By Anya Nova, Crypto Economist & Business Development, Power Ledger
Around the world the use of renewable energy is accelerating as the technology driving the sector becomes even more efficient and accessible.
But the great challenge for the renewable energy sector is to create self-sufficient grids that are less reliant on fossil fuel back-up and able to handle every possible fluctuation in demand–that is provide dispatchable load.
In addition, renewable energy must find a way to stand on its own financially, free from subsidies or other forms of market intervention for support.
In recent years a piece of technology mostly associated with the financial sector, blockchain, has opened up vast new opportunities for renewable energy, helping to create truly connected, reliable and verified green energy grids.
But how exactly is it helping create and shape the renewable energy grid of the future?
Blockchain is digital proof
Simply put, blockchainis a digital ledger that securely records the details of any transaction.
Distributed and decentralised, records added to the chain are added in blocks, hence the name blockchain, and cannot be altered retroactively without affecting every other block.
Each block generated in the chain holds a cryptographic hash of the last block, transaction data and a unique time stamp.
This elegant digital design utilises sophisticated cryptography for its security, creating an instant digital record that can be relied upon for its accuracy. Another blockchain functionality, smart contracting, removes counterparty risk and allows entities that previously may not have transacted with each other to start transacting.
This combination of high security and digital flexibility has made blockchain a vital part of many modern financial transactions, most prominently for cryptocurrencies such as Bitcoin, where rock-solid verification is crucial.
But while blockchain technology has certainly made a name for itself in the crypto world, it’s quickly becoming a significant force in many other sectors that value secure transactions and an independent audit trail.
One of the most important is the renewable energy sector, which is using blockchain to help tackle its most pressing technical challenge.
The problem of variability
Wind, solar, biomass, tidal, geothermal or hydro.
The technology that drives renewable energy has been proven to work and provides a cost-effective and green alternative to fossil fuel-based energy sources.
Across the world, governments, businesses and households are embracing renewable energy projects and demanding change.
But the big stumbling block for renewable energy remains intermittency.
When the sun doesn’t shine or the wind stops blowing, renewables go offline, forcing grids to use fossil fuel-driven energy sources to pick up the slack.
These sources are also tapped when renewables are unable to handle fluctuations in power use within the grid at peak times.
There are scores of technological solutions being proposed, with the main one being vast amounts of battery storage, so renewable sources can cover every aspect of demand.
But battery storage requires investment. This investment can be subsidised by governments or can naturally occur as participants in energy markets react to price signals.
While this may seem straightforward, the challenge is to create and run a marketplace that is trusted, where millions of transactions can be verified, and where financial settlement can occur without counterparty risk.
Blockchain solves variability of renewable generation
Blockchain-driven energy markets using the ledger and smart contracting functionalities, are emerging and facilitating the orderly integration of renewables into the grid by allowing energy and related grid services to be dispatched and traded in real time and with total security.
This solves the problems of intermittency and variability that strain the grid. Grids are able to source their renewable energy and grid services from more sources, such as excess household solar stored in batteries and EVs, with instant transactions completed securely and transparently using blockchain technology.
Blockchain’s secure and transparent data allows energy grid operators and anyone else to acquit energy generation against consumption and to procure clean energy and energy services with the sure knowledge that it’s being purchased from a renewable source.
In other words, blockchain is a market-making technology that brings the required level of orchestration to the multitude of participants in the energy sector.
This makes it possible to more confidently establish a totally renewable grid or switch to alternative energy sources without having to resort to fossil fuel-driven back ups.
This blockchain-aided process means that renewable energy grids will be able to operate around the clock with total confidence as more batteries, whether stationary or in EVs, are incentivised to contribute.
And while blockchain is solving this important technical issue for the renewable energy sector, it’s also driving rapid change in its economics, particularly amongst consumers.
Blockchain creates a new energy economy
Computers were once the preserve of those who could afford them or had a use for them – usually big businesses, governments and institutions.
But starting in the 1980s, the widespread emergence and embrace of the personal computer led to the development of a multi-billion-dollar global trade that has completely revolutionised our lives.
A once specialised technology for the few became the standard for the masses.
This is the trajectory the renewable energy sector is working to emulate, where green energy sources become so widely available that they develop their own economic momentum.
Blockchain is emerging as a key element in making renewables attractive for consumers without the need to rely on subsidies, with peer-to-peer (P2P) energy trading and participation in virtual power plants (VPPs) rising in popularity.
Via a localised energy marketplace, a home with solar panels and a battery is able to sell any excess energy it generates back into the grid or to another home using blockchain-secured transaction technology.
This simultaneously helps the renewable energy grid deal with fluctuations in power generation and intermittency by allowing it to tap into a distributed network of households that have easily verified sources of renewable energy available.
But it also generates quickly-paid and easily-tracked income for households and cheap energy for communities, further accelerating the cost-effectiveness and appeal of using renewable energy.
The future of blockchain and energy
The rise of renewable energy in recent years has been swift and far reaching, with countries worldwide embracing green energy sources at a scale once thought impossible.
The issue of orderly integration of renewables remains a challenge, but the rise of blockchain technology as both a technological and economic solution is a powerful agent for change.
Using blockchain-facilitated tracking and trading, renewable energy grid providers can swiftly and securely source alternative renewable energy and services during times of need.
Meanwhile, trading renewable energy amongst consumers, and from consumers to larger players, creates a viable economic base and a thriving ecosystem of users whose efforts provide the grid with a way of smoothing any demand or supply issues.
Using blockchain, the renewable energy sector can take charge of its own destiny.