Smart Grids and Blockchain: Creating investment opportunities in the energy industry.

4년 전

Ladies and gentlemen, no matter what country you live in, the cost of investing in clean energy now is far cheaper than paying for the consequences of climate change later (…) Those betting on renewable energy will win big.

Former Secretary of State John Kerry at Bloomberg New Energy Finance Summit 2016

Never have words been truer!

The recent improvements in technology as well as the urging situation seem to have given momentum to the renewable energy market. At the end of 2017, the global renewable generation capacity reached an all time high of 2,179GW mainly due to a sharp spur in the solar capacity added – 90GW.

This evolution is the product of the decrease in the Levelized Cost Of Electricity – which allows comparison between wind, solar, natural gas etc. taking into account their unequal life spans, the risk, the return, the project size and capacities – of renewables. The LCOE from PV cells has decreased by 73% between 2010 and 2017, thus competing directly with fossil fuels. Moreover, onshore wind power also benefitted from a mitigation of costs of over 18% in the same period.

The most interesting aspect of this stark improvement is that it is just the beginning. With the never-seen-before promises and support from governments across the world, the renewable market has the wind in its sails.

In the 2015 Paris Agreement, nearly 200 countries came on a consensus concerning the absolute necessity to cut greenhouse gas emissions. The main and most important goal is to keep global temperatures well bellow 2°C. Since then, 47 countries – part of the poorest nations in the world – have pledged to have a fully green economy between 2030 and 2050. Among these countries are Bangladesh, Ethiopia and Haiti. Such promises keep on coming and actions are following, in early 2018, the Spanish Balearic Islands have also promised to reach the 100% renewable energy goal by 2050 and 230MW of Solar panels are already on their way.

Even if countries are not all cooperating to the same extent, cities are proving that they can take the lead in this green revolution. The Carbon Disclosure Project’s data shows that over 40 cities worldwide are already entirely powered by renewable energy, 30 of them are situated in Latin America.

However, according to a report from the Global Smart Grid Federation (GSGF) published in 2012, the 21st century’s requirements in terms of quantity, quality, efficiency, reliability, economy and ecology are impossible to meet with the current grid networks installed today. Indeed, the electric grid we are currently using was invented over a 100 years ago in 1882. At that time an electric grid was composed of a power station which sent energy to an electric pole which was then distributed to houses. Although it did gain in complexity, the overall structure has remained the same.

In this distribution network not only do we lose hefty amounts of energy – between 6% and 8% from the plant to our plug – but often, renewable energies are not connected to any networks, thus wasting the surplus energy. As PV cells and wind mills become more efficient and affordable, the underlying system connecting producers to consumers is not up to speed.

It is not Smart enough.

1. The Smart Grid


The Smart Grid is basically a 2-way system where information and energy can be exchanged between both the utility and the end consumers. This enables solar panels and Plug-in Electric Vehicles to be integrated and gives useful information about daily energy consumption and production, allowing for a better forecast of the demand.

This new grid requires every component in the network to be smarter, including your houses. In order to set up this new grid, a smart meter must be installed. Unlike your run-of-the-mill meter, it allows for a 2-way communication between the network and the power plant, thus giving real time data on your energy consumption. Smart meters allow for a higher accuracy and eliminate human error as it directly reports from the data retrieved. Furthermore, outages & power distribution could be detected earlier hence providing clients with a shorter response time.

These smart houses can go one step further by fully integrating appliances and electric. This means that their run schedule and therefore their energy demand could be reduced. Overall, it increases control over energy consumption and enables us to program our equipment to work during off-peak hours such as smart dishwashers, smart washing machine etc. Another example is the electric car which could also charge at night when the energy price is at its lowest.

This improvement in the Network will have many effects, for instance, the power plants that had to be turned on during peak hours will no longer be necessary. The reason behind this is simple, with more information power plants will be able to better forecast demand and consumers will better manage their energy consumption. Another positive aspect would be that the Smart Grid will be aware as soon as an outage occurs and will be able to redirect power from another node in the network.

There have been some experiments which have proven to be very successful, among them is the Smart City of Queensland, Australia. In June 2012, a 46% reduction in electricity demand and consumption during peak hours was recorded. Smart Meters integrated in the Californian Energy market led to a reduction in the number of complaints regarding the quality of energy and increased the level of satisfaction for 90% of the consumers.

Nonetheless, there are some issues that are inherent to the smart grid:

  • In some countries, such as India, many regions are unevenly connected to their national grid.

  • The risk of security breach is of major importance. With that amount of data who knows what could be done?

  • Renewable energies do not produce uniformly throughout the year, therefore how do we store the surplus?

  • As huge amounts of data come in every day, data management must be a priority as it will enable a better forecasting of demand, better prices, and avoid failures.

2. Enhancing the Smart Grid: The Blockchain Technology

If you have not heard of the Blockchain technology by now, you have been living under a rock. Blockchain is the technology behind bitcoin and is, according to a survey led by Price Waterhouse Cooper (PWC) on its clients, considered to be the biggest disruption in the next 5 years.

At its core the Blockchain technology is a distributed and shared ledger which records and manages transactions between multiple participants. This means that it is no longer a central database that stores these transactions, as is the case in traditional ecosystems. The main qualities of such a distributed ledger are: high transaction speed, transparency, reduced transaction costs – as there are no third parties – increase in security for there is not a single point of failure.

