Editor’s Note: This article was first published by the Environmental Defense Fund, an organization focusing on creating economical policies to support clean air and water; abundant fish and wildlife; and a stable climate. The article was authored by Dick Munson and originally appeared here.
Talk about a disruptive technology. Blockchain – the secure, decentralized and highly efficient platform for keeping track of infinite transactions – could soon be revolutionizing America’s electricity markets, too.
Anyone wondering just how a “peer-to-peer power grid” works can look to LO3’s microgrid project in Brooklyn, New York. It’s where 60+ residents are now trading electricity they generate from solar panels to neighbors in need of extra power, via a simple app.
Or to Europe, where companies are rolling out blockchain technology to enable energy trading between utilities, between residential customers, or simply to help owners of electric cars charge up their vehicles with their cell phones.
Investors smell opportunity, too. Technology giant Siemens just committed an undisclosed amount to LO3’s startup platform, signaling what’s ahead: The powerful blockchain tool may soon change how consumers buy and sell energy, transforming electricity markets as we know them today.
22 million users and counting
Virtual energy markets are built on top of existing infrastructure to track power that is produced and bought, using blockchain to account for such transactions. It’s the same technology that the wildly popular bitcoin cryptocurrency is using, and which is now transforming the world’s financial markets – while also making inroads in insurance industries, political systems and philantrophies worldwide.
Nearly 22 million people use bitcoin today to make electronic peer-to-peer transactions without an intermediary bank, according to Blockchain, the world’s largest provider of digital bitcoin wallets. That’s twice as many as a year ago.
Will peer-to-peer energy trading see a similar growth curve?
Utilities face technology wake-up call
As distributed, decentralized energy resources such as batteries and solar panels continue their rapid growth, some analysts believe the market for blockchain applications could actually be larger in the energy sector than for financial services.
This poses new challenges for entrenched power companies. Some may lose revenue over blockchain, while others embrace the technology as part of their business model.
How it’ll all play out here in the United States will depend, in part, on regulators, but also on consumer demand and evolving market trends.
As grid modernization and new utility business models gain traction, disruptive technologies such as blockchain point to innovative approaches for delivering efficient, reliable, affordable and clean energy – all of which can be strong selling points as we’ve seen across the pond.
Europeans take the lead
In Europe, where utilities have less market control and distributed generation is accelerating, peer-to-peer and business-to-business energy trades are getting significant attention:
- German electric utility RWE is testing a blockchain application for charging electric vehicles.
- Vattenfall AB, the largest Nordic utility, plans a blockchain app that would allow its customers to buy and sell power independently of the utility.
- Austria’s Wien Energie is participating in a blockchain trial focused on energy trading with two other utilities.
- Finland’s Fortum plans to let consumers control appliances over the internet in connected homes, using blockchain.
These are just a few examples, and there are developments in other parts of the world as well.
Energy trading made safe and secure
Rather than being stored on a central server, peer-to-peer transactions are replicated across a number of computers, creating a data store that records exchanges in almost real time. To guarantee secure transactions and prevent hacking, the authenticity and identity of participants are maintained through cryptography and digital signatures.
And because blockchain technology is decentralized and accessible from multiple locations, trades of electrons – as with bitcoin funds – can’t be frozen, withheld, seized or taken.
Who will take most advantage of blockchain as it enters American electricity markets remains an open question for now. But count on this: LO3 and Siemens, first out of the gate, will have followers very soon.