Blockchain Techologies For the Energy Access Sector

Overview

• See Blockchain Opportunities for Social Impact in Developing Countries

Blockchain technology reduces transaction costs: recording every transaction, it can be identified on the public record by all parties of the transaction.

Therefore, also in the energy sector, blockchain technology has the potential to play a significant and potentially game-changing role:

• It may lead to reduced costs of utility bills and/or reduced transactions costs in wholesale market for gas or electricity limiting the need for working capital.
• Game-changing will be the impact of blockchain technology on the communication possibilities among energy devices (water heaters, electric vehicles, batteries, solar PV installations, etc.) and with the grid operator (smart grids).
• Lowering costs are also expected due to more information for utilities and grid operators for the integration of volatile renewable energy capacity into the grid.
• The source of electricity can be identified; for example, with blockchain technology it can be possible to identify whether the kWh a consumer currently uses has been produced via renewable energy systems or via traditional ones.

Like for many “new” technologies, people are overestimating the impact in the short run, but underestimating it in the long-run! Many use cases will come up in the future and in remote areas.

• [What other impacts will blockchain have on the energy access market?]

Challenges to overcome:

• Energy regulations often include who can be a retailer (and who can not be). Changes are often necesssary to include also prosumers and small electricity providers.
  
• Lack of regulation in the blockchain technology sector might make companies wait before investing. Defferences in regulations are expected worldwide.

Infrastructure is still an obstacle. Bitcoins are not always accepted. Mobile phones need to download an app.

Is Blockchain technology sutiable to deliver subsidies in a cost-effective matter?

Blockchain Technology in Financing Energy Access

In many regions in Africa, many solar panel projects are often left unfunded. Most of them are under 1 million USD in value. This funding gap could be closed by crowd-financing: individuals around the world can purchase the photovoltaic cells that make up the solar panels on African houses. Only if enough solar cells are pre-purchased, the solar panels are constructed. During the crowd-sale period (a certain limited number of days), the sum a buyer is willing to spend is allocated to the number of solar cells he will get for it (due to the volatility of the bitcoin). Those cells deliver energy to the African households, in turn households pay a rental income in bitcoin to the investors for some years. The solar cells are owned globally by individual digital currency users with ongoing solar powered nano-income payments made possible because of the unique properties of bitcoin, the blockchain technology used to finance energy access.

Companies and Organisations Using Blockchain Technology for Energy Access

[What other companies are in this field?]

Renewable Cryptocurrencies

Renewable cryptocurrencies aim to motivate solar prosumers by rewarding them. This is a take on how bitcoin incentivizes miners to commit processing power to the network by rewarding them with bitcoins for each block of transactions mined.

SolarCoins

MIT start-up SolarCoin pays people with an alternative digital currency for generating solar energy, one coin for 1 megawatt-hour of solar electricity. So far, it is active in 32 countries. SolarCoin is incentivizing 97,500 TWhs of global solar energy production over the next 40 years.

M-PAYG

M-PAYG makes transactions using crypto-currencies and executes the payments contracts on blockchain. The M-PAYG concept has two sides and both include blockchain: 1 Mobile money or Blockchain technology to pay into the cloud and 2 real time monitoring of the solar panel (including shut off/on).

They use a leasing to own model: 5 USD per month gives the consumer a flat rate of solar energy.

• Converging technologies: energy (M-PAYG) and payments, WIFI were three separate fields are now targeted together. MPAYG are starting with providing energy, and other partners are delivering the towers to roll out wireless internet connectivity to the rural areas.
• This will allow for more value added services: data calls, e-health, e-farming, insurance, e-banking, payments, education, content.

They actively work in Tanzania, with plans to move into Uganda and Malawi within 2017.

“Currently, we are working with mobile wallet providers like M-PESA to bring solar energy to the unbanked part of the world. But in the future, our business could build on Blockchain-based payment solutions, radically lowering transaction costs and taking out the centralised middleman as a provider of trust,” says David Dizon, co-founder & CEO of M-PAYG

Cross-border payments by Coinfy

Blockchain payments and trade platform Coinifyallows cross-border payments. Blockchain payments incur minimal transaction fees, which is paramount for developing countries suffering from high transaction costs making trade economically unattractive. Blockchain technology allows low cost payments between off-the-grid solar companies and people lacking access to energy sources.

Experiences: Investment Platform based on Blockchain Technology by EcoKraft

EcoKraft GmbH is developing a next-generation social impact investment platform for community energy projects in developing countries.

Smart meters collect the consumption data from households in Malawi and send it through SIM cards (GMS data system) to Germany. So far, this is only the pilot. But EcoKraft expects to change the financing of energy access project worldwide!

