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Blockchain network disruption coming, and Australia among pioneers

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Australian start-up Power Ledger has been named in a Bloomberg New Energy Finance report as a global leader in the development of “blockchain” technology – a technology, says BNEF, with the potential to “rapidly disrupt” the energy market status quo and fast-track the shift to decentralised generation.

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As we reported here in August, blockchain is the software that underpins Bitcoin, a digital currency that has proved popular in many markets and is now being applied to the buying and selling of energy, among other things.

The technology works to identify the ownership of energy as it is generated and then to manage multiple trading agreements between consumers who buy excess solar, for example, direct from the original owner/producer, without the addition of market costs and commercial margins.

In Australia, Perth-based Power Ledger is testing various applications of blockchain across residential, retail and wholesale electricity markets in three different pilot projects across the country, and one in New Zealand (see table below).

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As Power Ledger chair and co-founder Jemma Green put it in an interview with One Step Off The Grid in August, “effectively, we’re cutting out the middle-man to save consumers, and to maximise returns for producers.

“It’s a win for the people who have been able to afford to invest in roof-top solar, but also a win for customers who haven’t: they will be able to access clean, renewable energy at effectively a ‘wholesale’ rate. Everyone wins.”

Well, perhaps not everyone. As the BNEF report notes, while most blockchain software and business models are currently at a proof-of-concept or trial stage of development, their potential to “rapidly disrupt traditional energy market structures” cannot be ignored.

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How rapidly? Based on the progress of a number of companies around the world, including Power Ledger, BNEF puts the outlook for an increased uptake of blockchain technology at between 2 and 10 years, with “potential for a much larger long-term impact.”

But the report also notes that the secret to more rapid success for blockchain start-ups may lie in working with the energy market incumbents, rather than competing against them.

This is certainly the approach Power Ledger has taken. As Green noted in August, network operators in both WA and Victoria had been receptive to trialling the blockchain technology, while WA retailer Synergy was said to be “supportively involved” in discussions on a 2017 trial in the Perth metro area. In New Zealand, the company is working with Auckland network operator Vector.

As the BNEF report notes, Power Ledger “is interested in evolving business models, and is currently operating in an area where a high uptake of residential solar is diminishing the grid’s role in transporting electricity.

“The technology being developed can be used behind the meter or across networks, and the company is thereby considering the grid’s potential to act as a trading platform. Power Ledger is working closely with established entities in the Australian power sector, and is already receiving interest from Brazil and Japan.”

Another start-up tapped by BNEF is New York Based blockchain pioneer LO3 Energy – which, as we reported earlier this month, has itself opened up a branch in Australia, in New South Wales’ Byron Bay.

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Lawrence Orsini, founder of LO3 Energy, the company that funds the Brooklyn Microgrid project and has this week set up office in Australia. Credit: Image courtesy of Sasha Santiago

LO3 is best known, however, for its microgrid in Brooklyn that allows peer-to-peer energy trading between the boroughs of Boerum Hill, Park Slope, and Gowanus.

The startup successfully completed preliminary tests of the Brooklyn micro gird in April this year, and just this week won the backing of infrastructure giant Siemens, to progress its peer-to-peer energy trading platform elsewhere in the US and internationally.

In China, says BNEF, another start-up in the sector, Energ Blockchain Labs, is taking a different approach, trialling a range of potential commercial/industrial blockchain applications that take advantage of the liberalisation and decentralisation of the power sector.

An investment fund in China, Energ Blockchain Labs, says BNEF, is applying blockchain to distributed solar, EVs, wholesale and retail power markets.

“Projects are tested in a business incubator – an industrial park in Ningbo, China which holds one energy trading licence for all entities based in the park, therefore legalising the exchange.

“Two factories generate energy through rooftop PVs and there are 5-6 off-take entities in the park. The companies exchange power through PPAs, which are valid for one month. The price is therefore not set in real-time, but graduated rate tables provide discounts at different times of the day.

