Can Bitcoin technology create a truly free market for energy?
In March, 2016, Solar Tribune began reporting on how blockchain technology is finding its way into the energy industry. Since then, the number of blockchain pilot projects has boomed in the solar sector, and promising developments may soon bring solar users more autonomy than ever. In the increasingly hostile environment for indie solar created by government-sanctioned monopoly utility companies and the coal industry, blockchain tech may be the first major step to changing that paradigm.
Blockchain technology is the foundation for all of the various cryptocurrencies (Bitcoin, Ethereum and ZCash, to name a few) that have older financial analysts grumbling and scratching their heads, while millennial entrepreneurs race to profit.
There are endless articles across the web that go into great detail about how the blockchain works, but for the purpose of this article, all you really need to know is that the blockchain is an encrypted digital ledger that exists not on a central server, but across a network of independent computers, distributed in secure “blocks” of information. Using a block validation system guarantees that nobody can tamper with the records. Old records are kept on the chain to insure that record match and there has been no unauthorized activity. This is why the blockchain is referred to as a mutual distributed ledger (MDL).
On the most basic level, the blockchain is a secure, decentralized accounting system. One top of the ledger, the currency piece comes into play. Cryptocoins News describes how it works like this:
A cryptocurrency is a medium of exchange like normal currencies such as USD, but designed for the purpose of exchanging digital information through a process made possible by certain principles of cryptography. Cryptography is used to secure the transactions and to control the creation of new coins. The first cryptocurrency to be created was Bitcoin back in 2009. Today there are hundreds of other cryptocurrencies, often referred to as Altcoins. Put another way, cryptocurrency is electricity converted into lines of code with monetary value. In the simplest of forms, cryptocurrency is digital currency.Unlike centralized banking, like the Federal Reserve System, where governments control the value of a currency like USD through the process of printing fiat money, government has no control over cryptocurrencies as they are fully decentralized.
As we can see, electricity is literally at the heart of cryptocurrencies, so it makes perfect sense that solar should be both a fuel source to power the crypto-economy as well as an industry that can take advantage of the blockchain’s decentralized nature. Using the blockchain and cryptocurrencies, neighbors can buy and sell electricity with their neighbors, or even trade solar power with a producer in another country. Even beyond the simple transaction of a customer buying power from a producer, some developers think that blockchain technology can be used to manage how energy is purchased and consumed down to the level of individual devices. In 2016, IBM and Samsung unveiled a platform for controlling connected devices based on the blockchain called ADEPT. Developers call this “device democracy,” and wrote in a white paper on the subject:
“We demonstrate how, using ADEPT, a humble washer can become a semi-autonomous device capable of managing its own consumables supply, performing self-service and maintenance, and even negotiating with other peer devices both in the home and outside to optimize its environment.”
To be sure, skepticism continues to surround the “Internet of Things” (IoT) and IBM and Samsung may very well have over-reached when it comes to “device democracy.” Likewise, there are plenty of questions about the cryptocurrency teams that are looking to elbow their way onto the energy grid playing field despite their lack of experience in the extremely complex field of energy production and transmission. An army of new start-ups across the globe are currently raising money through ICOs (Initial Coin Offerings), a controversial practice of launching a new cryptocurrency to quickly pull in cash for an under-funded project.
Despite some dodgy financing on the part of Altcoin entrepreneurs, when it comes to the management of independent solar arrays and microgrids by energy sector veterans, the hype around solar plus blockchain seems to be well-deserved. Blockchain technology does indeed excel in the area of managing distributed resources securely, as well as providing a trading platform that transcends many of the current roadblocks to financing solar projects.
The first two solar/blockchain projects that Solar Tribune featured were Australia’s Power Ledger and the LO3’s Brooklyn Microgrid in Brooklyn, New York. Both companies have seen substantial growth since I wrote about them last year. What follows is an update on those two veteran companies as well as a preview of what’s ahead from some of the rookie players in the arena.
