Blockchain and the local energy revolution

Chris Stuart-Bennett

28 Jun 2018

In this guest post Chris Stuart-Bennett reflects on blockchain and its potential to make a positive impact at Low Carbon Gordano and the wider local energy community. Chris is a board member of Low Carbon Gordano. He will be a panellist at NovAzure and Tilix Smart Energy Masterclass on 19 July 2018 at IdeaLondon. Buy tickets online at Eventbrite £200 + fees & VAT.

At first glance you might be forgiven for wondering why several recent pilot peer-to-peer/local renewable energy schemes, such as EDF’s London-based community energy scheme, have been highlighting the use of blockchain as part of their model. After all isn’t blockchain a massive energy user, a ponzi scheme and frequently associated with extremist politics, none of which are things generally endorsed by responsible and socially aware business ventures. Added to that, those of you in business will have been aware of the recent trend where blockchain is touted (either by pointy-haired bosses or enthusiastic consultants) as a panacea to all of your ills, to the extent that a US Iced Tea company saw an overnight 289% stock price jump after rebranding to include the word ‘blockchain’ in their name. Some of you might see this as signs of, at the least, an example of a peak of inflated expectation and at worst the beginning of the end for society as we know it, but there are valid reasons why the underlying technology could help drive forward a radical new model of energy generation and consumption.

For the rest of this piece I am going to assume that you are broadly au fait with the fundamentals of blockchain.

Earlier this year, IBM’s think-piece details the criteria that should be considered when deciding whether your idea could benefit from incorporating blockchain technology into the design, with the core concept being:

Is a business network involved? If so, are one or more of the following also true?

  1. Is consensus used to validate transactions?
  2. Is an audit trail, or provenance, required?
  3. Must the record of transactions be immutable, or tamper proof?
  4. Should dispute resolution be final?

If these criteria can be met, then there is a good, rational, case to be made to investigate how blockchain might help your project. In the case of a local energy proposal then yes, there is a business network involved (generators and consumers) AND at the very least points 2, 3 and 4 are necessary to ensure integrity and validity of transactions. Consensus validation would help prevent 51% attacks, but these could be easily prevented in a small-scale community scheme through specific, secure hardware (tamper-proof low power mining systems for processing the transactions), or constrained entry criteria (domestic users only, no industrial scale usage or generation).

An example implementation might be where external funding enables the installation of 1-2Mw of rooftop solar across a community, under the wrapping of a licensed supplier. Smart metering will allow for the configuration of a local grid whereby those properties with minimal/no PV can preferentially use surplus electricity generated by their neighbours, sharing the asset throughout the community. At the same time an in-house hub will allow for block-chain mediated generation/usage accounting and cross-charging, reducing the need for large scale data-centres and back-end staff. Since there will be some rooftops which are perfectly aligned for PV and others which are less optimal, the emphasis can be placed on installing on the most advantageously orientated. By reducing the grid costs and administrative costs, local residents will be able to buy locally generated electricity at a lower price than grid-derived power and the licensed supplier (who owns the generation asset) will be able to sell electricity at a higher margin.

A model such as this would also be able to demonstrably address at least two of the concerns about blockchain that I listed at the beginning, as the blockchain processing would, by definition, be powered by (and drive uptake of) renewable energy and the tokens themselves would be backed by the electricity generated as a valid and securitisable, if intangible, asset.

Political and trust issues around blockchain are thorny topics which the community will have to grasp on an ongoing basis. I am looking forward to discussing these as well as technical issues with other energy industry stakeholders at the Smart Energy Masterclass on 19 Jul at IdeaLondon.