Smart technologies are on the brink of revolutionising the energy sector. Smart blockchain applications start to fade out of the fossil era by introducing better options along the value chain. The FY2020 has demonstrated that renewable energies are more resilient and socially accepted in comparison to their dirty counterpart. As a result, further advancements in blockchain, IoT, and AI will close the massive shortfalls inherited by an outdated energy industry and herald the smart power sector era.
While renewable energies have won the battle in 2020, the outcome of the war is yet to be determined. Whatever one thinks about renewable energies, the rationale behind milking the sun, wind and water is clear. Hence, the value of paving the way towards a more sustainable and environmentally friendly energy sector should be undisputed.
Blockchain applications and renewable energy
Blockchain, and especially Bitcoin (BTC), have a stigma of being energy-intense processes. Compared to other payment methods, this might be true. However, Bitcoin is unlikely to become a preferred payment method but rather viewed as a store of value like gold or silver. Thus, comparing the environmental footprint of BTC to these more accurate use-cases can draw different conclusions.
Gold and silver depend on fossil fuels to be mined, smelted, shipped, stored, etc. BTC miners often use renewable energies for the same processes and can be monitored meticulously.
Gold-mining accounts for 132 TWh of energy consumption per annum, whilst the current estimate for Bitcoin-mining is 121 TWh. Not included within these estimates are the harsh environmental side-effects of gold-mining. For example, extensive use of harmful chemicals, and landscape destruction. In addition, transporting gold accounts for further energy consumption. This factor, however, is already included in the BTC estimate.
Alternatives for the dilemma
To conclude, comparing apples with pears reflects poorly on BTC. Whilst comparing the digital currency to its more accurate use-case turns the table dramatically. Besides, many other cryptocurrencies soley focus on the payment sector with amazing results regarding transaction speed, cost and power consumption. These blockchain applications would be more relevant to compare to credit card payments and bank transfers in relation to the power consumption. Chainlink, a Ethereum based digital currency, is one example for a promising player in the field of the payment sector.
In the rest of this blog post, we will summarise the blockchain applications that can decarbonize the industry’s footprint further. To conclude, we will also consider the footprint of BTC.
Decarbonization, Digitization, Decentralization, Incentivisation
Fossil fuels power 63% of the current electricity generation. With the ongoing electrification of so many industries, total consumption will increase dramatically. Hence, a steady increase in renewable energy deployment is not enough. In 2020, all newly installed renewable energy power plants only accounted for ~ three-quarters of the consumption increase.
One of the biggest challenges at the moment is the urgent need for $22.5 trillion in investment for the energy sector until 2050. However, energy efficiency will be the MVP of the energy transition. In this blog post we will address the whole value-chain of electricity, from generation sites to transmission. Finally, we will focus on power consumption with the buzzword ‘energy efficiency’.
For the energy sector to achieve effective energy efficiency, a leap in the current data gathering, processing and monitoring processes is essential. Digitization and the logical consequence of decentralization are key concepts in truly creating smart data-usage to accomplish energy efficiency.
Renewable energy deployments skyrocketed in recent years, mainly due to governmental and consumer pressure. Currently, another push factor is the declining LCOE of renewable energy resources. Solar PV became the cheapest electricity source in history, with wind power breathing down solar power’s neck. Hence, decarbonizing the electricity sector means further investment in renewable energy solutions rather than outdated fossil fuel options.
The increasing amount of power generation assets and consumption produce huge amounts of data. Data from solar panels, batteries, BEVs, etc. is collected via sensors to form a network of generation, transmission and consumption charts. However, this data is implemented slowly to smart applications for BEV charging, intelligent homes and storage to identify usage and behaviour patterns for further optimization. The latter, smart applications, need to be given more attention in the future as these have a massive potential for energy efficiency and, consequently, energy savings.
Combining all of these data points on the IoT and Blockchain allows for almost unimaginable innovations. For example, (i) Renewable Energy Certificates (RECs) to track renewable energy generation and prove its origin, or (ii) smart-battery installations attached to renewable energy assets to sell power when the price is high and store power when the price is low. Fully automized machine-to-machine communication can make these optimizations a reality.
As the residential deployment of solar PV increases dramatically, with more people deciding to become prosumers every day, the power sector’s decentralization becomes a reality. In one of our previous blog posts, we have already reported ‘The power plant of the future‘ and the evolution of microgrids. One of the most significant factors within this development will be integrating different OEMs products to communicate via machine-to-machine transmission. The need for such an overlapping technology calls for blockchain and AI installation, with the central vehicle IoT.
Virtual power plants and virtual batteries will enable wholly automated power distribution within these microgrids, internally and externally, with neighbouring microgrids. Microgrids will communicate with each other and the primary grid to minimize energy losses and failures.
Like any new technology needing a kick-start, blockchain-based applications require the support of corporations or governments. Cryptocurrencies that solely provide solutions for storing value or enabling peer-to-peer transactions are self-regulating. In contrast, the applications we will discuss later on require collaborations with huge market players to unleash their potential.
What are the most promising blockchain applications?
The energy sector provides a playing field for blockchain, IoT and AI. For the following fields, solutions are already available and in operation, i.e. (i) Data Collection, (ii) Authenticate, Validate & Secure, (iii) Decentralized Data Marketplaces, and (iv) Process, Analyse & Automate.
Sensors for data gathering purposes are used widely in your home, at the office and elsewhere. All of this gathered data forms the IoT. The definition of IoT could be ´everything attached with a sensor to transmit data via the Internet´. For the energy sector, these ‘things’ are power plants, parking lots, fridges, transmission lines, smart meters, etc. Depending on the intelligence of such sensors, user behaviour and usage patterns can also be taken.
