Blockchain technology has evolved from its initial application as a platform for cryptocurrency exchange to a tool to facilitate smart contracts in every area of business. As a result, many are enthusiastic about the positive transformation that it has the potential to create in the modern world. Although the energy sector has been slow to adopt new technologies, the possible benefits of integrating blockchain into the industry could lead the general population to reduce the use of fossil fuels in favor of more affordable, efficient, clean energy.
One blockchain concept within the energy sector that could reduce reliance on fossil fuels is peer-to-peer energy trading. The decentralized nature of blockchain technology hints at a future in which energy producers interact directly with consumers. This model is in stark opposition to the current energy model, in which the consumer and the energy-producing business are separated by a multi-tiered system of intermediaries. When these middlemen are removed from the process, energy transaction costs could significantly decline while efficiency levels increase. In this model, the use of renewable energy technologies, like solar panels or Distributed Energy Grids (DERs), would allow private citizens to generate power, which they can then sell directly to other people living nearby via the blockchain, rather than back to the electricity grid, as in the current model.
Although the number of solar power installations in the United States doubled last year, the number of homes equipped with the technology is still a fraction of that of the rest of the country. Encouraging the public to invest in the adoption of this clean, efficient form of energy is a challenge in the battle to reduce reliance on unsustainable fossil fuels. However, blockchain technology may help to provide some incentive. An investment in solar or other renewable energy would cover one’s own cost of power while also offering consumer-producers the ability to receive immediate payment from those whom they supply through the blockchain. The transparency, affordability, and ease of use that blockchain offers could inspire a significant number of consumers to become consumer-producers, creating a decentralized, clean energy market that appeals to both private citizens and major investors.
Blockchain energy projects in this vein are already well underway. For example, through the Brooklyn Microgrid, a project which began in 2016, five buildings in the New York City borough were equipped with rooftop photovoltaic systems to power themselves. Any leftover energy that is not used by the buildings is sold directly to five nearby households connected to the participating buildings through the existing power grid, with the transaction stored and managed through blockchain technology. The ultimate goal of the project is to create a local cooperative organization that operates the program, with the collective group acting as the organization’s shareholders. Similar projects have been begun abroad, including Vattenfall: Powerpeers in the Netherlands, Slock.it in Germany, and Oneup, also based in the Netherlands. Although these kinds of peer-to-peer energy projects have a long way to go before they become routine, their growth has continued. Overall, blockchain demonstrates the potential to decrease dependence on fossil fuels and increase reliance on renewable energy.
