Will blockchain technology revolutionize solar energy?

Translation note: This article is translated from: Bitcoin Technology to Fuel P2P Solar Revolution? Reproduction is prohibited.

An Australian company is applying blockchain technology to the solar energy sector. The company has built a platform based on blockchain technology to facilitate residents to sell their excess solar power to other residents.

This platform is driven by blockchain technology, and one of the most well-known applications of blockchain technology is the cryptographic digital currency - Bitcoin.

What is blockchain technology?

Blockchain technology can be understood as an implementation of a distributed database. This database contains all the records in the system, and these records are fully stored on each node in the network. Since each node in the system will continue to update the data, the normal operation of the entire system does not require the introduction of any centralized service. Each node in the system will continuously monitor each other, and the authenticity of each record generated in the system will also be verified by the consensus mechanism between nodes.

Any information stored on the blockchain will never be erased. Therefore, with the help of blockchain technology, a data record system that includes all records and can be audited and verified is realized.

Although the controversy over the decentralized currency Bitcoin has never stopped, the underlying blockchain technology brought by Bitcoin has been proven to work correctly and has extremely high security.

"Blockchain technology opens the door to a decentralized, open, and scalable digital economy," wrote a paper titled "Blockchain Technology: Beyond Bitcoin" co-authored by Michael Crosby from Google, Nachiappan and Pradan Pattanayak from Yahoo, Sanjeev Verma from Samsung, and Vignesh Kalyanaraman from Fairchild Semiconductor. "This disruptive technology holds tremendous opportunities, and the transformation of related fields has just begun."

P2P Solar Revolution

In Western Australia, blockchain technology has brought about the emergence of a P2P solar surplus electricity trading system.

A solar startup called Power Ledger and Ledger Assets, Australia's largest blockchain software company, created this trading system. Jemma Green, CEO of Power Ledger, said, "This system establishes a direct connection between the producers and users of electricity. They can trade directly instead of through an electricity company acting as an intermediary. The advantage of direct trading is that it saves money, saves trouble, and maximizes the use of clean energy."

The prototype verification project of this system has been tested in Busselton Lifestyle Village, a senior community near Perth, Australia. There are 20 participants in this test, from 10 families. Some of the electricity consumers in the Busselton community have solar panels installed in their homes, while others do not. This combination provides good testing conditions. The reason for choosing the senior community is also due to special considerations, "We want to show everyone that this technology is simple enough for anyone to use, even elderly retirees."

The test began on August 11 and will last for two months. During the test, residents with solar panels installed in their homes will be able to sell the excess electricity directly to other residents through this system, rather than just to the power company.

Busselton’s Sustainability Manager Steve McGill said: “We are very excited to be working with Power Ledger. This pilot project will demonstrate the commercial opportunities of the solar industry and we are excited to see how solar energy, battery storage and smart energy technologies can have a positive impact on Busselton, our customers and the environment.”

Traditional energy recovery

Currently, when a solar panel owner generates more electricity than they use, they generally have two options: store the energy in batteries or, more commonly, sell it directly to the power company.

The problem is that power companies have absolute control over the prices at which they buy back and sell electricity, which is obviously not in the best interests of both consumers and producers of electricity.

Currently, residents in the Bussleton community sell surplus electricity to the power company at 7 cents per kilowatt-hour, while the price of purchasing electricity from the power company is as high as 26 cents per kilowatt-hour, a price difference of up to 19 cents.

P2P power recycling

Power Ledger's P2P electricity trading system allows residents to sell their surplus electricity directly to other residents at a higher price than directly selling it to the power company. Obviously, in this way, the producers of electricity get greater profits, and the consumers of electricity also get lower electricity costs, which is the best of both worlds.

Power Ledger uses its patented blockchain-based technology to identify the owner of electricity at the beginning of its generation, and then completes the transaction between the owner and the consumer through a series of transaction protocols. This mechanism does not add additional costs, which makes lower electricity costs possible.

