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.
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).
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.
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.
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.”