Blockchain: The Cryptocurrency for Clean Energy
Since the cryptocurrency Bitcoin came into existence in 2009, it has been a game-changer for the finance industry. Using new blockchain technology, bitcoin allows consumers to exchange goods and services directly with one another in a safe, secure manner. Additionally, blockchain uses a “peer-to-peer” network, eliminating the need for a central bank or regulating authority overseeing all transactions. Blockchain, which is a digital record of transactions between peers, is typically associated with the finance industry. However, it can be used to exchange nearly anything of value–for example, clean energy.
Blockchain to Create Energy Microgrids
Because blockchain can be used to exchange anything of value, experts have experimented with using blockchain to exchange energy. This would allow energy consumers buy locally produced clean energy, rather than purchasing solely from a central utility. Experts typically see microgrids to have specific benefits: energy independence, grid resilience, and community engagement with energy. However, in addition to these benefits, Duke University engineering student, Anuj Thakkar, postulates in a recent paper another potential benefit of this technology in certain communities. According to Thakkar, blockchain could make clean technologies more affordable for people wanting to generate clean energy.
In a community that has a blockchain-powered energy microgrid, homeowners with clean technology like solar or battery storage could generate energy and then sell that energy to their peers, rather than using the current system of simply delivering excess energy back to the macrogrid.
How it Works
The backbone of Thakkar’s idea is simple. In communities where the demand for clean energy is high and where the supply of clean energy is low, community members could bid up the price for clean energy until they reach an equilibrium between supply and demand. With pre-established pricing protocols and energy price floors, producers could receive large payments for their electricity. This could reduce solar payback time by more than 50% from 10-15 years to as low as 5 years.
Currently, companies like LO3 Energy are testing blockchain in energy grids, but the pricing protocol model hasn’t been tested. If Thakkar’s hypothesis is true, blockchain grids could reap not only the benefits of energy security, grid resilience, and community engagement, but could also encourage community members to install more clean energy by making it much more affordable over time.
For more details, see the original postulate and description here.