In the case of Energy distribution, this technology could change the game. To keep track of the quantity of renewable energy that is produced, governments across the world have to create tradable certificates, however, transaction costs are off the roof because of such a long process.

When a renewable power plant generates energy, the meter sends the information to the registry provider who enters the data into a new system and creates a certificate. This certificate is then passed through a broker deal and finally these certificates are verified by another party. This means there are three intermediaries in the selling process and in general it takes 60 to 80 days for an energy producer to get paid. Here is where the beauty of Ethereum smart contracts kick in, as they allow 2 parties to transact depending on pre-agreed there is no need for intermediaries! The Blockchain Technology would get rid of these therefore reducing costs and the producers should be able to get paid immediately. This would be a huge incentive for companies to start a renewable energy business for they would need less capital to start and run the business.

The possibilities are endless, let’s say you want to sell some of your surplus energy to your neighbor rather than sending it in the grid and losing a great percentage of the overall power, you could do it directly by sending some of the energy you had stored in batteries and a ledger would be created instantly, no need for any intermediaries. Moreover, the information will not be easy to tamper because of the enhanced encryption level inherent to the shared ledger. PowerLedger, an Australian blockchain-based cryptocurrency and energy trading platform which allows decentralized selling and buying of renewable energy, has successfully demonstrated a product which turns an apartment building into a microgrid thanks to a shared system of solar panels and battery storage.

Of course the Blockchain technology, for the time being, has its limits. For instance, Ethereum is limited to 15 transactions per seconds and the proof of work system on which is based some blockchains consume great amounts of energy because of the sheer number of computers necessary for mining.

However, as time pass some solutions emerge: IOTA enables over a 100 transactions per second and Ethereum is supposed to switch to Proof Of Stake, which instead of relying on computational power relies on the number of cryptocurrencies native to the system held by each node in the system and therefore no mining is necessary.

3. Investment opportunities

If you still do not believe the potential Smart Grids and Blockchain hold to renew the energy distribution system I will let the numbers speak for it:

  • Western Europe is to invest a total of 133.7 billion dollars in Smart Grids infrastructures by 2027.

  • In January 2017, Thailand’s National Energy Policy Council agreed to go forward with a Smart Grid plan and deployed $5.6 billion to meet this goal.

  • Trillian Networks, a global communications solutions firm, has connected more than ten million end points such as gas meters, electric meters, and in-home displays across the United Kingdom.

  • According to Bloomberg investments in Crypto Energy has reached 300 million dollars since the beginning of the third quarter of 2018. There are now more than 122 companies that are developing products or services for the energy industry. Here is a short list:

And these are only a few of the numerous investments that have been made in this field.

Let us take a closer look at Power Ledger which has developed numerous world-leading blockchain energy applications and provides the opportunity to sale the renewable energy surplus that was generated in residential or commercial properties. In a few points, the company:

  • Tracks each unit of electricity sold

  • Simplifies and secures energy investments and transactions

  • Lets producers choose their clients

This offer seduced clients and investors as the company raised a total of 34 million dollars during its ICO where over 15,000 buyers participated. 17 million dollars of which have been raised in 72 hours.

More recently, Power Ledger has signed a contract with the island of Puerto Rico – where power has been wiped out by both hurricane Irma and Maria in 2017 – in order to restore energy. The start-up will be working with factories and regulators to fund resources such as solar panels and storage systems to which it will add its blockchain technology. Such an endeavor will allow companies to sell their excess energy to local communities in exchange for cash, cryptocurrency or even labor.

All these Blockchain related startups might as well enable regular citizens to invest in solar panels – as you would in real estate - providing them with additional income and a better control over their energy consumption.

Whether you like it or not a revolution is on its way and it seems to be adapt or die. If used correctly Smart Grids and the Blockchain technology could together lead to a cleaner and more efficient energy usage. So, whether you are in it for the ethics or the money, remember it is not a question of if but when; and the answer is now.

1ReportIEA: The era of solar
2ReportIRENA: Renewable capacity highlight
3ReportIRENA: Renewable power generation costs in 2017
4ReportPWC: Use cases for blockchain technology
5ReportChallenges and issues of smart grid implementation
6ArticleBBC: What's in the Paris climate agreement
7ArticleBBC: 100% green energy for World's poorest countries
8ArticleThe Guardian: Balearic Islands, 100% green energy goal
9ArticleThe Guardian: 100 cities powered by renewable energy
10ArticleMedium: Power Ledger raises $34million
11ArticleTechcrunch: Power Ledger's Chicago energy trading system
12ArticleClean Technica: $133.7 Billion to be invested in grid systems
13ArticleBloomberg: Power Ledger for Puerto Rico's resiliency
14ArticleBloomberg: $300 Million invested in Crypto Energy
15ArticleMetering: Thailand invests $5.6bn in grid systems
16ArticleMetering: Trilliant connects 10 million UK smart meters
17ArticleMIT Tech Review: Blockchain for a Smarter Energy Grid
18ArticleREW: Energy Efficiency in the Power Grid
19SpeechU.S. Embassy: Remarks by Secretary of State John Kerry
20Company sitePower Ledger
21BookBlockchain Revolution: Don Tapscott & Alex Tapscott
1City Today: Smart Grid
2Crypto Compare: Blockchain
3MyMoneySouq: Investment
4Twitter: Crypto-energy startups
5Power Ledger Logo

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PS: special thanks to @katerinaramm for her useful tips and comments!

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