Power Ledger
According to Power Ledger’s website:
“Power Ledger allows for each unit of electricity to be tracked from the point of generation to the point of consumption within the building it is generated, or when sold to other consumers, using the local electricity distribution network. Blockchain technology couples a tracked energy transaction with a financial one, making the process of realizing the value of renewable energy investments simple and secure. Power Ledger allows renewable energy asset owners to decide who they want to sell their surplus energy to and at what price. Energy traded across the distribution network is tracked providing a secure revenue stream for DNSPs (Distributed Network Service Providers).”
Last month, Power Ledger secured $34 million via an initial coin offering (ICO) in one of the largest successful raises by an Australian startup for this alternative mode of financing. This fresh round of funding builds on the $17 million the startup raised in its pre-sale ICO in September this year, which sold out in just 72 hours after its 190 million Power Ledger tokens — called POWRs — were snapped up by buyers on the Ethereum cryptocurrency network.
Power Ledger co-founder Jemma Green told StartupSmart:
We want to focus on the democratization of power and really using our resources efficiently to demonstrate leadership in that area.
Brooklyn Microgrid
The Brooklyn Microgrid launched in 2015 in the Gowanus/Park Slope area of Brooklyn. It was the first of the blockchain-driven solar energy trading systems to roll out, and it has been an extremely successful test platform for the concept. The wide variety of commercial and residential customers, along with the diversity in architecture provided challenges that a newer, less urban neighborhood might not have.
With initial backing from German energy giant Siemens, The company has just pulled in new investments from Braemar Energy Ventures and Centrica Innovations in a series A round of capital financing. Their next step is a pilot project in Germany, the Landau Microgrid Project, at the Karlsruhe Institute of Technology with local utility EnergieSüdwest AG.
CEO Lawrence Orsini told Green Tech Media:
There is no command-and-control system that can manage a billion devices at the grid edge efficiently. So there’s a different way you have to manage the level of DERs (. Distributed energy resources) that we’re going to have in the next few years. Blockchain, it turns out, is a really efficient communication platform for value.
Sun Exchange
Sun Exchange is a peer-to-peer solar equipment leasing marketplace based in South Africa. They recently raised $1.6 million in startup money from several partners including New York-based Network Society Ventures. The project uses blockchain technology to allow investors to purchase solar arrays located in the developing world and earn rental income paid in Bitcoin.
Members of the marketplace can finance arrays at hospitals, factories, schools and rural communities in Africa and the Middle East, where the power is needed and the solar assets are good, but capital is lacking.
Greeneum
https://www.greeneum.net/Greeneum is another blockchain newcomer in the energy management space, based in Tel Aviv. In what seems like a potentially over-ambitious plan, they are attempting to introduce blockchain-based “smart-contracts” and Artificial Intelligence (AI) into energy management, and are testing with a system operator in Cypress. Despite a pretty thin pilot project portfolio, they are planning to launch an ICO before the end of 2017. According to their white paper:
Energy Trading on the GREENEUM system takes place on the electrical grid as well as the GREENEUM blockchain network. Electrical data transmits through a validation process, where the energy is profiled and verified. The system runs periodic calculations of production and consumption on the grid and allows consumers to interact directly with each other. Producers of GREEN energy are rewarded with GREEN certificates and GREENEUM tokens. Consumers use GREENEUM colored tokens (GREEN certificates) for energy consumption…GREEN certificates can be used to convert to GREENEUM tokens in the GREENEUM Energy Trading System. Carbon Credits and GREEN Certificates will be validated, monetized, and globally traded.
WePower
WePower has gotten a considerable amount of positive press lately both from mainstream media and cryptocurrency journalists. They have a relatively simple plan for using smart-contracts and “tokenizing” energy through an Ethereum-based platform.
WePower is a blockchain-based green energy trading platform. It connects energy buyers (households and investors) directly with the green energy producers and creates an opportunity to purchase energy upfront at below-market rates. WePower uses energy tokenization to standardize, simplify and globally open currently existing energy investment ecosystem. Energy tokenization ensures liquidity and extends access to capital. WePower blockchain solution is already recognized by Elering, one of the most innovative Transmission System Operators in Europe.
They are seeking to raise $30 million, but according to their website: “After a successful public pre-token sale, WePower team has decided to postpone the token sale date to 1st of February, 2018. Decision was led by the need to do a better and more secure token sale…”
