And Blockchainâs Pivotal Role In The Revolution Blockchain technology has been heralded as an exceedingly innovative application for catapulting us into the next era of energy.
Blockchains are essentially a distributed ledger, where information is spread over multiple computing devices in lieu of a central database.
Hence, computing power also comes from multiple sources instead of a single server.
Vinod Tiwari, a speaker at the 4th International Sustainable Energy Summit (ISES) 2018, explained that information is stored in âblocks,â and thus a string of connected blocks would form a blockchain.
âIf you want to change a block, say block number 18, you would have to remove 17 blocks to get to 18.
Not only that, you will have to remove the 17 blocks simultaneously across all nodes within the network that hosts the blockchain data.
This demands high computing resources, which essentially means that blockchain records are immutable.
Data cannot be easily changed.
It almost becomes an unhackable system, which is why we are seeing more and more blockchain technology applications,â Tiwari continued.
In particular, blockchain enables energy measurement, settlement, reconciliation, and billing of said energy in near real-time.
Additionally, blockchains are ideal where provenance tracking is crucial.
This is clearly especially beneficial for the renewable energy (RE) industry.
âIt works really well when it is dealing with microtransactions in near real-time – it can bring forward the value for transactions in any industry.
We are quite used to the postpaid scenario where we consume electricity and the retailer bills us at the end of 30 days, then we pay after 15 days.
Retailers themselves are exposed during that time period after purchasing energy from wholesalers, so they would have to provide security deposits and bank guarantees to cover this exposure,â he said.
With that in mind, if network operators do not change their approach to charging electricity, the inevitable response is customer defection from the grid.
Once energy storage systems become cheap enough, consumers would begin storing their energy instead of selling it back to the grid.
âIf I do that and others do that as well, it will cause what is considered grid defection, a significant drop in consumption from the grid.
This will force grid operators to increase prices for those who are staying connected, because they need to recover the cost of their assets.
And so it is almost like a death spiral because those who are connected are paying a very high price.
It would motivate them to install more solar and go off the grid as well,â Tiwari cautioned.
For grid networks to remain relevant and be properly utilised, they can use blockchain-based peer-to-peer (P2P) energy trading platforms to incentivise consumers by monetising their assets better.
The platform operator receives a fee for facilitating energy transactions, and different tariffs can be created depending on how far the energy is travelling.
Additionally, grid operators will receive fees for maintaining the grid.
The Power Ledger platform has the ability to apportion the grid fee based on the physical distance between the producer and the electricity buyer, so that the imposed grid fee is fairer to buyers.
âYou can define a new structure of tariffs or networks while still incentivising consumers by letting them utilise the assets.
You are still incentivising them to stay connected, which is what the grid wants.
And you can change things around to make the way we use energy more efficient,â Tiwari reasoned.
He believes that blockchain applications will make energy systems a lot more efficient, whether at the wholesale electricity market level or at the P2P energy trading level.
There will be a change in consumption behaviour as people interact more with markets to derive the best efficiencies.
Pricing signals, for example, can change the utilisation of the grid significantly, having been created for meeting peak demands and incentivising consumers to react to P2P trading platforms.
Regulation plays a role for such changes to happen, especially if the electricity market is highly regulated and only allows the sale of electricity via a Single Buyer.
Once the market is liberalised, however, there also needs to be a change in the grid business model.
âGrids can create and be part of application hosts.
A grid operator can be an application host and devise new network tariffs to make these transactions happen.
So prosumers can trade with consumers, facilitated by an existing physical grid where application hosts could be the energy retailer or a full network,â Tiwari reiterated.
While some blockchain-based companies (such as Bitcoin) are energy intensive, Power Ledger happens to use proof of stake (PoS), a type of algorithm by which a cryptocurrency blockchain network aims to achieve distributed consensus.
âIt is significantly less energy intensive.
Our blockchain network operates on less electricity than a standard laptop.
Not all blockchains are super energy intensive,â he affirmed.
Furthermore, the disruption of utilities was already happening with the rise of other technologies such as solar PV and energy storage.
Companies like Power Ledger are not seeking further disruption either; rather, they look to cooperate with sustainable energy authorities such as SEDA Malaysia to advance their RE agendas, in addition to partnering with grid operators.
Existing grid operators come with existing consumer bases, thus the logic lies in supporting grid operations while scaling up the RE market among prosumers.
âWe see it as a positive change, and our platform helps to redefine the new electricity paradigm.
It makes the electricity system more efficient.
It does not overturn the current grid business model, just modifies it to allow greater public participation to trade energy with each other.â To countries who are about to take on blockchains on a large scale, Tiwari says that you do not have to reinvent the wheel.
âLook at what has happened in other markets.
Maybe Malaysia is not where Australia is right now, but it will get there.
And it will have the same issues that Australia has faced.
You do not have to reinvent the wheel and find solutions then – you can look at solutions that exist.
P2P energy trading is one clear way to deal with grid defection.
It is here and it is available; you do not have to work too hard at it.â â courtesy of SEDA Malaysia With Vinod Tiwari, Head of Business Development for Power Ledger (Australia).