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But for everything else, we still have a system where, more and more, consumers are frustrated to pay so much for electricity and not to get a fair return on their solar investments. A system where strong winds it can darken 20,000 homes. Where investments in renewable infrastructure are limited to sophisticated investors and carbon emissions initiatives are limited by cumbersome registers.
These problems are asking questions about today's energy markets. And if we let go of the preconceived views on how the solution should look, blockchain can respond to many of them.
Better management of the energy system
The use of blockchain means that consumers can sell the electricity produced by the battery to their retailer during peak periods and provide energy services to help dealers manage their price risk, receive a higher price for the own energy and pay it the same day.
projects benefiting from this type of agreement are already underway, allowing customers to change their usage habits to consume energy in off-peak billing periods.
If electricity is expensive one night because everyone takes a shower, the price mechanism can kick start and run the system so that it warms the water a little later on when the peak is finished.
If the market has a high price, you can set up your system to automatically send your energy and get paid immediately.
Cross-selling retail: a market in good faith
Today, families with solar panels can sell their excess energy to an energy retailer at a fixed price, and the retailer sells it to other families. This is possible only if both customers use the same energy provider, not to mention the payment to the family that sells energy can take months.
On the contrary, the use of the blockchain can provide a fast and cross-retail peer to peer trading and settlement system that can constrain the financial transaction to the physical transaction, regardless of who the energy provider is. The use of a blockchain mitigates the risks of a single party that controls the central repository of sensitive information, as would be necessary if using traditional database technologies. A blockchain denies the need for a central authority to settle transactions.
As for regulators, access to immutable and validated market registries offers the potential to help simplify disputes and complaints, reducing "undersized" incidents.
Low-cost and low-carbon energy for everyone
If we are able to activate more peer-to-peer interactions through networks, we can build an economic framework and a market where the owners of solar energy and batteries are encouraged to continue to support the general system, rather than to detach themselves completely from the network. This keeps costs and customers happy. Customers without solar panels can buy renewable energy from their neighbors, which allows them to contribute financially to the renewable energy economy.
Carbon markets
Currently, the emission of carbon credits and the register for renewable energy credits are managed on spreadsheets. The negotiation of credits on the secondary market is largely managed through aggregators and intermediaries, making it a manual, opaque and expensive process.
Efficient emission
The monitoring of carbon credits tokenized on the blockchain has the additional advantage of ensuring that the withdrawn credits can not be exchanged, or that a credit can not be held by two parties at the same time, thereby reducing the incidence of errors and frauds.
An example of blockchain in action can be observed in the United States with the Low Carbon Fuel Standard (LCFS), a clean fuel program operated by the California Air Resources Board (CARB), which allows companies that fuel electric vehicles in California to claim credits that can then sell.
Silicon Valley Power, owned by the Municipality of Santa Clara, is using the blockchain to track solar energy from solar panels to electric vehicle charging points to automatically validate LCFS credits, simplifying the process and reducing intermediate costs.
Secure registry that can unlock market-based liquidity
A blockchain-based credit registry reduces the incidence of fraud or error but, above all, history has shown us that when market-based liquidity is added to large fragmented markets, great value is created for everyone. A token log of blockchain-enabled coal creates the preconditions for this type of market.
Transparent and liquid markets
By encrypting credit on the blockchain, eligible participants are able to exchange credits easily, instantly and transparently through an exchange, where the price of each token is public and the market may be more liquid than the markets where each transaction is negotiated on a bilateral basis.
Financing of energy activities
According to the International Renewable Energy Agency (IRENA), "renewable energies must be reduced six times faster so that the world can achieve the objectives of the Paris Agreement".
If the world is about to swirl this growth in renewables, we need investment, and the blockchain represents an opportunity to access previously untapped capital in this space.
More buyers and smaller capital
Worldwide direct investment in large renewable energy assets is generally available only for "sophisticated investors". For example, in Australia only people with an annual income of at least AUD250,000 or net assets of AUD 2.5 million can invest in this type of business.
Fractional activities on the blockchain makes them available to everyday retail investors, not just for individuals with high net worth.
Issuance and management of efficiency costs
Blockchain can facilitate the fractional ownership of large-scale renewable energy resources in an economic way. The cost of issuing these financial products on the market and maintaining the legal and accounting structures for the assets can be reduced by using the blockchain as a register of assets and income.
There are several ways in which blockchain creates additional efficiencies. For example, by reducing the cost of each individual investor's verification through blockchain-enabled solutions, you know your client (KYC).
Developments in identity technology have the potential to reduce the overall costs of compliance and fraud prevention, as each user needs to be verified only once. This ensures that personal information is kept secure and that only real and verified investors can gain access, but can do so quickly.
Errors and frauds reduced
Make mistakes in the patrimonial registers it is expensive. Blockchain mitigates this risk because it is not possible to issue more than one hundred percent of a given resource.
Faster and more liquid settlement
These benefits extend to secondary investment business. If you were to buy a stake today, you will not own it for two business days due to the delay in liquidation. The blockchain allows investors to own their investment instantly, making trading more transparent and economical. Basically, it condenses the two phases, the purchase of an investment and the transfer of ownership of that investment in a single step.
In the end this will allow the issuers of investments to block the capital without blocking investors in an investment that is negotiable and therefore liquid. This makes the business more attractive, as investors are able to exchange and exit investments using tokenised ownership representations.
Its first days but the signs are good
It remains to be seen how long it will take for the blockchain to produce a formidable impact on the energy markets. We are only starting to scratch the surface of the improvements that blockchain technology can do, but it is clear that the prospects are there and that technology can get what is asked of it.
Blockchain represents an opportunity to allow consumers to be part of a market where families that generate renewable energy can trade with their neighbors, or energy companies, and get a fair market price on their investment. It can enable more efficient carbon markets and offer new opportunities to inject the necessary capital into renewable energy resources.
All you need now is the cognitive shift to allow it. M
Jemma Green is the president and co-founder of the Australian energy trading platform Power Ledger.
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