These data streams call for secure and reliable information gathering to fulfil their utility of creating databases and displaying data. This is where blockchain applications enter the playing field.
XAGE – is a blockchain application to create a security fabric and secure IoT devices. It enables autonomous operation, credential rotation, access control, and zero-touch deployment. The more IoT devices connect to the network, the safer it becomes.
Everyone in the energy sector would be pleased to have reliable remote meter readings of generating assets by simultaneously increasing cybersecurity. With this technology, outages can also be detected quickly and increase the availability of assets.
Slock.it – BEV charging infrastructure is one of the biggest challenges in electrifying the transport sector. Therefore, Innogy Innovation Hub and Slock.it prepared a solution to share private EV charging stations. Via peer-to-peer transactions, everyone connected to the system can use the home charging stations of their neighbours.
Authenticate, Validate & Secure
The more granular our energy mix becomes through increasing market participants, the more difficult it gets to monitor data streams. The challenge is to validate and authenticate where power comes from as the grid can’t distinguish an electron from a renewable or fossil fuel source.
Blockchain is a brilliant solution for such examples. At the moment, numerous projects are in the pipeline, with the most promising listed below:
Energy Web Foundation – The easiest way to describe this new platform’s functionality is to imagine the CO2 certificate market and mirror its process but in the opposite direction by accrediting renewable energy generation with certificates. In practice, that means that every generating renewable energy asset linked to the energy web chain receives Energy Attribute Certificates (EACs) equal to the amount of generated power.
EACs include (i) the source of the power (solar, wind, hydro, etc.), (ii) the geographic region of the generating asset, (iii) the exact amount of electricity generated and (iv) the date and time. To trade the renewable energy certificates the EWF built a blockchain-based credit market. This process is more efficient than all of the other vastly manual-driven projects currently available. Blockchain trading allows for further automatic add-ons like kilowatt-hour mapping of carbon offsets. The blockchain is used only for what it is best at enabling trust between two machines communicating and processing transactional data instantaneously. Many other decentralized IoT applications will allow for the Energy Web Chain’s functioning on top of the blockchain layer.
Use-case for BTC and corporations
With this functionality, BTC mining farms get the chance to prove their power origin. It would make the cryptocurrencies footprint more transparent and provides an opportunity to lay off the stigma to be environmentally harmful. Another brilliant opportunity is the integration of this blockchain application into Power Purchase Agreements (PPAs). Many countries, especially in Europe, will no longer provide Feed-In-Tariffs for new deployments. Subsidy-free PV-Plants become the new normal and naturally have to compete on the market without any subsidies. Validated origin of power might be a driver in price for power utilities as large corporations like Apple or Google striving for net-zero operation of their business. Greenwashing accusations would become an issue of the past via fully transparent balance sheets of power purchasing processes.
Power Ledger – This project is very similar to the EWF, with the difference that they also enable shared ownerships of renewable assets or BEVs. Power and EVs can be traded peer-to-peer, with further input of the assets data.
Decentralized Market Places
The idea behind decentralized marketplaces comes down to buying the gathered data to develop smart algorithms via AI for efficiency optimization. With all the processes mentioned above of collecting, validating and processing the data to a usable format, massive enterprises and grid providers can develop algorithms for better power management.
Ocean Protocol – This platform allows you to buy data and sell your household data concerning power consumption. The obvious benefit for energy firms is the validated and high-quality data to feed their AI algorithms which will set off electricity bills in the long run. On the other hand, a consumer can earn tokens by providing access to their smart meter.
Grid Singularity – This is one of the many applications on top of the Energy Web Chain. A fully automated platform to buy & sell power in real-time. Enterprises can finally prove where their purchased power comes from and offset their carbon emissions with EACs. Grind Singularity offers a new opportunity for corporates to enter validated PPAs. Greenwashing accusations suddenly become a problem of the past.
Process, Analyze & Automate
The missing piece of our perfect energy value chain puzzle is to develop AI algorithms for machine-learning purposes. A human being will never be capable of making the right decisions for the underlying issue fast enough. In contrast, machines programmed to learn and identify patterns will solve this issue. Distributed computation and machine learning are the processes of distributing the according slices of a problem to all the applications discussed in this blog post. Each application then solves its piece of the puzzle and reports the solution back.
Fetch.ai – They build tools and infrastructure to enable a decentralized digital economy. The platform offers decentralized machine learning based on a distributed ledger. As a result, secure sharing, connection and transaction of any data globally become possible. The use cases for this technology are incredible. Optimization of financial trading for users; reconfiguration of the public transport; intelligent adoption of cities by analysing the user behaviours of the citizens; restructuring of the gig economy; and the connection of energy networks in a smart grid.
Other exciting blockchain applications in the sector
If you are a prosumer or a power company, you should look at the solar coin foundation. They provide everyone generating power with solar PV with 1 Solar Coin (SLR) per generated MWh. At the moment, one SLR trades for $0.03 and would add some additional revenue to only selling the power. This additional revenue comes for free and might be a deciding factor in profitability calculations of solar PV assets. Major players in the market like SMA or Green Power Monitor offer solutions to automate the SLR collection via their SCADA solutions.
Another exciting project is sunexchange.com. This platform offers to buy individual solar cells anywhere in the world with BTC. This can be a compelling investment case and, on the other hand, provides solar power to rural locations worldwide.
To conclude this little journey into a perfect world, we want to draw your attention to this blog post’s key learnings. The energy sector needs to catch up with other industries already utilizing the relevant data for innovation. When AI eventually hits the ground to create a fully automated grid, blockchain applications represent optimal vehicles to store and validate the collected information for further usage.