Blockchain: a natural partner for 21st century power grids
Blockchain technology – a distributed transaction database that maintains continuous records in the form of time-stamped and modification-resistant blocks – is emerging as a key enabler for the current wave of energy innovation. From underpinning a small community energy scheme in Brooklyn to facilitating a trial of utility-scale energy trading in Austria, how is blockchain supporting the roll-out of advanced energy technologies?
‘Evolution’ might not be a strong enough word to cover the changes that have been taking place in the global energy landscape. Over the past decade or so, a surge of innovation in renewable generation, grid technology and community energy schemes has been prompting a shift away from the utility-centric power provision paradigm of old and towards a more decentralised system that helps integrate new energy sources, empower customers and allow consumers – from individual homeowners to large industrial users – to feed power into the grid as well as draw from it.
As expectations around electricity supply and a host of associated issues continue to change, power systems will have to change with them. New digital technologies have the potential to make this transition smoother. Take blockchain, for example, a distributed database system that is swiftly becoming a hot-button topic in energy circles, not to mention a host of other industries.
Blockchain’s energy potential
The blockchain concept was originally developed by a mysterious programmer (or programmers) using the pseudonym of Satoshi Nakamoto in 2008, and the system was first implemented as part of the core infrastructure underpinning the cryptocurrency bitcoin. Essentially, a blockchain is a digital ledger used to record and log transactions (financial or otherwise), grouping them into chronologically-ordered ‘blocks’.
A simple enough premise, but it’s the associated advantages that come with a blockchain that make it such an attractive proposition. The database is distributed across a network of computers, leaving no centralised entry point that could be targeted by hackers. The system is also completely transparent, with all users able to see transactions and changes to public blockchains, and once data is entered into a block on the chain, it is inherently resistant to any modification as any change would require a brute-force attack on the whole chain.
Now that the blockchain concept has proven itself by ensuring stability and transparency for bitcoin – the total value of which has now passed $14bn – other sectors are working out how blockchains could complement their businesses. Clear advantages in the energy industry are already being found, with solar-incentivising cryptocurrency SolarCoin implementing blockchain to log data and automatically make SolarCoin payouts to solar producers.
Consumers, power networks and utilities stand to gain a great deal from blockchain, if they can get their heads around its implementation and implications, and a start-up eco-system has sprung into life to seize the opportunity. But what blockchain-enabled applications are being developed for the energy sector? The four case studies below illustrate the wide-ranging scope and scale of the technology’s potential for the grids of the near future.
The Brooklyn microgrid: a community perspective
Blockchain has immense potential at the local level as a means of tracking and verifying transactions as part of community energy schemes. LO3 Energy’s Brooklyn microgrid has been an early advertisement for blockchain’s facilitating role in local energy.
The microgrid, currently installed in a small Brooklyn neighbourhood, allows for peer-to-peer trading between local residents, so those with rooftop solar panels can sell excess power directly to their neighbours. The well-established, blockchain-based distributed computing platform Ethereum is used to track and log the contracts that are automatically generated between users, providing reliability and transparency between the energy vendor, recipient and anyone else on the network.
“Blockchain is a really good communications protocol for what we want to do,” LO3 Energy founder and CEO Lawrence Orsini said at MIT Technology Review’s Business of Blockchain conference in April. “This isn’t just about settling energy bills,” he added, “It’s about self-organising at the grid edge, which can’t be done with normal databases.”
The Brooklyn microgrid might be small-scale, but the company has plans to expand its concept, and there’s evidence that consumer appetite is high. At the same conference, Orsini quoted an Accenture survey which found that 69% of consumers are interested in an energy trading marketplace, while 47% planned to sign up for community solar schemes.
Large-scale energy trading trialled in Austria
It could be assumed that this process of distributed, decentralised energy systems facilitated by blockchain represents a threat to large utilities and other traditional industry stakeholders. But it’s not just smaller community projects that are starting to leverage blockchain tech; power companies – the more progressive firms, at least – are keen to get ahead of this trend and assess how blockchain could work for them.