In this case, however, transactions are not automatic and are still processed in local currency, says BNEF, as bitcoin and other digital currencies are not legal in China.

The Chinese company is also looking into the potential for using blockchain to monitor batteries at electric vehicle charging points, says BNEF, determining when it is economically and technically sensible for batteries to enable demand response.

This would also determine the best times for a battery to discharge or recharge, thus prolonging its life. A further future add-on service of this model is demand-side management – that is, letting the owner of the battery or charging point know automatically when to participate in ancillary services for the grid, and therefore maximising returns on a given charging station.

Ultimately, says the BNEF report, “if blockchain achieves scale, it is likely that it will be implemented in manners that support current market/regulatory trends, rather than as a disruptive technology in its own right.”

Thomas Zimmerman, CEO of Siemens’ digital grid business unit, agrees.

“We are envisioning tremendous opportunities for the application of the blockchain technology, especially in microgrids with distributed and decentralised energy systems,” he said recently in comments on the company’s partnership with LO3.

“Its big benefit is that it permits transparent, efficient trading between multiple participating systems and various stakeholders while taking grid-specific requirements into account.”  

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  • Barri Mundee

    Solar owners could be micro business owners under this proposal. A welcome disruption if it progresses beyond the trial stage.

    Can anyone envisage any way the incumbents could stymie it?

    • Pete

      By lobbying the current government to legislate against it?

      “But the report also notes that the secret to more rapid success for blockchain start-ups may lie in working with the energy market incumbents, rather than competing against them.” This sentence disappointed me. It may be the best way to go but, in my opinion, the incumbents should have been leading the way on renewables. Instead they’ve tried to block it at every turn and, being a vindictive old bugger, I’d like to see them all go the way of Kodak!

  • DJR96

    I’m an advocate for deregulating the market enough to allow trade of energy in either direction between any connected market participant. Whether that be the big generators through to the consumer with or without solar. We should be able to get to a point where anyone can sell energy into the grid at higher rates during peak periods than they can purchase it for during off-peak periods. Which would provide real market incentive for investment into energy storage.

    This blockchain technology could well be the platform that can continuously put a value on energy at any time. Ideally if used for the entire grid it would also apply to the generators and replace the market function of AEMO which is not serving it’s purpose all that well – SA in particular.

    So I think it would be essential that the entire industry very seriously look at using the tech to be able to continue being relevant. Or slowly see themselves squeezed out of the very market they’re supposed to have control of.

  • Kenshō

    The disruption vision needs revisioning. Climate change can only be averted by all of us working together. Disruption is a feature of us lefties feeling emotionally reactive and powerless. It’s a feature of polarised politics and a divided humanity. It’s a feature of psychological development called “formal-operational logic”, where the lefties reason from one set of premises and those in opposition from another. The next development is “dialectical thinking” or “synergistic awareness”, where the observer looks for win win methods and strategies to move forward. The oceans, wildernesses, global ecosystems know no boundaries. This is the only real theme needing healing in the collective story, we call the Hanson, Trump, Brexit split between a government and it’s people, capital and labour, establishment and those fleeing persecution.

    • Ren Stimpy

      “Climate change can only be averted by all of us working together.”

      Crap! No it’s all just about cost. Make the superior solutions cheaper and they will succeed.

      Thanks again for the rest of your psycho mind babble but really it all just comes down to cost.

      • Kenshō
      • Kenshō
        • Alastair Leith

          Oppositional strategic thinking and tactics is your first go to? Yikes!

          • Kenshō

            I recently attended a number of the Green’s strategic review processes and I used this work among others. Have you no education to speak of?

          • Alastair Leith

            Alas, I’m completely ignorant. Best to not feed the trolls Kenshø — didn’t anybody tell you that at University?

          • Kenshō

            I’ve been a soldier, years overseas service and then three degrees at UQ. And you?

