For most people, the mention of the word blockchain brings to mind cryptocurrencies such as Bitcoin. However, blockchain is also valuable in many other sectors for creating smart systems. Blockchain facilitates self-executing contracts by electronically storing and validating transactions on a digital ledger. It is considered a secure, safe, and efficient form of storing transactions data.
In the Decentralized Renewable Energy (DRE) sector, blockchain can be a game-changer as it enables the scaling of innovations and increases energy access to the millions of people still living without access to reliable power. These include creating efficient and cost-effective management and operation systems for renewable energy platforms serving off-grid rural communities in Africa and Southeast Asia. It also supports the uptake of other innovations in the sector, such as e-mobility and smart batteries for energy storage. These and many more such initiatives are piloting the use of blockchain in the sector. Some of the key areas where blockchain can play a pivotal role in enabling clean energy access include:
1. Rural Electrification and Increasing Energy Access to the Largely Underserved Market
Using blockchain systems for decentralized energy generation and peer-to-peer transactions can enable local solar power generators to sell power to other consumers with no or poor access to grid-based electricity with intermittent power supply and outages. Blockchain-based energy can be traded through smartphone applications enabling micropayments made by the consumer, thereby creating greater and easier access to energy.
For underserved off-grid areas, innovative financing schemes are required to make electricity more affordable. These could be deferred payment initiatives, pay-as-you-go systems, amongst others. Blockchain-enabled power plants can integrate this information into smart contracts with only a few lines of code, making it seamless for underserved consumers to pay for the energy being used to power their off-grid households.
Use Case 1: ME SOLShare, Bangladesh
SOLshare has successfully piloted the world’s first ICT-enabled peer-to-peer electricity trading network for rural households with and without solar home systems in Shariatpur, Bangladesh. SOLshare combines solar home systems and centralized mini-grids to enable more rural households to access renewable electricity at a lower cost alongside
its implementation partner, NGO UBOMUS; financing partner, Infrastructure Development Company Limited (IDCOL) and research partner United International Universit-Centre for Energy Research.
The trading network interconnects households via a low-voltage DC grid and controls power flows through bi-directional metering integrated with an ICT backend; handling payment, customer service, and remote monitoring. Each SOLshare meter enables the user to buy and sell renewable electricity with neighboring households, businesses, and rural industries.
So far, SOLShare has enabled the installation of 48 kW of solar power capacity, providing electricity to 2,570 off-grid people and saving about 1,756 liters of diesel per year and 4,970 kilos of CO2 per year. The ICT-enabled trading allows the households to become more than beneficiaries of yet another rural electrification project, but become the sole controllers of their energy generation, consumption, and trading. The project enables energy access by connecting unelectrified households or businesses that do not have the resources to put up a solar home system with those that have excess power.
Use Case 2: The Sun Exchange, South Africa
The Sun Exchange has a blockchain-based solar financing platform that allows the crowdfunding of solar power plants. These projects are deployed in off-grid areas for schools, hospitals, factories, etc. It allows anyone in the world to purchase tokens that can be used to become part-owner of the solar power plant. So far, The Sun Exchange has installed about 3,800 kW of capacity with another 1,200 kW currently under construction in Africa.
The Sun Exchange identifies schools, businesses, and other organizations that are willing to opt for solar-powered energy and evaluates the site for economic and technical viability. A crowd sale is then initiated to allow people to purchase the solar cells to be deployed for the project. This platform enables the purchase of solar cells that will be deployed in solar rooftops etc., wherein the purchaser becomes part-owner of the solar power plant. Once the appropriate number of solar cells is purchased, the sale is closed and the project is constructed. The funding can either be done through local currency or Bitcoin. The part-owners receive a monthly income into the Sun Exchange wallet as currency or Bitcoin. The transactions are carried out through a blockchain-enabled platform.
The Sun Exchange model combines public offering and clean energy access through a unique blockchain platform that enables investors to invest in clean energy projects directly, unlike other traditional projects that use large institutional investments. So far, this model has enabled the deployment and operation of 1.7 million solar cells generating 5,212,890 kWh of energy, funded by members in 179 countries. The business model brings together environmentally conscious investors with the need to deploy clean energy solutions, providing access to energy to socially important consumers such as schools, hospitals, etc. in Africa.
2. Renewable Energy Certificates
Renewable energy certificates (REC) are market-tradable incentives to encourage power generation through renewable sources of energy. Blockchain advantages around REC include providing real-time verified and validated data to authorities for issuing RECs to users. Once the blockchain-enabled generator raises a request for RECs, the system automatically verifies the claims based on actual generation. Smart contracts remove any redundancy or double-counting of RECs. The process further eliminates the need for a centralized verification authority thereby saving on time and costs.
Use Case: SolarCoin, United States
SolarCoin incentivizes solar power generators in the form of a solar coin, identical to renewable energy certificates. A solar coin is generated upon the production of 1 MWh of solar power. SolarCoins (SLR) are cryptocurrencies that are sent to accounts in digital wallets and used as currency or can be stored long-term in offline (paper) wallets. Solar coins can be exchanged at government crypto exchanges or spent at businesses that accept them.
