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Renewable Energy and Blockchain

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My name is Indiana Lee writing to you from the Pacific North West.. I have been a professional writer for almost a decade and you can find a small sample of my work on my...

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  • Apr 3, 2020

We’re officially in crunch time in regards to emissions reduction. At this point, we need to move beyond eliminating wasteful uses of fuel and energy and focusing on shifting more exclusively to renewables.

Smart light bulbs and automatic starters to prevent wasteful engine idling won’t save us. The world needs to be fully renewable by 2050 to meet global warming targets, and that’s now only 30 years away. For the energy sector, the task is mammoth because our energy grids are so bogged down with inefficiencies that identifying opportunities for growth in renewables is a challenge.

The power of the blockchain for a long list of industries and applications is only just being realized, but it’s most transformative impacts could be felt not in finance or even in tech but in the energy sector. Blockchain could not only remove the inefficient processes that plague energy grids but turn over energy to the masses in a way that’s sustainable and rewarding.

What is Blockchain?

Simply put, a blockchain is a database that stretches across a network. The records within the database exist in bundles known as blocks. They’re then added to the chain in links, one after another.

Blockchain is decentralized and distributed, which makes it an incredibly powerful database. When a new record is added, it’s checked by the network’s computers (or nodes) to make sure it’s valid before adding the record to the block. Every blockchain has its own unique code as well as the unique code of the previous block in the chain: these codes are known as hashes. These hashes connect each block together in the order in which they were added.

The hashes are important because they make the record almost impossible to change. Hashes are always the same length, and any change, no matter how minute, to the original block, generates a new hash. If a change occurs, it impacts the whole chain because every block will still have the old hashes. Recalculating every hash takes up an enormous amount of energy and ultimately impacts the entire blockchain. It adds a layer of security that’s almost unprecedented.

If you’re a visual learner and looking for a great infographic, check out this one from Reuters.

How Blockchain Can Aid Renewable Energy

Blockchain’s most prominent applications are in finance and cryptocurrency. But where does the immutable ledger play a role in the advancements of the energy sector? As it turns out, blockchain has a huge role to play in supply chains generally and particularly in the energy supply chain.

For energy companies, blockchain unlocks a concept known as the smart grid, which is a “smarter” version of the current energy grid. The typical electricity grid features electrons, which are generated by energy types that are indistinguishable from another. You can’t tell whether the electron generated is the product of fossil fuel energy or solar. Currently, governments use tradable certificates to track the production of clean energy, but the system is so clunky that it’s preventing further investment in renewable energy.

Why is it clunky? When a power plant generates a single unit of power, a meter produces data and logs it in a spreadsheet, which then gets passed to a registry and then entered into a new system. Only then is the certificate created. There are also intermediaries and third parties who buy, sell and verify the certificates. For every new transmission, an error is possible, either by accident or through fraud. And spotting those errors is hard work. It’s a complex and expensive supply chain that impacts the cost and value of delivering renewable energy.

By using the blockchain, everyone involved in energy production can keep track of the certificates and better manage their shared data. All those moving parts above disappear because the meter would write data and add it to the block. If there were changes, it would be obvious and wouldn’t take a hero to identify it. The product could be a re-energized energy grid, and it would be huge for renewables, particularly those companies still in their SME phase.

Blockchain’s Role in Fighting Climate Change

The data sharing allowed by blockchain is a big part of its appeal to those working in renewables. When you can share data in real-time, you’re not only working more efficiently but you also give consumers control. You then allow them to make smarter choices both when choosing an energy provider and even when choosing what energy sources they use. SMEs also get a bigger cut because, in the current system, it can take months for producers to get paid for their energy, but blockchain systems allow them to get paid quickly, which allows smaller products into the market and helps them grow.

Blockchain-based smart energy grids could even allow neighborhoods to trade energy on microgrids. These advances would cater to consumers’ increasing desire to ‘shop local’ and give people the option of clean energy in places where large energy companies have been slow to adopt. Blockchain can make energy transfer and distribution easy while also protecting payments both between providers and between providers and consumers.

It can also help regions that struggle with emissions and reaching goals. India is best known for a combination of energy poverty and its goals to switch almost entirely to renewable energy. In early 2020, India announced that its new renewable energy capacity target is growing to 175 gigawatts by 2022 and 450 gigawatts by 2030. 

So far, India has come a long way since its first commitment in 2010, but the combination of its 1 billion and growing population combined with the vast size of the country means adoption is a challenge. As Yvo Hunink writes in his fascinating series for Energy Bazaar, with the use of blockchain, a biomass plant in rural India could contribute to the central grid, which would not only allow for inclusion and wealth creation but also better protect microgrids installed across rural India from being shut down due to commercial viability. 

With the right commitment, it’s possible to see the same kind of transactions take place in the world’s other fossil fuel burning nations, like the U.S. and China.

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Matt Chester's picture
Matt Chester on Apr 3, 2020

lockchain-based smart energy grids could even allow neighborhoods to trade energy on microgrids. These advances would cater to consumers’ increasing desire to ‘shop local’ and give people the option of clean energy in places where large energy companies have been slow to adopt.

I've heard a few times about these time of exciting applications, but has anyone taken them from conceptual paper idea to actual implementation, or at least pilot?

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