Something odd is happening on President Street in Brooklyn. While solar panels on the roofs of terraced houses soak up sun, a pair of computers connected to the panels quietly crunch numbers. First, they count how many electrons are being generated. Then, they write that number to a blockchain. Welcome to the future of energy exchange.
This project, called Transactive Grid, is the first version of a new kind of energy market, operated by consumers, which will change the way we generate and consume electricity.
Transactive Grid was developed by New York City start-up LO3 Energy. It aims to enable people to buy and sell renewable energy to their neighbours. To deal in energy at the moment, you have to go through a central company like Duke Energy in the US or National Grid in the UK, or one of their resellers.
Transactive can skip this central authority because its energy market is built on a technology. First used to underpin the currency, a blockchain is a cryptographically secure list of transactions. The list is stored on every computer in the system, and is continuously updated as each transaction is completed. The list for President Street is built using blockchain software called . It deals with buying and selling electrons generated by solar panels. No central authority is in control: the computers monitor each other to stop fraud.
Buy and sell
LO3 installed the first devices on President Street a few weeks ago. On one side of the street are five homes that produce some of their own energy through solar power. On the other side are five consumers interested in buying excess energy from their neighbours.
Lawrence Orsini, founder at LO3 Energy explains that the blockchain makes it easy for anyone to set up and enforce contracts, with the transaction following automatically.
“You don’t have the billing components around it, you don’t have the infrastructure losses or the accounting losses in the system,” he says. Depending on how the accounting balances out, you may not even have to send electrons to the consumer at all – they might be able to get them from somewhere closer.
Down the line, LO3 plans to build an app which lets residents set personal preferences for the distribution of the energy they produce. One homeowner might decide to sell all their excess energy for maximum profit, for example, while another could choose to donate a portion to a low-income area.
Either way, the energy and the money goes to benefit the community, says Orsini, not the large centralised power company. “When you buy energy from the community, the money goes back to the community.”
“Every kilowatt you buy, you pay for network. If you can cut out the middle man and do the trade directly, you don’t have to pay for the wires,” says Philipp Grunewald of the University of Oxford.
But the might of utility companies makes the road to autonomy rocky. Grunewald says that at one point solar panel users in Spain were paying less than their fair share for grid access. When a charge was introduced to account for this difference, some were forced off the grid entirely, which is bad for the system as a whole.
Despite hiccups like this, Grunewald sees the potential in projects like Transactive Grid. “People are disgruntled with their utility companies, and like this idea of becoming autonomous,” he says.
Disaster-proof your grid
Decentralised systems may also prove more resilient than a centralised grid in natural disasters such as hurricane Sandy, allowing people to rely on a local microgrid when the major infrastructure fails.
Other companies are hot on LO3’s heels., based in Vienna, Austria, wants to bring the same decentralised energy market to developing countries, to help distribute solar power. MIT start-up pays people with an alternative digital currency for generating solar energy, one coin for 1 megawatt-hour of solar electricity.
With blockchain, “it’s like the early days of the internet,” says Greentech Media CEO Scott Clavenna. When the internet was first introduced, it was hard to conceive of the drastic impact it would have on the world. “,” he says.
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