SolarCoin follows a blockchain-based process wherein the generation is verified by a SolarCoin affiliate. The coins are distributed based on the actual generation or deemed generation based on the nameplate capacity of the installed power plant. The coins are blockchain-based and transacted through peer-to-peer networks. Once the generation is verified, the SolarCoin is issued to the generator. The transactions are collected, verified, and summarized in blocks that create the SolarCoin blockchain.
SolarCoin (current price of 1 SolarCoin is equivalent to USD 0.09) attempts to incentivize solar power generation, akin to RECs, but in a blockchain-based tangible cryptocurrency that can be exchanged or used by generators. The SolarCoin is an additional incentive along with RECs, carbon credits, etc. Blockchain-based SolarCoins provide cryptocurrency incentives for solar generation that can offset capital costs and encourage investment into the deployment of solar power plants in areas with low energy access in developing countries.
3. Accelerating Adoption of Electronic Mobility by Improving Access to Charging
A significant challenge facing owners of electric vehicles (EVs) is accessing the charging infrastructure network in real-time without waiting in long queues. A blockchain-based system could enable the adoption of EVs by improving access to the charging network and reducing range anxiety.
An integrated electric mobility system – with vehicles, charging stations, battery-swapping stations, and customers all on the blockchain platform – makes it seamless to coordinate among the various EV units. EV owners can get real-time information regarding the availability of charging stations on the platform. The blockchain platform can verify and validate the units consumed by the EV and generate the bill accordingly, which can be paid through the blockchain platform in traditional money or cryptocurrency.
Smart contracts enable predetermined information to trigger actions. For instance, an EV owner takes two days to completely run out of the battery, so the smart contract with the EV owner will reserve a slot at the charging station every two days at a predesignated time and inform the owner about the impending charging appointment. Further, these smart contracts can enable seamless payment directly through the blockchain-enabled wallet of the consumer.
Use Case – Share&Charge, Germany
Share&Charge has developed an open charging network where charging solution providers can integrate their services in a plug-and-play manner. In August 2019, the company conducted a pilot project for a cryptocurrency-based e-mobility wallet. Carried out in Germany, 50 EV users were able to pay for their EVs using a stable cryptocurrency called DAI. The pilot was conducted with Innogy, MakerDAO, and Share&Charge Foundation.
Based on blockchain technology, EV owners can charge their vehicles using cryptocurrency by registering their vehicles and connecting the EV with the Share&Charge app. The charging session is paid for in terms of DAI, the cryptocurrency. DAI transactions can be tracked through the blockchain portals to verify and validate the transactions having been carried out. It is a stable form of cryptocurrency that does not fluctuate like bitcoin. Blockchain enables secure transactions for charging the EV.
Share&Charge aims to disrupt payment solutions for e-mobility and make cryptocurrency the primary mode of payment to create a traceable, verifiable, and secure history of units of power used and EVs charged during any given period of time. With the increase in blockchain and cryptocurrency-based solutions, it is important for e-mobility to embrace the technology as a futuristic mode of energy access based only on verifiable digital payment platforms.
Challenges in the Use of Blockchain for Energy Access
Roles and responsibilities: Energy generation, supply, and transaction through the blockchain process involve multiple stakeholders, which may sometimes lead to the blurring of roles.
Regulatory issues: Blockchain is still in a nascent stage in most countries in Asia and Africa. Regulatory agencies have, therefore, not yet standardized regulations for blockchain platforms, especially since the government has little to no control over direct-to-consumer transactions.
Operation issues: Variable transaction costs for public blockchain systems may lead to an increase in expenses and cost of power as these warrant more complex transactions. Blockchain platforms are highly energy-intensive, which may sometimes be counter-productive to the zero-carbon quotient of renewable energy.
Technological hurdles: Loss of identification can lead to loss of complete data as blockchain requires unique IDs for peers to enter the system. There is a high risk of fraudulent activities at the interface of the real world and the digital world of blockchain processes, where smart meters, connections, etc., may be tampered with to inflate or deflate consumption. Technical problems with initial applications and setup, especially in regions with a low knowledge base, may arise, leading to inefficient processes.
A few challenges notwithstanding, blockchain technology can be vital in facilitating cost-effective and efficient DRE systems and smart e-mobility. Most of the initiatives are at the piloting stage, generating lessons on the way forward for scaling up. Over the next few years, increased blockchain application across the energy access value chain can be expected to lead to a transformed DRE sector.
This blog has been developed from Blockchain for Energy Access report authored by Ashay Abbhi and Prachi Seth, Country Specialists for the Energy Catalyst programme. Energy Catalyst is an Innovate UK programme with cofunding from the Foreign, Commonwealth and Development Office, Global Challenges Research Fund, the Department of Business, Energy and Industrial Strategy and the Engineering and Physical Sciences Research Council. This material has been funded by UK aid from the UK government; however, the views expressed do not necessarily reflect the UK government’s official policies.