Exactly a year ago this week, Bitcoin hit a historic high of nearly $16,000, up from $600 five years earlier. Today, as the price dropped to around $3,700, the hype on how it will become the next currency seems to be gone. What has quietly been evolving through the highs and lows of the Bitcoin hype, however, are the practical applications of the technology that underlies it: blockchain.
In our previous article on blockchain earlier this year, we used a definition from The Economist to explain the technology in its simplest form as “a shared, trusted, public ledger that everyone can inspect, but which no single user controls.” Due to its transparency, security, and built-in type of crowdsourcing, this invention makes possible applications in many industries―from security to energy―that were not possible before. In the energy sector, blockchain is being applied to trading, which we explore below.
Blockchain applications on their way to brighten the energy sector globally.
Blockchain will Soon Empower Consumers to Trade Their Energy
A few weeks ago, Greentech Media published an interesting article on the application of blockchain to empower consumers to directly trade the excess energy they generate at home or in their businesses from solar panels, windmills, and even hydrogen. This would be in the form of a “digital platform” they dub as a “blockchain of blockchains” that would “let consumers sell the energy they generate at home in markets worldwide,” without the need for intermediaries, as soon as 2019.
Interestingly, this platform, an open source software application called EW Origin, which is being built by the Energy Web Foundation (EWF), has a built-in sustainability system. It is “all about tracking the origin of renewable energy and showing the ‘carbonality’ of that unit of energy — how black, brown or green it is depending on where it is and what time of day it was generated,” according to Jesse Morris, EWF’s chief commercial officer. In this case, blockchain will be used to create a transparent “ledger” to enable anyone to track accurately the origin of the energy they buy, and how sustainable it is.
A white paper released by EWF illustrates how the EW Origin global energy trading system is one among many applications that can be powered by “EW Chain,” the name of the system that uses blockchain for several energy initiatives. Other frameworks being built on EW Chain include: “EW Link, a set of architectures and standards for securely connecting physical devices to the blockchain, and EW D3A, a simulation tool for localized blockchain-enabled electricity markets.”
Greener Energy Made Possible by Blockchain
An article in Renewable Energy World earlier this year explored how blockchain is making greener energy possible: “When applied to the energy sector, [blockchain] will enable people to trade energy among themselves. Just as Venmo allows the exchange of money with its peer-to-peer platform, blockchain will enable a fundamental shift in the distribution of energy.”
The article explains that the shift to greener energy will happen because the transparency inherent in blockchain-powered transactions will “stimulate more renewable energy projects as a whole, ultimately forwarding our transition from carbon-emitting electricity generation.” They add that “tokenizing renewable energy allows wind, solar, and hydro producers to seamlessly connect with investors, who are willing to pay upfront for the right to consume renewable energy. As a distributed system, the middleman is removed.” In other words, the technology allows for an entire exchange system for energy that is as transparent and frictionless as trading stocks have been in the past. They provide a simple and real example of how this works in practice:
One demonstration of what this distributed system might look like within a local community is the Brooklyn Microgrid Project. In this project, solar panels are installed on five buildings. All unused energy is sold to neighboring buildings. While all the buildings are still connected to the grid, transactions are managed and stored on a blockchain. Through smart meter technology and blockchain software, transactions are easily made from neighbor to neighbor. This project is proving out the concept that blockchain can create a local community market for renewable energy.
A More Secure and Balanced Grid Enabled by Blockchain
A final application of blockchain in the energy sector that we highlight today relates to making the grid more secure and balanced. An article in Utility Dive explored these two areas, among other applications of the technology. They cite research from McKinsey indicating that the connected-home market is growing at an annual rate of 31% and now has 30 million homes with Internet of Things (IoT) devices installed. As a result, utilities are gaining unprecedented access to the data that these devices generate, creating cybersecurity and data management problems that can be solved by blockchain
They cite the example of TenneT, a large utility in the Netherlands, which uses blockchain to enable electric vehicles to help balance the grid, as follows:
TenneT, one of the Netherlands largest utilities, is working with Vandebron, a green energy supplier, to encourage owners of electric vehicles to participate in an EV-to-Grid (EV2G) pilot initiative. Integration of power generation from renewable energy resources such as solar or wind power in combination with storage requires a more granular control to manage supply and demand. The project in the Netherlands is the latest in a long and growing series of technology initiatives to discover new ways of integrating new technologies such as EV and storage onto power grids. Under this new program, TenneT will be able to store and dispatch power from consumer EV batteries in order to balance grid demand with supply. These EV2G transactions will be recorded and shared on a peer-to-peer (P2P) network using a permissioned Hyperledger blockchain.
A Transformative Technology
Silently, blockchain is making its way into making energy more democratic, efficient, and sustainable. The benefits of this technology are also being explored by myriad energy pioneers. For example, blockchain can enable applications like the widespread trade of clean Hydrogen 2.0 energy in the future, and the incorporation of other sustainable energies into the mix. Unlike the Bitcoin tsunami that came and passed just as fast, the wave of blockchain is silently raising the game for everyone in energy in ways that will benefit all of us.
As the Hydrogen 2.0 ecosystem gains momentum, we’ll be sharing our views and insights on the new Hydrogen 2.0 Economy. We also update our blog every week with insightful and current knowledge in this growing energy field.