Blockchain in Electricity: From Microgrids to Macrodreams
Photo by Mikael Kristenson on Unsplash
Main page Analytics, Ethereum, Blockchain
Hot topic
11 November
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Electricity production and distribution are basics for economies and our safety (you know, winter is coming). Our everyday life depends on power and light and… on power companies and system operators. Let us consider how they can depend on us (with a little help form blockchain)?

A BLOCKCHAIN STATE OF MIND

With the development of the so-called “microgeneration” and particularly renewables, several questions have popped up: “How can we, consumers, benefit from them?”; “What can we, producers, do, if we do not use the volumes we have?” Some of the future-minded Brooklyn-based enthusiasts, who`ve installed solar panels on their roofs and now share their “extras” with the community, might have some of the answers. The pilot project - “Brooklyn microgrid” - was launched by LO3 Energy (creates local energy marketplaces using data platforms) and Siemens in 2016.

“LO3’s transactive energy platform is based on a decentralized, Web-based bookkeeping system that uses cryptographic technology to save data in a way that is inexpensive and forgery-proof,” states the German energy giant Siemens.

This peer-to-peer trading trial project is claimed to be first of a kind, it is based on the ethereum platform, payments go through PayPal. Traditional market relations model in utilities would require a third party – a supplier. On a local transaction energy platform, there is no need for intermediates, thanks to the “smart contracts”. Consumers will even have the ability to decide, who they will buy electricity from. The time of the transactions is fixed, they are crypto-guarded and unfalsifiable.

The project in Brooklyn is the first of a kind, but not the last. A similar system is being prepared in collaboration with Centrica, a British energy supplier in Cornwall, UK. This trial will be integrated not only to the local market but to the national grid as well.

GRIDS TO WHEELS

Some of the energy companies have quite literally been driven crazy by blockchain. German RWE, for example, cooperates with an IoT developer Slock.it, which was founded by ex-CCO of Ethereum Stephan Tual. Are trying to find out, how can the human-machine (and machine-machine) relations can be transformed.

There are dozens of electro-vehicles in Germany and the necessary charging stations for them. At first, only 100 stations were “blockchainified”, after launching the app the number of such stations has increased up to 1070. They are providing different types of smart contracts, which allow drivers to rent a station. Consumers don’t pay for the time they charge, but for the amount of energy consumed. “RWE makes proper use of the public blockchain by leveraging a shared resource and paying only for what it uses,” explains the mechanism Stephan Tual.

Currently, BlockCharge project provides a human-to-machine communication through a special app, which automatically finds the best price. Payments are in “crypto-euros” and the currency is backed with real euros held in escrow.

What is in it for the user? “Simplified billing for one: the charging station works on behalf of RWE and handles user authentication, payment processing, and loyalty point assignments as part of one single immutable transaction”, reasons an expert.

The Slock.it team is aiming to achieve machines autonomy when humans will not interfere in the process of charging in any way.

EVEN A CURRENCY

The blockchain is integrating into the energy sector in every way, there even exists an energy crypto-currency – SolarCoin. The founders see their mission “in building the foundation for a global energy transition by rewarding solar producers with the first energy-referenced currency”. The final goal is the reduction of green energy cost. If an investor receives additional money for a solar installation, the payback time will be shortened.

No matter, how big is your solar plant, you can claim to receive the coins. There are several parties in this mechanism, there is even an intermediary, a so-called “affiliate”, who verifies and submits such claims and receives payment from the SolarCoin foundation. SolarCoin gives generating companies digital tokens at the rate of one coin to one megawatt per hour and claims that even the (proof-of-stake) algorithm is low energy.

Founders see electricity as a value representative of the currency. “Electricity delivering assets can hold their economic value more effectively than gold or debt due to price stability and resistance to devaluation from over-issuance,” Nick Cogerty and Joseph Zitoli, the creators of the foundation, believe.

There is a significant flaw in this project for investors: a megawatt-hour peak has the same value as the same amount of energy during base load, as it’s mentioned in a research by the German energy agency - Dena.

It is hard to say, how much cheaper the blockchainified electricity ecosystem will be. There will be no intermediary between producer and consumer, but new technologies usually bring new fees with them. “Those who launch new blockchain systems, they get their fees. The question is, how big is this fee. Using Ethereum is not free, and registering on-chain each transaction may be more expensive than services of trusted third parties. Not to mention the rate risk,” says managing partner of FirstImagine! Ventures and an experienced energy market professional Alexander Starchenko.

He cannot recall even one successful case of broad-scale use of blockchain technology in electricity yet. “The major problem is immaturity of technology,” he says, explaining that very few transactions per second

are possible with current technology. Basically, current blockchain-based projects cannot scale right now. And machine-to-machine (M2M) transactions are possible even without blockchain, so its necessity is not obvious, concludes Mr.Starchenko.

For instance, even smart charging station developer Slock.it keep “smart contract” system under review, explaining that it`s not completely battle-proven and bug-free.

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