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IMA Energy & Environment Blog

How Digital Energy Currencies May Impact the Market

NRG Energy is an IMA Member…

Digital energy currencies are something of a crossover phenomenon. Bridging the worlds of virtual networks and physical infrastructure, they inhabit a space where the emerging digital economy meets the evolving energy sector. They mark a commercial sweet spot for innovation among both the tech community and the engineering profession.

Much as they are a product of gamechanging technological advances, their commercial uptake is being driven by cultural megatrends. From a consumer perspective, the big social trend impacting markets is the growth of the sharing economy, forecast to balloon from just $14 billion in 2014 to around $335 billion by 2025.

The second prime factor is the surge in adoption of digital and mobile payment methods worldwide—which should come as little surprise to the many of us regularly using the likes of PayPal, Apple Pay and other forms of contactless payments. Enabling businesses and consumers to sell, shop and send money to friends and family, these technologies underpin the kind of peer-to-peer (P2P) trading that is the foundation of e-commerce platforms platforms such as eBay and Etsy, or Airbnb and Zipcar, as well as the sharing economy.

Taking these megatrends together with the near-ubiquity of mobile phones and widespread internet access, means residential consumer transactions are becoming highly digitized. When it comes to household outgoings, therefore, the fact that utilities commonly feature unit-based costings potentially makes them comparable and tradable, with the energy sector a prime target, especially in States such as Texas where a deregulated market operates.

Energy’s attributes therefore make it a good candidate for P2P commodity trading founded on digital currencies that can facilitate secure, cashless transactions and asset valuations – all readily accessible to consumers and companies alike.

The key to bringing such digital currencies to the mass-market is blockchain, the foremost global software platform for trading digital assets, or currencies. Set to surpass $2.3 trillion in market worth by 2021, it boasts bitcoin as its most popular “cryptocurrency.”

When it comes to physical infrastructure, then, blockchain-enabled networks and microgrids promise to uncover new possibilities for the increasingly distributed power sector; initiatives such as P2P car-charging for electric vehicles in California and some pioneering work in residential solar happening in New York, with LO3 Energy and the Brooklyn Microgrid are a few real world applications of the emerging technology. In this expanding, experimental community, residents with solar electricity are able to sell excess energy generated to their neighbors, via blockchain technology. Being able to trade in this way amongst themselves, helps the community decarbonize its grid supply, build shared resilience in terms of energy security and brings some economic benefits as well.

This P2P sharing improves renewables access for low-to-moderate income (LMI) residents, multi-family groups and nonprofit companies. For this reason, Brooklyn Microgrid has successfully been selected for the Solar in Your Community Challenge, a prize competition to improve access to solar electricity, funded by the US Department of Energy SunShot Initiative.

LO3 Energy will work with the New York City Housing Authority, the largest public housing authority in North America, to seek opportunities in 18 buildings within the microgrid’s operating zone, identifying locations for installation of rooftop PV.

And now that the Brooklyn Microgrid is operational, there are plans in place “to expand the technology to demonstration projects in other communities, and around the world,” as LO3 Energy’s Director of Business Development Scott Kessler told PRI.

Similarly active in the digital energy sector is leading blockchain-powered P2P renewable marketplace Power Ledger, which recently revealed a vision to make Perth, in Western Australia, the first city in the world to be entirely community-powered—operating almost like an energy cooperative or collective, crowdsourcing their power generation together. Power Ledger enables direct trading between ‘prosumers’ and consumers without industry intermediaries. It uses blockchain technology to act as an agreement machine, facilitating third-party settlement and reconciliation of millions of transactions between hundreds to thousands of traders, buying and selling energy, across five-minute intervals.

Power Ledger works with affordable housing providers and financially or socially marginalized tenants, but also recognizes the potential viability of commercial distributed energy applications at scale, as Chair & Co-Founder Dr Jemma Green explains:

“Blockchain platforms make commercial renewable energy more economical. For example, instead of each community member installing a battery in their home, the community can purchase a large battery and blockchain facilitate distribution of ownership and allocate revenue accordingly (called Autonomous Asset Management).

Campuses are another great example, as they can use energy trading across buildings, plus another commercial client is wholesale electricity marketplaces – where the system offers rapid low-cost and transparent dispatch optimization and management, data aggregation, reconciliation, and settlement.”

Digital energy currencies are therefore already able to provide power solutions in support of community resilience, facilitating smart and local energy usage, primarily off the back of decentralized solar and storage capacity. They do so, not by increasing generating capacity, per se, but by helping improve the relationship between supply and demand, stimulating market activity and system efficiency. They carry potential to help with electricity grid load-management on a citywide basis, as well as building local bonds and boosting energy affordability.

The energy sector itself is successfully embracing more collective and cooperative generation and multi-stakeholder ownership models, too, such as district energy and community solar, as well as localised technologies including microgrids and distributed wind. Add to these proven physical benefits the new and emerging commercial opportunities in prospect for digital and what is currently a crossover phenomenon appears set to go mainstream.

The primary hurdle remaining from an energy perspective, ironically, might prove to be the recent revelations surrounding power consumption involved in managing a cyptocurrency such as bitcoin—so, to truly become part of the energy solution, digital currencies will first need to ensure they are not, in fact, part of the problem.


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