Traditionally, energy systems flowed in one direction: from big power producers to consumers. Now, with more people getting rooftop solar panels, they're increasingly two-way: homes send excess power back to utilities, reducing their household bills. In the future, we may see a third change: people trading power not only with utilities, but also with each other.
Several startups are now working on the trading aspect, including Power Ledger in Western Australia. It's launched trials based on blockchain technology, which offers an inviolable internet-based record of transactions as they take place. Blockchain came to prominence with the bitcoin virtual currency, but increasingly it's being used to track and authenticate all kinds of asset trading, from stocks and bonds to electrons.
"The energy system used to be linear: energy flowed from distant generators to consumers via long networks and was facilitated by wholesale markets and retail agents," says David Martin, managing director of Power Ledger. "The system is more distributed now and energy flows in multiple directions. Yet we still rely on wholesale markets and retailer intermediaries to operate as they always have."
Martin argues that the decentralized blockchain system, with its string of trusted nodes all over the world, could align with the decentralized energy system to create something really new. Essentially, the blockchain could complete the job of solar panels in allowing people to sell energy at the price they want and maintain rights to their power whenever they need it. (We covered some other blockchain energy projects here).
"Blockchain can be used to create a trading platform that is secure, low-cost and fast," Martin says. "It's ideal for managing the multiple transactions that occur between prosumers and consumers when excess energy is spilled into the distribution network from rooftop PV."
In Australia, households currently sell surplus power to energy retailers for about 6 cents per kilowatt hour. But, when their battery runs low, and they need to buy power back from retailers, it costs them 25 cents per KWh. The market for excess solar power is closed: home-owners either accept the prices on offer, or the power goes to waste (assuming home-owners can't store it).
Power Ledger has three trials in the works. The first is at a local retirement facility and involves 15-20 homes; it will verify, record, and settle electron transactions virtually. The second, set to begin in Fremantle next year, involves 80 homes trading electricity across a network and settling transactions. The third, now being negotiated with an electricity distributor in Victoria, should begin next year as well, and will incorporate a wind farm and solar system.
Each pilot will test whether blockchain technology can track electron transactions and offer a way for consumers to make more money from their excess power. The first trial, in Busselton, Western Australia, will help work how much return on investment people can make from solar given an open market for excess energy.
Blockchain networks offer a way for households to leave the main grid and set up independent co-operative microgrids, where people trade power according to need (as in this pilot in Brooklyn). They also could help incorporate people without solar panels, allowing them to trade with people who do.
But Martin says retailers could offer blockchain trading as a way of keeping hold of customers and not having them completely defect from the grid. "P2P energy trading presents an additional value proposition for network businesses to provide to consumers," he says. "The network company wins because they're paid for the use of the network, stalling issues like decreased asset utilization, load defection and, ultimately, the death spiral."
There's much to be worked out in solar markets and blockchain technology. But the building blocks are available for a completely different energy system based around distributed generation and decentralized structures. We may still need utilities, but blockchain could help change our relationship with big companies, offering more local and household control.