce/change the cost of production, use, and availability of energy, particularly in rural and remote regions.

For example, Okra Solar have developed software and partnered with energy companies in developing countries to provide solar power to these communities. These micro-grids operate autonomously and mean the communities not only have a means of producing their own energy, but the system can also be scaled over time, and energy can be paid for in micro-transactions using crypto.

Blockchain and Clean Energy

Although climate change is as prevalent as ever, there is still an incredible amount of resistance to producing clean energy on a global scale. With privatisation of energy production becoming more prevalent, and the reduced profit margins presented by renewables, the consumer is left with very little voice in the matter.

Moreover, as all energy produced is fed to a central location/distributor, and it is almost impossible to determine just how much energy produced is coming from clean/renewable sources or produced by a nation.

Smart grids and DLT can also change this, as the ledger itself can record exactly where power was produced, where it was sent, and the amount of energy created. It can also change the way we distribute power by providing a means of selling your surplus energy (say that produced by solar panels) to your local community, as opposed to feeding it back to the central distributor. This also means you can earn for your energy production, and completely changes our interactions with renewable energy sources.

Power Ledger is an Australian blockchain company currently tackling this issue, creating a peer-to-peer marketplace for renewable energy production and supply, in an effort to cut costs and carbon emissions.

Using blockchain technology, the platform provides a transparent, audit-able and automated market trading and clearing mechanism for residential and commercial businesses to decide who they want to sell their surplus energy to and at what price. —Power Ledger

By using an autonomous system, Power Ledger is able to meter surplus energy being fed to the grid, sell it on to wherever it is needed, and provide quick, efficient and automatic payments to the energy producer.

Blockchain technology and smart contracts really can revolutionise the energy industry, taking a resource heavy production model and supply chain and optimising it for the modern world. The use of an open and immutable ledger can also be used to keep energy producers and nation-states compliant, and gives us- the consumer- a means for holding them accountable.

What do you think about blockchain and energy? Do you think it will make a difference, or are we facing stiff competition from fossil fuel reliant companies? Leave us a comment and let us know your thoughts!