          • Alastair Leith

            hippie scum

          • Kenshō

            The book is not exclusively oppositional by a long shot. It a work of art and thousands of years old. It is a modern bible of many in politics and military. It is the crowning glory recognised the world over.

      • Alastair Leith

        Hi Ren, even if it was all about the costs (and it clearly isn’t because Wind already kills new coal and gas on LCOE and solarPV already has socket parity) it’s not smart to talk about it exclusively in terms of costs. Costs and cost of living are extrinsic values and part of the reason humans are making such a fine balls up of this ecological marvel we call spaceship Earth is because of a human-culture wide overloading on extrinsic values and ever increasing ignorance around intrinsic values.

        more here [Common Cause Australia] (but it’s probably fair to say it’s harder going to read and comprehend this than viewing a cartoon impression of the world)

        • Ren Stimpy

          Let me submit as exhibit A a very recent example – the typical Trump voter. Complex or collective or green tinged solutions are always going to be anathema to these people. The only possible way to get them involved in climate action is a costs saving. Clinton voters talk the talk but probably more than half of them wouldn’t walk the walk without some kind of costs saving also.

          The pricing of externalities – yes I get it and agree with it but it’s a hard political sell. It would have to be more than offset by income tax reductions and other compensations (again, a costs saving), but then along comes a Trump and promises income tax cuts for everybody without a carbon tax.

          • Ren Stimpy

            My message for the 60 million Trump voters would be

            * You don’t need to become eco sustainability warriors or greenies.
            * You don’t need to change your lifestyles.
            * You don’t need to cut back on meat consumption or your summer BBQs.
            * You don’t need to cut back on flights.
            * You don’t need to worry about what you buy when shopping and what it is doing to the climate.

            * Do consider solar panels to save money on your power bills.
            * Do consider best energy rating appliances to save money on your power bills.
            * Do consider LED light bulbs to save money on your power bills.
            * Do consider insulating your home to save money on your power and gas bills.
            * Do consider plug-in electric cars to save money on fuel and servicing.
            * Do consider cycling, walking or taking public transport more often to save money on fuel and parking.
            * Do your recycling, at home and at work.

  • Tobias J

    p2p energy trading is what you want. Decentralize everything now.

  • Carl Raymond S

    For blockchain trading to work, people need to understand or at least trust blockchain. I watched several YouTube videos on the technology yesterday and came away appreciating its genius. Recommended viewing.
    The banks will hate blockchain. It ends their ability to skim from every transaction. If you’ve ever thought of the banks as bloodsuckers, promoting blockchain is a chance to get one back.

    • Alastair Leith

      The banks already use blockchain technologies themselves, they were leaders in its adoption because it’s more secure (nothing is unhackable but it’s a level up from what they had) and more affordable than previous methods of reconciling interbank trading and account transfers.

      On the skimming thing, Western Power has sponsored a PhD to the White Gum Valley project to work out what their take should be on every energy trade over the SWIS network. (CUSP has two others doing PhDs one of them is sponsored by ARENA.

      The trading tariff (or service fee) will be smaller than micro I guess, but hundreds of millions of trades a year will mean millions of dollars revenue for Western Power and postponement of the death-spiral scenario which so many grid operators and quasi-government solar regulators seem to harbour a secret wish to bring about.

  • Hugh M

    How does this technology differ from the P2P trading that Powershop has started?

    https://onestepoffthegrid.com.au/powershop-launches-p2p-solar-product-victorian-customers/

  • Brian Innes

    Using Blockchain for energy trading really only works if you own the wires (eg behind the meter). So it will be popular with utilities as they can take a cut on a trade but best to not be the poor sucker trying to trade a commodity in a flood of supply (eg when sun is shining an everyone’s PV is producing) so don’t expect to get much from your current PV. If adding value and disrupting is your goal via a blockchain app then first go buy a battery so you can sell you power in a drought, and in the meantime enjoy the fun of maximising your self consumption.