Energy prices are being driven down globally by the availability of renewables at country level auctions. Solar prices have dropped 62% since 2009, while supplies from wind and other renewables have increased and brought costs down by half for these technologies in 2018. Country level auctions are largely driven by the demand from countries like India where energy prices are also falling. Countries like China and Germany are at capacity for renewables in 2018. Jennifer Delony, editor of Renewable Energy World, says this trend will continue due to the “sheer power of competition in those auctions,” and competition is expected continue “barrelling forward into next year.” As countries like China push forward in their ambitious plans for renewables they force grids, delivery methods, and community interaction to be upgraded with technology. Blockchain promises to be the method of delivering and tracking these energy markets worldwide.

One of blockchain technology’s extremely promising use cases is renewable energy independence and trading on the global level. As the world moves away from using coal, gas, and petrol into more renewable forms of energy, blockchain becomes the best way to connect renewable technologies, devices, and grids, to people and communities. Blockchain, which functions as a public ledger or record, can take inputs like amount of energy produced from smart devices like solar panels, record them, assign a price and then send it out to smart homes on the grid while recording incoming payments for energy purchased. Already, in local neighborhoods like Brooklyn, New York, we are seeing smaller versions of this microgrid system working. The next phase is to get this system working on the citywide, countrywide, and then global level. Blockchain promises to be the answer.

Equipment, Companies and Individuals Create Agreements and Interact

How does blockchain promise to create microgrids that might connect on the global level?

When neighbourhoods set up solar panels, for example, the meters on the solar panels can communicate with another reliably. The phone application created by a local company can act as a bidder for renewable energy at a certain price, say lower than if you bought it directly from the local municipality. Consumers can then reliably control the energy flow to their homes.

On the countrywide level, companies that own the renewable energy farms can pool their energy and auction them on a decentralized market where autobids at certain points create “smart contracts” that release funds automatically. The trigger can send energy from the pool created by the company to local power grids. Individuals can then use their phones to access the decentralized grid by prepaying a cryptocurrency to pay per microtransaction. Each and every transaction could be available from the individual granular level up to the country and company and be cryptographically secure. This is called the renewable energy blockchain and most experts believe it is the future, especially as solar is on track to beat coal to become the cheapest energy on earth.

Smart Contracts Lock and Unlock Grids and Funds

Right now, energy markets and distributions are endlessly complex. They require agreements drafted by lawyers to manage devices like smart meters, with energy companies that contract with utility grids and then companies that produce energy. These systems are usually run on the country wide level. From a market to market level, the complexity increases as energy markets are international and often pegged to politically complex commodities like petrol which are governed by international trade laws. The complexity and high cost of legacy infrastructure has traditionally kept this system from being changed. Developing countries, advances in renewables, and the maturing of blockchain technology is offering an opportunity to bypass these costly systems.

Smart contracts, on other hand, are executed between devices and drawn up by a software engineer. In this scenario, any group of devices like solar panels owned by anyone in the world could produce and store energy. Those devices can then have a contract with a utility grid that releases the energy at a certain price. The grid communicates with other grids to match demands that are facilitated by smart meters that lead to cities or even more granularly, into buildings. Bids can be run automatically on energy exchanges where tokenized energy packets can be bought and sold and sent anywhere in the world.

So for example, if I program my smart meter through my phone app to purchase renewable energy at price set at X when it is available and my city sets their smart contract to buy renewable energy at the same price in batches from a series of microgrids, a company can release a solar PV to put power on the grid and sell it for that X price to us in a cycle. When these conditions are met, devices execute the smart contract and transactions and prices are recorded in an immutable shared common history which can then go on to provide information to other markets on prices on renewable energy. Customers are happy as they can verify they are using renewable energy.

Key Takeway: Future of Energy Markets

Blockchain technology is emergent in the energy market and still has a way to go before widespread implementation between smart devices and energy companies. First, blockchain could help tokenize renewable energy development to allow markets to develop and mature. Smart contracts coming online through distributed applications platforms like Ethereum can address hurdles like microtransactions and instant transactions on blockchain as they apply to energy consumption across grids and smart meters. In 2 to 5 years, these blockchain technologies will be common place and fully tested. Corporations and companies will need efficient decentralized technologies like blockchain to meet their lofty renewable energy goals. Developing countries will take advantage of using innovative “mesh networks” connecting devices and energy markets to the internet based on blockchain rather than investing in expensive infrastructure that developed countries had to use before this evolution.

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