In peer-to-peer energy sales of electricity all electrons are equal. Some electrons on the grid are generated from renewable sources and most are generated by fossil fuels.
Governments around the world have created all kinds of systems to account for how much energy gets produced from renewable sources. Some of that tracking for renewables like solar, wind and hydro is based on tradable certificates.
Other than knowing their sources are different, is the electricity generated from green sources distinguishable in any way from electricity generated from coal? Until now the answer was; ‘No!’
Blockchain technology could fix that problem. It is a technology that will aid keeping track of renewable-energy certificates. Blockchain technology can track the ownership of electricity generated without disrupting the business of generating. The grid depends on its shared data sets. Australia is leading the world on the trend towards decentralised power. This technology might even transform the grid’s working.
Blockchain is best known for being the technology behind the cryptocurrency, Bitcoin, but we will get into that later.
This article is about peer to peer energy sales or peer to peer energy trading. Blockchain plays a part in the success of peer to peer solar power or green energy trading. A blockchain is a public, shared, encrypted record that is maintained on a network of computers. These computers verify that transactions between the individual generator of a certified type and amount of power to a buyer or consumer.
This blockchain technology is promising where a network of peers (electricity producers and consumers) are connected via the grid. Blockchain energy trading is high on accountability.
What Does Blockchain Do for Power Vendors?
Currently, when a renewable-power plant owner generates a unit of electricity, the owner’s network-meter logs data in a spreadsheet. The spreadsheet data gets entered into a registry system so a certificate gets created. Another group will broker deals between buyers and sellers of these certificates, and a different group verifies the certificates after they are purchased.
This system has high operation costs, with potential for accounting mistakes ranging from human errors to intentional fraud.
Using blockchain technology the network meter would script its data directly to a blockchain energy grid certificate registry that does all these steps in one action. The cost is minimal, with zero time delay and no errors.
Small “distributed” power generators and storage systems, like rooftop solar panels, are connected to the grid. Also, recently electric-vehicle batteries have been regularly connecting to the grid for charging.
The owners of panels and batteries might use a blockchain-based platform that allows producers to trade energy (peer-to-peer energy sales) with consumers. A blockchain-based system allows energy producers to get paid immediately they transact with a buyer of their electricity.
The technology is more efficient than one where the electricity producer sells all electrons to the grid owner at their grid buy price. The grid owner then makes those electrons available to its customers at set prices determined by the grid owner.
What’s In This For Solar Owners?
Currently solar panel owners get a feed-in tariff for excess power. The small payment for feeding excess power from their roof into the grid can be offset against fees and electricity used from the grid. The power companies will on-sell that electricity at a much higher price than they buy it.
In a blockchain system neighbors, or peers, could simply trade energy and digital cash directly with each other.
The traditional system users need to figure out how much they, as users, should pay for access to the network and to the blockchain commercial software. This blockchain technology potentially adds a new dimension to the electricity market by enabling such peer-to-peer energy sales and transactions.
There is great potential for blockchain in the energy sector. In Austria a purpose-built blockchain, which was based on Ethereum, has been developed for the energy sector. The blockchain application will validate transactions, and track renewable-energy certificates. In the longer term, homes and buildings will be software enabled to automatically sell to and buy power from the grid on the basis of real-time price signals.
In peer-to-peer energy sales, instead of selling your excess solar power to the grid, you sell directly to your neighbour instead. You still have the option to sell to the grid but it would be based on economics and would be a choice.
Theoretically you could sell power from your home solar generator to yourself, say buy it at a location remote like your office carpark, for charging the battery of your electric vehicle.
Blockchain Enables Peer-to-Peer Energy Sales
Blockchain is enabling energy generators to deal business directly into the hands of consumers. The energy trading system has been overhauled, opening the market up. Blockchain is allowing households to buy and sell solar energy from providers, other than the grid owner. They can achieve prices different to the standard feed-in grid tariff.
Without blockchain technology, the owner of the grid is the only energy buyer and is paying the feed-in tariff price. With it the producers could sell for higher rates than the feed-in tariff. Solar owners would sell at prices undercutting the power company’s retail price offered to energy buyers.
It's a decentralised energy-trading concept. It is a response to the incredibly expensive centralised system of high cost infrastructure.
Welcome to Blockchain
Blockchain uses the data of tradable commodities when converted into a digital form. This effectively allows and documents person-to-person trading without an intermediary to process the transaction.
