Blockchain technology, applied to microgrids, will facilitate consumer energy choice
By Juliana Ennes
Have you ever imagined choosing your electricity generation source the same way you shop clothes online? Brooklyn Microgrid is trying to deliver this service sooner than one would imagine. Waiting for regulatory approval, the company expects to be connecting locally-produced, solar electricity to the Gowanus and Park Slope neighborhoods of Brooklyn, NY, in just a few months.
Consumers connected to the microgrid will have an App on their smartphones to define the price they are willing to pay, and to choose the sources of their electricity. Do you think coal is highly polluting and don’t want to use it? You can. Are you afraid of a nuclear disaster? Don’t use it. Believe wind turbines kill birds? Cross that off your list.
The possibility to choose will soon be available thanks to “transactive energy,” an economic or market-based construct that can manage generation, consumption or flow of electricity within an electric power system. It means that one tenant can sell power to his neighbor. While waiting for the regulator’s green light, Brooklyn Microgrid already has producers and consumers aligned.
Distributed generation is not exactly new in the country. Rooftop solar allows anyone to generate their own power. The difference here is that the surplus is not sold back to the centralized grid operated by utilities. The startup LO3 Energy created a system based on blockchain – the same type of technology utilized on the cryptocurrency Bitcoin – that allows consumers to sell power directly to each other over a peer-to-peer network.
But the company is not the only one looking into using blockchain technology for the energy sector: in February, world’s top energy enterprises such as Shell, Statoil, Centrica and Tepco joined the Energy Web Foundation, a global non-profit devoted to accelerating the use of blockchain in the energy sector.
LO3’s founder and CEO, Lawrence Orsini, explains that the company’s flagship product, the smart meter, keeps track of who consumes energy and how much they buy. The meter is highly encrypted and, in contrast to Bitcoin, this blockchain does not include financial transactions. “Our blockchain will be separate from financial transactions, which makes it more secure. Without transporting money, it becomes less interesting to hackers,” said Orsini.
The startup is using Brooklyn as a test case to connect dozens of homes through a digital network. Different business models are also being tested in Australia, Germany and the UK.
The model used in Brooklyn is the result of a series of consecutive events. Superstorm Sandy, in 2012, left the certain coastal areas of New York without electricity for months in some cases. It served as a catalyst for New York state’s Reform the Energy Vision (REV). The new policy is meant to change the way utilities work, building greater grid resiliency. Since Brooklyn Microgrid has the capability of working independently of the grid, it can work in island mode in case of a new event such as the superstorm and floodings.
The ability to choose local power, however, may not necessarily have a beneficial impact on pricing for consumers. Prices will be market-based, which means higher prices when there is a greater demand. And Brooklyn Microgrid expects high demand for the community’s solar power.
“There is a misconception that consumers care more about cheap energy. That is only true for low-income families. Most consumers care about choice, not price,” believes Orsini.
On the utility side, some critics believe it may have a negative impact since consumers will be able to avoid using electricity from the grid. Orsini, however, disagrees. He says utilities will still get paid for the infrastructure they provide, which is already their main source of income.
Besides, the grid could use the digital meter to its advantage in moments of power peaks and buy back electricity generated by a rooftop solar instead of using heavily polluting and expensive gas-fired power plants. This would also reduce transmission costs, since production and consumption stay within the community.
Microgrids are part of the trend to improve reliability and resiliency, to lower costs and to diversify energy sources. Increasing the amount of renewable energy generated in the community, it will be possible to manage the distributed resources during power outages and emergencies. However, more than improving electrical grid resiliency and efficiency, Brooklyn Microgrid wants to give the consumer the power of having a choice.