Application of blockchain technology in the renewable energy sector

What is blockchain?

The technology behind Bitcoin, blockchain, has implications for industries all over the world. Blockchain uses a decentralized network of computers to verify specific transactions independently. Essentially, each computer verifies the data individually and creates a record block that is then linked with the other validated blocks to create the blockchain.

Once the information is stored in the blockchain, it exists in a continuously reconciled database that is impossible to alter or corrupt. Since each computer approves, timestamps, and encrypts the data, the blockchain is able to hold together a complete audit trail of secure information. 

Blockchain’s energy consumption is directly linked to “mining” – solving mathematical problems to validate transactions and gain rewards. In Bitcoin’s mining system, every machine in the network competes to solve mathematical problems. The first to solve each problem “wins”, receiving Bitcoins for their efforts, and at the same time blocks of transactions are validated.

This huge number of machines computing simultaneously leads to enormous energy consumption. In March 2018, the Bitcoin network reached 57 TWh of annual electricity need – around 86.5% of the consumption of the Czech Republic. A single Bitcoin transaction needs over 500,000 times more energy than a Visa transaction, entailing huge carbon emissions.

As blockchain technology improves, however, this problem will likely be solved with better consensus algorithms that require less energy.

Application of blockchain in renewable energy

Blockchain technology has the potential to change the way businesses in the renewable energy sector operate by improving data transparency and security, as well as transaction efficiency. 

Since blockchain is data-centric and allows you to store information accurately and securely, the storage of ownership records and transaction data is a major potential benefit for renewable energy. Energy companies could store all of their data in the blockchain without having to worry about it being tampered with. This could be very beneficial if applied to the verification of renewable electricity production and emissions allowances, or emissions trading.

Smart contracts are another way blockchain could revolutionize the renewable energy industry. These smart contracts could initiate transactions based on preset parameters to ensure that energy and storage flows could balance supply and demand automatically. If more energy was produced than was needed, the smart contracts could deliver this into storage automatically – they could even run virtual power plants.

Consumer-driven power generation

Perhaps one of the biggest potential applications of blockchain in the energy sector is consumer-driven power generation. Blockchain can make energy grids more accessible and sustainable by sharing data in real time. Introducing a system that could process peer-to-peer energy transactions would disrupt the energy sector by promoting decentralization and giving smaller renewable energy companies a chance to compete.

A blockchain-driven energy grid can give consumers complete transparency over where their energy is being sourced from, how it is being produced, and how it should be priced. This will allow consumers to compare energy providers and plans, further driving competition and promoting sustainable energy.

A company in Estonia called WePower has already taken advantage of the country’s 100% digital energy grid to use blockchain to make this a reality. Their start-up gave customers the opportunity to monitor energy prices and even change their energy portfolio based on their predictions of where the market was headed. 

Examples of blockchain in the renewable energy sector

There are many cases of blockchain already being implemented in the renewable energy industry. A great example is The Brooklyn Microgrid, which is a community-based approach to blockchain that allows members of the community to generate, store, and trade energy locally. Even though the utility provider is still controlling the electrical grid that physically delivers the power, it gives the people an opportunity to use their own solar panels and even electric cars to contribute to renewable energy efforts.

The Exergy project, developed by LO3 Energy, is a unique program that is working to heat homes using the heat already being generated at data centers. The heat will be captured so that it can be reused elsewhere, and blockchain technology will allow participants to purchase this stored heat. 

Another example is the SolarChange project, which was created to reward solar energy producers using blockchain. For each megawatt of solar power that is directed into the grid, they get one SolarCoin, which can be stored or converted into Bitcoins. 

Incorporating blockchain into your renewable energy business

As you can see, blockchain technology in the renewable energy sector is already causing major disruptions and is here to stay. Using this technology is the best way to stay relevant in the industry, and in order to make sure that you capitalize on all the possibilities it is best to work with a consultant that can optimize your business processes and help you improve your bottom line.