“Residents can earn more by selling their surplus electricity directly to other residents at a higher price than the power company’s repurchase price. For buyers, the price of purchasing electricity directly from other residents will also be lower than that of purchasing directly from the power company, which will also reduce their electricity costs.” Green continued, “In essence, we have eliminated the power company as an intermediary from the transaction process, achieving a win-win situation for both electricity producers and consumers.”

In fact, during the testing phase, no real transactions will take place in this system. However, once the system is proven to be successful and effective, Power Ledger will launch a formal trading system covering 80 households in the Perth city, which is expected to be achieved in the first half of 2017. As Green said, this will be the first practical P2P electricity trading system in history.

Ecochain: Environmentally friendly blockchain

Unlike Bitcoin's blockchain, which uses the POW (Proof of Work) mechanism, Power Ledger uses the POS (Proof of Stake) mechanism. Power Ledger's blockchain was developed by Ledger Assets and is called Ecochain.

“Power Ledger will be the first application to store power information on Ecochain, the world’s first low-energy, environmentally friendly blockchain,” said a company statement from Ledger Assets. “Ecochain’s operation is powered by solar energy and uses the latest POW mining mechanism (mining is a blockchain term), which consumes much less energy than other blockchain products.”

The transaction confirmation time on Ecochain is 1 minute, which is 10 times faster than the Bitcoin blockchain. At the same time, Ecochain also supports the electricity meters in the power grid to directly exchange information with the Ecochain blockchain, solving the hardware trust problem.

The centralized power grid that drives the vast majority of homes and businesses around the world is actually quite inefficient and also causes huge pollution. Data shows that in the centralized power grid, the process of power transportation and distribution consumes 6%-8% of the total electricity.

If a P2P microgrid structure similar to Power Ledger is adopted, the remaining electricity is likely to be used at a very close distance, which will greatly improve the efficiency of the power grid.

Green believes that the Power Ledger P2P power system is bound to increase people's interest in solar panels and the popularity of solar panels will also increase, which will also help the further growth of the P2P power grid.

For example, a local government department may want to use cheap electricity, but the office building does not have a rooftop for installing solar panels. Residents not far from the government have solar panels installed, but the electricity they generate is not enough for them to use. At this time, through Power Ledger's electricity trading system, the surplus electricity will be easily transferred from the surplus area to the above government departments.

Where will traditional suppliers go?

In Spain, when the automatic consumption mechanism of solar power greatly reduced people's dependence on the centralized power grid, centralized energy suppliers began to lobby the government to levy "grid usage fees", which is the famous Spanish "sun tax" incident. This incident also caused a sharp drop in the sales of solar panels in Spain, and the time for the installed solar panels to recover their costs was also greatly extended.

However, in this experiment of Power Ledger, the centralized grid operators in Western Australia and Victoria have shown a high degree of acceptance of the new technology of blockchain. Energy supplier Synergy is also actively participating in the official version of the P2P network that Power Ledger will launch in 2017.

Green believes that Power Ledger's blockchain-based electricity trading network does not pose a threat to energy suppliers, it is just a new means of competition in the diverse energy market. Increasingly cheap energy storage batteries pose no less threat to energy suppliers than Power Ledger.

"The profits from the business model of traditional energy suppliers have been declining. In the next few years, as the price of energy storage batteries becomes cheaper and cheaper, the competition between the energy stored in energy storage batteries and the electricity in the grid will further expand, which will further reduce the amount of electricity used in the grid."

“However, if traditional energy suppliers can adapt to the changes and seize opportunities, they can seek greater benefits by opening up the grid to emerging P2P electricity trading platforms such as Power Ledger and paying usage fees to suppliers.”

With projects like Power Ledger underway in Brooklyn and Vienna, there’s a strong sense that decentralized energy networks will flourish in the coming years.

It is worth noting that decentralized energy projects can also help developing countries better deliver solar energy, as energy infrastructure in these countries is generally slow to build and unstable.

Will decentralized energy networks surpass Bitcoin and become the most well-known blockchain application in the future? Let us wait and see.