Can Blockchain Change Power Industry?

24.08.2016

These days, there are more and more news on implementation of blockchain technology in power industry, namely in renewable sources of power (RESOPs).

Last April two Brooklyn-based guys have used Ethereum’s blockchain to effect transactions enabling one of them to directly sell electric power to the other. The neighbors managed to do it under the auspices of LO3. The transaction concerning the sale of abundant renewable energy was concluded between Eric Frumin and Bob Sauchelli thanks to initiative dubbed TransActive Grid (which is a joint project of LO3 and ConsenSys).

A few days ago, Australia saw the beginning of a bigger experiment to sell electric power using blockchain technology. Testing of the system enabling private households to sell electric power without intermediaries involves ten families. For two months, they will be selling electric power without added value by using a blockchain-based system allowing for tracking the power and money.

Meanwhile in Belgium, blockchain researchers have gone even further and developed a ‘smart’ power system dubbed Scanenergy, whose members will produce and consume power at the same time. NRGCoin may become their alternate currency. Once a member has excessive power, he or she connects to the smart local network to earn a unit of internal currency for every generated kW*h. In case they need more power, they may buy the required number of kilowatts for the same price paying with previously earned NRGCoins. The internal currency will be also exchangeable for traditional money.

According to Mikhail Mikhaylov, one of the project’s originators, the price for a unit of energy is fixed in the data exchange protocol underlying the system. Therefore, people are protected from changes occurring when third parties, like authorities or power companies, make their decisions.

At the first glance, implementing blockchain technology in alternative power industry may disrupt it and make electricity nearly free, but is it really so?

Solar energy industry is on the march, and the trend isn’t going down. In particular, the IEA has issued a forecast for global economy development by the year 2040, which states that RESOP technologies will keep on cutting power costs. Thus, in case of solar batteries the decrease will comprise 30 to 50 per cent, while the cost of batteries, which are the most expensive part of photo-voltage systems, will drop by 50%. This would result in the growth of RESOP’s share in power generation from 12 to 24 per cent, and from 14 to 19 per cent in power consumption. My all means, RESOPs aren’t just solar batteries, but also windmills or biomass usage. Still, solar power occupies nearly 90 per cent of the overall RESOP scope.

As for economy, it all looks radiant as well. The British government believes that by the year 2025 atom generation’s cost will exceed that of solar generation. They expect the price to be at around 60 pounds per MW*h.

But, if we approach to the problem critically, we’ll start hearing lots of alarm calls. Thus, only few analysts or marketing experts involved in RESOP industry acknowledge that the solar glut is caused not by low cost efficiency or technological advantages, but by legal measures assumed by most governments in an attempt to reduce CO2 exhausting level.

Such measures include tax perks for solar energy producers, crediting quotas, forced procurement of energy by power grids, and so-called ‘green tariff’, i.e. procurement of ‘solar electricity’ at a higher rate. Certainly, all losses are incurred by traditional power industry and the economy as a whole, which resulted in a string of bankruptcies amongst power companies around the world.

Consequences of such attempts to legally regulate the market are obvious even now. As of this year, the prerequisites for solar power plants will shrink or disappear completely in countries like Germany, the UK, China, and India. In Japan, for instance, the cancellation of prerequisites will cause nearly 30 per cent of planned and endorsed ‘solar’ projects under 56 GW to shut down. This has seriously shaken solar energy enterprises.

For instance, the cost of Germany-based Solarworld, the industry’s flagship from Germany, has dropped from 7,000 to 4.6 Euros. In general, analysts from GTM Research believe that overall annual value of RESOP generation will decrease by 12 per cent in 2016 as compared to 2015.

So, what’s the conclusion we might make on the basis of the aforementioned? Will the RESOP/Blockchain system provide all people on Earth with free electric energy, or blockchain companies should better beware alternative power sources like hell? It seems, neither.

Blockchain developers have to realize that solar energy is an immature industry. Currently, applying RESOPs is reasonable only within optimal combination with power efficiency measures, while industry-wide installation of such systems is financially reasonable only in remote areas with decentralized autonomous power supply. Therefore, all efforts shall be focused not on ‘transparency of payments’Â or ‘removal of intermediaries’, but on increasing the efficiency of such systems in technical terms.

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Tags: blockchain, energy