To partake of Blockchain technology, you must own digital currency, which can be bought using ordinary fiat currency, like dollars.
Welcome Digital Currency
Bitcoin was the first digital cryptocurrency in 2009. Bitcoin was followed by Ethereum, and then Ripple. Collectively, they represent the majority of the cryptocurrency market.
Blockchain and cryptocurrency work together to enable the concept of Peer-to-peer energy sales. A Peer-to-peer energy sales application in Australia may operable with the same software in an EV charging application in America.
How Does Energy Get Onto The Blockchain?
An Australian start up company called Power Ledger has developed software, which is used for peer-to-peer energy sales. The software is installed on the electricity meter that reads the outputs of electricity across the meter. The software monitors the amount of energy that is consumed by the household or generated and exported by it.
Those two pieces of information are then recorded on the Blockchain and used to move energy from one person to another using a digital representation of energy. Power Ledger call such a unit 'Sparkz'.
Blockchain in this application is a disruptive technology that will revitalise an old industry. Enabling peer-to-peer energy sales will remove an inefficiency letting this energy economy flourish.
What about using blockchain technology to authenticate and sell power to autonomous electric-vehicle charging stations at parking garages or shopping centres? The EV is identified when it plugs into an outlet and consumes power. The owner can have an account to buy that power from a seller, much as a home buys power from another generator.
Blockchain has snatched attention of the heavily regulated power industry. Utilities and consumers both produce and trade or sell electricity. Blockchain may offer a reliable, low-cost way for doing away with the need for layered intermediaries.
Blockchain The Disruptive Technology
What blockchain offers is an trigger for updating the centralized, legacy systems used by large power plants and their grids. With distributed energy generators, like solar power, a decentralized sale validation system could deliver efficient, reliable, renewable energy.
This shift is prompting the energy industry to consider blockchain’s potential to make peer-to-peer energy sales a reality. Each participant involved in trading electricity needs to invest in a computer with a blockchain “node”. Software links to their homes’ solar panels and manages the capability to sell power to neighbors. The blockchain network manages and records the transactions without human interaction.
Blockchain may enable the development of energy trading that could permit a business that has a contract to buy electricity to trade it. They sell an option to a neighbouring business to use an amount of that electricity during a given time frame. Business A could sell some of its unused electricity during a particular period of time to Business B that needs extra power.
Greater grid flexibility in other areas with blockchain could enable consumers to switch power suppliers as price opportunities arise. A switchover would have been difficult in the past and could take a long time.
The Future Direction
The electric utilities with their mature infrastructure, old grids and growing energy demand, face scrutiny with high operating cost, threats of cyber security attack, and achieving strict regulatory compliance. Power Utilities need to be sensitive customer issues with rising power prices and ensuring they provide a great customer experience.
Finally, blockchain may make existing electric industry processes more efficient. Using blockchain technology the power industry can develop a decentralized energy exchange platform that can host applications ranging from validating electricity trades to monitoring grid equipment. Such a platform has the potential to prolong the life of equipment, in part because it improves both large and small power-generation system operators’ earnings.
It’s a new technology, so blockchain will face significant barriers. The government-backed programs and regulators will want assurances of no cost overruns if they agree to program in adopting that new technology.
Blockchain technology may accelerate the transition for both large and smaller power-generation systems at homes, businesses, and communities transactions within power markets. The potential of distributed generation and managing volatile renewable power sources, requires the industry’s infrastructure to become less centralized.
Despite blockchain being seen as technological disruption, it could prove to be exactly what Utilities require to keep up with evolving demand for electricity. The power industry could embrace Blockchain. The power industry could facilitate peer-to-peer sales.
The Last Words
The power industry has been experimenting with the blockchain technology, scaling it up from the small scale proof-of-concept utilisation and the private crypto-type applications.
Blockchain technology could change the environment and pattern of operation for utilities from being centralised and highly regulated towards being decentralised and transactional.
Power Ledger, an Australian-based start-up company, developed a decentralised commercial energy-trading platform on blockchain. Click here to get more information on the trial. That means established utilities are well placed to evaluate blockchain technology and make strategic investments in its potential applications.
If electricity utility companies do this, these established centralised incumbents may turn out to be the disruptors, with the utilities encouraging decentralised electricity distribution of peer-to-peer energy sales.
The distributed peer-to-peer blockchain energy trading platforms, and the utility’s poles and wires network would allow utility companies, solar power sellers, power reseller businesses and consumers the access and ability to sell directly to each other.