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How blockchain can help the utility industry develop clean power

Blockchain has the potential to improve grid efficiency and grow the market for renewable energy
Kimberly Henderson

Supports companies, investors, and public and social sector entities to address climate change

The utility industry is facing a number of disruptive transformations in the form of new energy sources, storage, efficiency, and market digitization. One unlikely disrupter is blockchain, known best as the technology behind the digital currency Bitcoin. For the utilities sector, blockchain may have the potential to streamline transactions and cut costs while catalyzing the transformation toward cleaner energy and greater efficiency.

There are reasonable questions about the viability blockchain’s future given its structural challenges and failure to as of yet scale a significant application. But an emerging perspective maintains that blockchain can be most valuable when it enables collaboration, democratizes data access, and solves specific pain points across industries. Before blockchain can achieve notable scale and widespread efficacy, it must resolve a number of hurdles including inefficient computing power use in transaction validation, ‘off-chain’ security vulnerabilities, and a lack of regulations and procedures. Nevertheless, we are seeing an important moment for blockchain, where promising pilots are facilitating a better understanding of industry opportunities. Below are five emerging sustainability applications for blockchain in the utilities industry.

  1. Build an ‘energy eBay’

    Balancing the supply and demand of variable energy sources such as wind and sun is an industry challenge. Blockchain could resolve this by enabling real-time transactions between power generators and storage providers in response to actual supply and demand. This type of ‘energy eBay’ encourages participation in power markets and incentivizes consumers to adjust their energy consumption in response to the amount of available energy supply. UK-based Electron is developing a trading platform that incentivizes higher consumption in periods of high renewable power supply and lower consumption in periods of relatively low supply. This flexible marketplace leverages a blockchain-based asset register that Electron has been developing over the last two years—a register that works without a central coordinator and allows direct transactions between other smart-home technologies.

  2. Issue and trade Renewable Energy Certificates

    Blockchain technology bases renewable energy credits on actual rather than forecasted energy production. Real-time data replaces costly inaccurate estimates, which saves money for the public agencies administering RECs. CoLab, IDEO's platform for collaborative impact, designed and built a proof of concept system demonstrating that smart solar panels could autonomously issue RECs to small renewables producers by integrating capabilities with Nasdaq’s Linq and Filament, a sensor maker. This type of collaboration enables solar producers, large and small, to easily track, prove, and trade power.

    We’re also seeing this trend play out on a broader scale. As of early November of last year, customers in Singapore have been able to purchase RECs using blockchain technology powered by utilities provider SP Group, according to CNBC. Blockchain technology in Singapore will help reduce REC prices and expand the marketplace from what's currently an originator-buyer transaction.

  3. Encourage ‘prosumers’ to generate and distribute through microgrids

    Blockchain technology’s relatively low transaction costs allow smaller energy producers, or ‘prosumers,’ to sell excess energy they don’t use. This ramps up competition and makes the grid more efficient. Smart contracts coordinate real-time data from solar panels and other micro installations and facilitate two-way energy flows throughout the network.

    In New York, utilities leaders are rebuilding the power grid to allow for collaboration between power companies and new entrants. Blockchain-enabled metering allows power to be exchanged between members of the microgrid, unburdened by a centralized authority or expensive infrastructure. Brooklyn Microgrid, a project supported by start-up LO3 and Siemens, is creating a microgrid that allows consumers to buy power from local producers. Members can control their energy-use preferences with a mobile app or smart-home system, and their blockchain meters will purchase energy from solar owners based on preset cost preferences.

  4. Develop new renewable energy markets

    In regions with limited access to energy, blockchain allows for easy local transactions. For example, the owner of a local solar-generation system can sell power to neighbors using a blockchain-enabled panel and a mobile phone. The lighter infrastructure and mobile-based micropayments allow these networks to thrive where other infrastructure—wires, traditional loan structures, and centralized energy authorities—would be too cumbersome. In a pioneering social initiative, the crowd-funding platform Usizo connects to blockchain-enabled smart meters in underfunded South African schools so that donors can pay the school’s electricity bills. For the power industry, the results are big: more individuals with access to power and a growing number of microgrids that support main grid infrastructure.

  5. Make electric vehicle charging stations more efficient

    Blockchain makes payments at electric vehicle charging stations easier by showing drivers real-time pricing data. Blockchain coordinates the charging-station network autonomously, showing drivers the locations of nearby stations and whether they are being used. If blockchain microgrids have been set up in the area, power prices at each station can be established by grid and residential power suppliers. Drivers can then pay for that power securely and instantly using ‘smart wallets.’ In Germany, Share&Charge, an app based on Ethereum technology, connects electric cars with available residential and commercial charging stations and facilitates payments. The technology has also been piloted in California using eMotorwerks’ JuiceBox EV chargers. By enabling a larger and more efficient charging network, blockchain encourages faster adoption of electric vehicles.

Taking the lead

While blockchain technologies are still in their infancy—and questions remain about security, scalability, and governance—blockchain’s ‘trustless’ transactions ruled by incorruptible algorithms give it enormous potential in a sector historically encumbered by myriad trading and clearing systems. Be it through lower barriers to entry, more efficient power allocation based on real-time demand, greater grid resilience through diversified power sources, and a limited role of centralized trade exchanges, utility sector leaders that use blockchain wisely could realize substantial benefits.

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