Blockchain’s Emerging Role in Energy

Shared solar is the next big threat to legacy energy providers

Blockchain has taken the financial world by storm, encouraging accountability in an industry which has struggled to regain trust. It’s not just the financial sector that is benefiting from the technology. For example, blockchain is currently used for data storage, supply chain communications and even voting. Innovative organisations are now finding more and more applications for the technology, especially in industries that are crying out for disruption. One such example is energy storage and provision. In Brooklyn, New York, LO3 Energy has created a peer-to-peer (P2P) transaction system which enables the exchange of solar energy within the community. Could this be another nail in the coffin for legacy, finite energy providers, and how will the peer-to-peer model disrupt energy as a whole?

Blockchain – not just for banking
The underlying principle behind blockchain is the general ledger, which is a long record of transactions which are incredibly difficult to tamper with. This system works for just about any collaborative initiative, which makes it applicable well outside of banking. LO3 Energy’s Brooklyn Microgrid allows users to sell locally generated, green energy to their neighbours via ‘smart contracts’. By reducing reliance on central providers, the system gives control to the community itself. According to LO3 Energy’s founder, Lawrence Orsini, “People can now make choices and decisions about how they want to participate in the energy market.” The project focuses on solar, which is arguably the most developed renewable energy source. However, there’s no reason as to why microgrids can’t be applied to other alternative power options in the future. The Brooklyn Microgrid is also a compelling case study for the establishment of similar systems elsewhere. In fact, trials in Australia are planned for later this year. Alongside advancements in battery technology, consumers will be able to store a greater capacity of power, making the microgrid even stronger. Whilst the encouragement of renewables is an important development, the concept of peer-to-peer provision has emerged as an incredibly disruptive trend in consumer markets. This attitude, enabled by technologies like blockchain, is the real challenge to legacy industries.

How disruptive is the peer-to-peer model?
In terms of energy, the most obvious effect of P2P solar is driving down the cost of power. This is great for environmentally-conscious consumers who want to maximise energy potential, and will help to accelerate the adoption of renewables. It could also help to recover from shortages and black-outs by acting as a ‘back-up plan’. This is undoubtedly beneficial for the communities involved, but on the other hand it presents a serious challenge to the centralised energy market. Less reliance on central repositories will force legacy businesses to abandon their traditional role as providers and become administrators. There is still a place for established firms as the infrastructure of the general grid will still be needed. The microgrid runs alongside the main grid, and is nowhere near ready to feasibly replace it. . . not yet, at least. In order to be successful, P2P networks require co-operation between users. All it takes is a reliable, secure platform, and blockchain appears to be the answer. Outside of energy, the blockchain powered P2P model could impact other modern commodities like WiFi, making Internet access ubiquitous. Retail is currently facing the challenge of retaining customers who can get hold of the things they need via collaborative consumption. In fact, all applications of P2P are contributing to the rise of a mass sharing economy. This isn’t just going to impact telcos, retailers and utilities – it’s going to transform the economy itself.

Within the energy sector, blockchain has the potential to deliver the disruption needed for the adoption of renewable power sources. However, there is still serious work to be done in terms of technological ability. The reliability of solar energy itself is still debated, and blockchain is continually undergoing development to improve the amount of transactions it can process. Never the less, by enabling the growth of the peer-to-peer model, the innovative financial solution is fuelling sustainable collaboration in a wide range of applications. It’s time for legacy companies in all sectors to recognise this economic and societal shift, and reevaluate the relevance of their business strategies in response.

Can existing providers continue to operate alongside peer-to-peer energy? Which other sectors could face disruption from P2P? Will the Brooklyn microgrid inspire other communities and cities? Comment below with your thoughts and opinions.