Blockchain starting to disrupt energy market

A new blockchain microgrid in Brooklyn is set to expand and further disrupt the energy market, by allowing solar PV owners to sell their excess energy in peer-to-peer (P2P) transactions instead of selling energy back to the power company at a wholesale price. The community energy market, developed by LO3 Energy and ConsenSys, will use the Ethereum platform to facilitate P2P exchanges for the energy and plans to expand, creating additional test sites in the US as well as in Europe and developing countries.

For owners of solar PV there are few options for trading their excess energy. They may be able to sell it back to their utility and aggregators are emerging who can pull together sufficient load to trade on the wholesale market.

Now a new option is emerging, which may enable individuals to trade with their neighbours. And if it takes off in sufficient volume it could present both a new challenge and new opportunity for utilities.

Blockchain microgrid

This new blockchain trading option is being made available as a ‘community energy market’ on the Brooklyn microgrid by TransActive Grid, which is a joint venture between distributed energy resource developer LO3 Energy, whose founder Lawrence Orsini is also a founder of the Brooklyn microgrid, and decentralized app developer ConsenSys.

It is being implemented through the Ethereum platform, which is a decentralized platform that runs peer to peer contracts based on tradeable digital tokens on a blockchain, or a set of decentralized nodes. These nodes store transactions in ‘blocks’ with every block containing a hash of the previous block, thereby negating the possibility of downtime or interference with the data. The best known example of the use of the technology is the bitcoin.

Alongside this is LO3 Energy’s hardware layer of smart meters, which provide the (near) real-time, granular data on electricity flow, and controllers which will control the operation of the solar PV and battery and loads such as air conditioning and put the electrons into the grid and data on to the blockchain.

Brooklyn microgrid is a community microgrid in the early stages of development in the Gowanus and Park Slope neighbourhoods of Brooklyn in the heart of New York.

Check out our upcoming microgrid webinar sessions with insights from ComEd, Navigant Research, Pecan Street Inc, S&C Electric, Alliander and more …

Trading solar

The concept is described as much like that of renewable energy certificates (RECs), which are proof of generation of renewable energy, rather than that the actual energy the purchaser receives is from a specific renewable plant.

Similarly, in this case a purchaser will not receive the physical electrons produced by the generator. However, by retaining the transaction within the microgrid, the benefits associated with this generation are then retained within the community rather than passing to a third party REC retailer.

In the first phase of the initiative five homes with rooftop PV are being paired with a number of homes without who are interested in purchasing their neighbours’ excess energy. At the time of writing (early April) two homes have controllers installed and the first blockchain transactions have taken place, and the next three are due to follow in the coming weeks.

Commenting on the project in a conversation with Engerati, Orsini was reluctant to divulge much detail on the technical aspects, saying it is still early days and in regulated markets such as the US, there are regulatory sensitivities around for example, the monetization of transactions.

“We are doing it within a microgrid as it is possible to manage the concept more efficiently and effectively and this is how we have designed the controller,” he says. “However, from a technical perspective such transactions could take place outside a microgrid.”

Blockchain transacting for developing countries

With the Brooklyn demonstration under way, Orsini says the company is now looking for additional test sites in the US, preferably in either California or Texas, which like New York “are undergoing rapid regulatory evolution to make possible this sort of thing” and two demonstration projects in Europe.

However, he believes the greatest potential currently is in the developing countries, especially where there is a need for electrification for rural communities with mini- and microgrids and regulation is less restrictive. To this end a pilot is planned in Kenya, which should be in operation by the end of the year.

“There are innovative things happening in energy trading in these countries and it is a bit of a wild west out there,” he says. “We want to prove out the concept in Kenya and then start scaling it up.”

Peril or promise for utilities?

The big question of course is the potential and inevitable impact if it takes off of blockchain transacting on utilities. As with other disruptions occurring it is likely to depend largely on their approach to it.

So far the response received from utilities has been mixed but generally positive, Orsini says. Some have expressed concern, but a number are interested in finding out more about the concept and how they might work with it to evolve their business models.

“Our view is that blockchain trading is an evolution of the energy market that has to happen,” he says. “Half of new solar generation in the next year is going to be decentralized and it’s about driving efficiency and lowering the bar for participation in the decentralized markets – and we believe it’s got to happen with utilities.”

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