Technology

Blockchains to democratize the energy market?

 By Chris Dalby

Blockchains have risen to fame in recent years thanks to the cryptocurrencies they govern, especially Bitcoin

Blockchain technology is seen as having two fast advantages. Attached to a cryptocurrency, it encrypts all transactions in a virtually unbreakable way and allows members of the public to trade freely, with all transactions being recorded on a shared ledger without needing a third party, be it a bank, stockbroker, or even an energy company.
For years, solar panel manufacturers have promised that having solar panels on homes will allow families to generate their own energy for free and sell any extra. However, local and national governments have varied massively in allowing this market to thrive. In Florida, after the passage of Hurricane Irma, it turned out that some corporate lobbying made it illegal for solar panel owners to generate their own energy, even though the power grid was down for days.
Blockchain tech has essentially allowed customers with solar panels in their homes to circumvent such irksome policies. A startup, Power Ledger, in Australia has created a local market where neighbors can sell extra energy to each other through cryptocurrencies. But as renewable energy markets grow, there is no reason the same logic cannot be applied to international transactions.
This would also be a major step toward simplifying corporate transactions between the public and private sector. Increasingly, companies own wind or solar plants far away from their operations, which they then inject into national grids, and get the equivalent amount deducted from their power bills. Blockchain technology would allow for far more ease and transparency.
Furthermore, it would mean that many disparate aspects of the energy revolution would suddenly become connected. On a local level, townships or counties could tie their own small grids to individual solar systems. Smart appliances could be connected to specific energy management programs, which could provide real-time data about these secure systems.
However, the real revolution would be on a number of larger levels.

Lawrence Orsini is the founder of LO3 Energy, a company building an open-source blockchain specifically designed to manage transactions on a microgrid. “Bitcoin is largely changing finance. But moving into blockchain energy could be much bigger than Bitcoin,” he said.
LO3 Energy’s Initial Coin Offering (ICO, the cryptocurrency equivalent of an IPO) is set for the first half of 2018. If successful, it would show that the idea of microgrids backed up by blockchain technology is a valid alternative. The first implementation of LO3’s microgrid is set to take place in Brooklyn, which may have the perfect blend of well-heeled, tech and savvy residents.
However, small-scale efforts are not going to be where blockchain energy sinks or swims. Both large corporations and national governments are beginning to look at the ins and outs. In early 2017, IBM and Samsung released a joint platform that uses a blockchain to control connected devices. Named ADEPT (Autonomous Decentralized Peer-to-Peer Telemetry), it would contain blockchain that would act as a “ledger of existence for billions of devices that would autonomously broadcast transactions between peers in a three-tier system of peer devices and architecture.”
Backed by Ethereum, ADEPT will essentially raise the profile of smart contracts. And smart contracts are where the customer will ultimately benefit. These “contracts” are not inscribed on paper, they are coded into the blockchain with their terms permanently etched. This blockchain is a decentralized ensemble, distributed across its users, making almost impossible to tamper with. Such contracts become instantly more secure than their paper counterparts.
One of the examples provided by IBM in its announcement about ADEPT concerns home use. Devices would connect to other nearby homes to make power trading and energy efficiency easier. Being able to instantly sell a surplus of energy to a neighbor for a specific use would be a major incentive for local microgrids or individual solar setups.

Samsung and IBM live Demo of ADEPT

Such innovations in the private sector have triggered similar progress from governments who don’t want to be left behind. Due to Samsung’s dominance in South Korea, it is not surprising that South Korea has been foremost among these.
In early December, the science ministry and the national power company, KEPCO, announced a small-scale across nine buildings. This would see households generate power themselves and sell it to neighbors.
This sale process would be through a platform where users table an offer and have to find a buyer. The sale would actually be done in what is being called “energy points” that can be traded for cash, pay bills directly or to power up electric cars.
Beyond this, in late November, Samsung signed a deal with the city of Seoul to develop a blockchain platform to improve governance and transparency, while handling welfare, public transport and safety issues.
Other companies and governments are attempting various variations on the above genres. Greeneum is testing an AI-based model to redefine renewable energy systems in “Cyprus, Israel, Africa and the US.” Grid+ raised $29 million from investors buying into its vision of selling electricity to final consumers at “near-market prices.” Even better, its democratic model means that people who bought tokens at its pre-sale in October have the right to “buy 500 kilowatt-hours at wholesale prices” with each token.
So where’s the catch? At this point, nobody really knows. Blockchain technologies that provide truly innovative solutions are likely to be around for a long time. Ethereum’s smart contracts ability helped it skyrocket to become the second most-traded cryptocurrency after Bitcoin. IOTA’s blockchain, Tangle, offers free transactions, regardless of the amount and the number of transactions that can be processed at a time is unlimited. The risks lie more in current unproven solutions.

Tangle transactions are confirmed asynchronously (iotaitalia.com)

Is blockchain technology scalable to the level needed to make smart contracts normalized around the world? As it does scale up, will weaknesses appear to be probed by hackers? How will the anonymity at the heart of most cryptocurrency-backed ventures meld with the business practices of giants like Samsung? What if users simply forget their passwords and get locked out of their energy trading market? For PwC, writing about the risks of blockchain use in the energy industry, the danger lies more in whether these developments are really going to prove their worth over traditional solutions. The firm states that this would “raise the question of what advantage such solutions would have over traditional database-based processes, as the key aspect of decentralized and tamper proof data storage would then become of secondary importance.”

READ MORE: IoT and the future of the energy industry by Mike Scott

about the author
Chris Dalby
Journalist. Editor. China, Mexico, Latin America, Asia, place branding, Olympics, oil and gas, mining, renewable energy, international politics.