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How Smart Contracts [Could] Simplify Clean Energy Distribution | Solar Heroes - Battery Hybrid, Off Grid & Grid Connect Solar System Specialists

How Smart Contracts [Could] Simplify Clean Energy Distribution

17th May 2017

On Tuesday May 9, Rocky Mountain Institute announced that ten energy companies from nine nations, including Sempra and Royal Dutch Shell, had joined the Energy Web Foundation (EWF), a nonprofit comprising of Rocky Mountain Institute and Grid Singularity, with a mission to accelerate the commercial deployment of blockchain technology in the energy sector. The foundation also announced $2.5 million in funding.

This is big news. Why? Because if the vision of what blockchain can do comes true, it could eliminate a lot of the complexities around managing distributed energy resources. And the fact that major energy companies are allocating resources to understand it is evidence that blockchain is worth paying attention to.

To understand how it works, first you must understand smart contracts. Unlike contracts written by lawyers and signed by all parties involved, a smart contract is between two devices. If I tell my smart meter to purchase solar electricity at X price when it is available and you set your solar PV to put power on the grid and sell it for X price, if and when those two situations take place, the devices execute the contract. I know I’m purchasing clean energy for the price I want and you know exactly who bought your solar power.

Thierry Mortimer, partner at EY, has been studying blockchain for some time. He attended the first Blockchain conference in Vienna this winter and talked with Renewable Energy World about how the technology will disrupt the current electricity model.

“We see a lot of similarities between the distributed nature of electricity production (with all the prosumers and the electric distribution) and the distributed nature of blockchain,” he said.

Mortimer said one of the benefits of blockchain is transparency. It allows you to “guarantee to your end-users or wholesalers that the electricity they buy is originating from green production.”

Mortimer explained that logs exist to record both selling and buying on the blockchain.

“The transaction is clear to everybody and can be verified by everybody on the blockchain,” he said.

“So you basically log when you put it on [solar on the grid or green gas in a pipeline] and log when you consume it and then you balance or reconcile.” Then there is a third-party certifier.

“That’s the idea behind blockchain. That you can log those transactions in a distributed network — which the blockchain eventually is — and everybody that needs to have access to those transactions can access them: the certifier, the producer and consumer.” He added, “you cannot produce clean energy twice. Its 100 percent bulletproof.”

Transacting at the Node

Because blockchain technology allows transactions to take place closer to the load, it eliminates some of the problems caused by big data, according to Mortimer.

“Blockchain is helping with the very complex problem of distributed data that comes along with distribution of production and consumption,” he explained.

Mortimer gave the example of smart meters saying that it is “nearly impossible” to bring all of the data collected at every smart meter into one central place and analyze it.

“Blockchain brings that analysis closer to the nodes,” he said, adding that “the smart contract introduces a new element of trust and consensus between devices and between people.”

Not Ready for Primetime Yet

The concept of what blockchain technology can do for distributed energy makes sense and the technology will likely be implemented at larger scale at some time in the near future. Mortimer estimates it could become mainstream within 2-5 years. But on the other hand, there are quite a few obstacles blockchain technology needs to overcome.

On the technology side, as of now, it is very slow. Mortimer said transactions on the public blockchain take upwards of 10 minutes to be completed. It would not be possible to use blockchain for a big microgrid or a big rollout of smart meters, he said. He sees blockchain emerging through simple transactions with a limited number of counterparts and pointed to Brooklyn Microgrid as a good example of where the technology is today. [watch a video about that project at the bottom of this article.]

Aside from technology, regulatory concerns will likely arise as well. Mortimer said that there are hundreds of utilities currently participating in pilot projects that use the technology as they wrestle with what to do about it. Mortimer’s role within EY is to help utilities make sense of blockchain.

“[We are] proactively advising customers on how to understand the technology, the impacts, the opportunities to build new business models,” he said. He added that while it is “on the radar” of regulators, he hasn’t seen them dive into it yet.

Social Activism

A final note about blockchain technology is its ability to literally put more power in the hands of the people. One of the key messages to Brooklynites about its microgrid is how by selling and buying electricity to and from your peers, a circular economy is created, keeping more dollars in a community instead of sending them to a utility located hundreds of miles away.