Much in like talk about the World Wide Web in the 1990s and smartphones in the 2000s, the talk about blockchain (and, relatedly, cryptocurrency) seems to be all the buzz in popular media headlines without the general population really understanding what it is how or how it can be used. But if those two examples are to be followed, blockchain will in fact become integral to our daily lives. Not only that, though, but much like the internet and our mobile devices have become necessary tools in the world of energy, blockchain will prove to be instrumental in shaping how concepts like energy efficiency and renewable energy are utilized in the future.
To prepare for the blockchain future that may sound like some babble out of science-fiction if you’re not accustomed to it, let’s answer the most basic questions about blockchain and how it will prepare us all for an energy efficient and sustainable future.
What is blockchain?
At its most basic, blockchain is a digital accounting tool. The use of blockchain in a digital world allows many people to write entries into a permanent record of information. When a change is made on one small aspect of this log of information, such as a transaction, then that change is made on the publicly kept ledger. The key difference between blockchain and, say, a regular website is that the information is decentralized. When an update is made to a website, the change is made on a central server that houses the website and anyone accessing the website simply sees what information is stored on that server. With blockchain, however, there is no central server and rather the information is stored on computers across the world. When a change is made to the blockchain ledger, and updated version is sent to each computer on the blockchain network for them to store, allowing for complete trust that the information is accurate because no single source is in control of it.
But then what is cryptocurrency?
Most people’s first exposure to blockchain was in conjunction as a digital log of how cryptocurrency moved around and changed hands among different people. Bitcoin, the first and most popular form of cryptocurrency, was largely people’s introduction to the idea of blockchain. The excitement around Bitcoin and other cryptocurrencies came from its abilities to take power away from central banks because a blockchain ledger could instill as much, or maybe even more, trust in customers about the ownership behind the digital coins.
Cryptocurrency is also frequently discussed in the context of cryptocurrency mining, which is the process by which specific transactions on the blockchain are verified and added to the digital ledger. Each time a transaction is made, computers on the blockchain network will compete to solve complicated mathematical problems using cryptographic solving methods. The user who first completes this task not only authorizes the transaction, but is rewarded for dedicating their computing power to the task with a small amount of cryptocurrency for their trouble. Given the value some cryptocurrencies reach, the cryptomining operations have spurred massive operations looking to profit on the opportunity with hundreds of computers working at once.
OK, but how does this all relate to energy?
As blockchain become more exciting to investors and entrepreneurs, the energy sector was identified as a natural opportunity for market disruption. The neat part is that the relation between blockchain and renewable energy is pretty mutually beneficial.
Starting with how renewable energy aids the block chain process, despite knowing the benefits of clean energy many customers are still slow to adopt to using renewable energy sources. This slow transition is for a number of reasons: most energy used will come straight from the grid and customers may have limited options to dictate that their energy be renewably sourced (though customers in New York, New Jersey, Connecticut, Washington DC, Massachusetts, Maryland, Ohio, and Pennsylvania can all choose to utilize Atlantic Energy’s renewable energy sources), regulations may make on-site generation (such as rooftop solar panels) a headache to install and require high upfront costs, or hesitation from the intermittent nature of some clean energy resources like wind or solar. Whatever the reason, limited transition to renewable energy sources end up hurting the viability of the overall renewable energy sector.
However, one market that has notably been drawn into clean energy to power operations is cryptocurrency. Popular cryptocurrencies, such as bitcoin, require immense amounts of electricity to be mined. In fact, the energy bill alone can account for up to 70% of total cryptocurrency mining operation costs. This trend has caused numerous cryptocurrency operations to realize that the most cost-effective strategy is to pay the high upfront costs to build renewable generation capacity at the outset to power operations, and then own those power generation sources, rather than pay on an ongoing basis for non-renewable energy from the grid on a monthly basis. Given the pending forecasts about how cryptocurrency and, more widely, blockchain will become ubiquitous in daily life moving forward, this attraction of cryptocurrency mining to renewable energy portends many new and large customers for clean energy, pretty much as fast as such capacity can be built!
Beyond the ability for clean energy to benefit blockchain users, though, the reverse can be true as innovators find new ways that blockchain can be utilized by actors in the energy industry. For example, a partnership with IBM and several other technology companies launched a pilot project that would encourage electric vehicle owners to make power from their car batteries available to the grid during peak house to ease grid imbalances. This project would use blockchain technology to manage, track, and distribute the energy across the grid system in the most effective way possible in a way that will reduce wasted energy and increase the viability of renewable energy sources on the grid.
Another example of blockchain being used to maximize the potential of clean energy includes a blockchain-based rooftop solar community. This program amounts to a digital accounting of electricity generated from solar, allowing for instantaneous and automatic information sharing of information on solar capacity, potential buys, and transaction details. The common thread in these and other projects is the ability to reduce transaction costs of clean energy through the keeping of a single transaction record and automating and computerizing the whole process on a more micro scale than currently exists. Because the nature of some of the most common renewable energy sources are intermittent and distributed, connecting generation to potential consumption on a minute-by-minute basis is critical.
Blockchain is poised to become an unparalleled tool towards these efforts and become intertwined with producers and consumers of electricity in the near- and long-term future. By understanding these complicated ideas now, and especially how they can be used in conjunction with renewable energy, you can follow all the developments of these exciting trends.