EcoKraft provides information on the economic viability of mini-grids for investors to finance additional mini-grids.

“With interest rates at 32-35% at traditional banks, especially small companies are not able to finance the access to electricity in their communities.” Bjoern Fischer, CEO of EcoKraft GmbH, states. That is why EcoKraft is looking for investors to help finance the access to electricity in remote areas. They offer a unique investment with competitive rates of returns and valuable information to the investors.

Blockchain technology enables transparent investments and risk management through forecasting future cashflows. Additionally, EcoKraft offers targeted technical assistance during the early stages of a new energy access project. Therefore, investment are de-risked.

Investors can track their projects at any stage, and stay updated on project performance and operational metrics. Therefore, they have access to the data about the total energy generation, energy reliability, and social and environmental impact of their investment. Investors can check how much CO2 was reduced, how many more people have access to lighting and healthcare. Due to the IRIS industry-standard performance metrics, investors can compare the EcoKraft investments with competitors.

• http://www.eco-kraft.com/invest/

Experiences: Solar Energy Finance Platform by Sun Exchange

Sun Exchange has built a blockchain based solar energy finance platform which fills a huge funding gap for commercial and industrial solar energy projects in Africa. It enables anyone in the world to buy and then earn revenue from solar panels powering Africa.

How it works: Buy solar cells and lease them to schools and businesses in developing nations. The Sun Exchange arranges your monthly lease rental collection and distribution.

The Sun Exchange is a marketplace where you can purchase solar cells and have them power businesses and communities in the sunniest locations on earth. You lease your solar cells purchased through The Sun Exchange to hospitals, factories, schools and other end-users, earning you decades of solar powered rental income wherever you are in the world.

The Sun Exchange hosts the so-call 'crowd-sale' of solar cells. It works similar to a crowd-funding as the project will only go ahead once all the solar cells have been sold. Solar Exchange arranges the solar equipment leases for the investors and arranges the revenue collection and distribution systems so investors earn a passive stream of rental income for 20 years powered by the sun.

Building Microgrids Based on Blockchain Technology

LO3 Energy (USA)

LO3 Energy is a New York based startup that implements microgrids using renewable energy to power sectors in a social setup. They are currently piloting a microgrid in brooklyn based on the blockchain technology.

How it works: The residents with the solar panels sell their environmental credit to residents without solar panels via a phone app. The residents can then negotiate with each other on how much and at what price they want to buy the electricity. This process eliminates the middleman and allows peer-to-peer exchange. The entire setup is made possible by blockchain, which allows the smart meters to communicate with one another reliably and the app acting as a bidder that gives microgrid consumers the power to control transactions.

LO3Energy is seen primarily seen as an energy technology company, but they think block chain is the most suitable solution. Transactivegrid is the blockchain they use. Their meters not only collect data on consumption but communicate with each other and other smart devices using tandard communication protocols. They see several business cases for blockchain technologies:

• Local peer-to-peer energy market: Electric flows between prosumers and traditional providers, but blockchain platform can allow for placing bids and provide ownership to the one who won the bid of the locally produced renewable energy.
• Localized Demand Response: Substation the risk of overloading can be managed cost effectively.
• Location-based pricing: supply costs are not the big part, but the grid costs are the heavy part of the electricity cost. Bying directly from the supplier will make it cheaper for the customers.

After a successful pilot phase, the microgrid will be formally launched in later 2017 and will provide electricity to 300 households and small businesses. Several pilots worldwide (Australia, Germany) within 2017 and they are partnering with Siemens, KIT, AEMO, EPEX SPOT.

Regional mini-grids: wholesale trading (Germany)

Enerchain from PONTON: They offer their services to energy traders who need trading data via platforms, data communication processes. Project Enerchain: The world’s first wholesale energy trade over the blockchain took place on 5^th of November 2016. Orders and all information are provided end-to-end. Blocktime is 1 second (Bitcoin uses 10 minutes) and therefore very fast. Over 30 partners (mostly big national utilities) test the blockchain until October 2017.

• An example of a local grid: NEW 4.0 (Norddeutsche Energiewende). Since the region has a large renewable share (> 50%), NEW brings together the producers and the consumers of this energy to manage demand and supply side via a marketplace (price, dynamic grid usage fee) using blockchain. Started in 2016 and will run for 4 years.
• Smaller blockchain based market place: Powerprice, battery, electolyser, electric vehicle interact via blockchain together to run the devices at the most cost-effective way.

Further Information

• Blockchain Opportunities for Social Impact in Developing Countries
• http://www.eco-kraft.com
• Groarke, David. ‘Energy and Blockchain Go Global: Utilities, Startups, and Use Cases’. Power Ledger -A New Decentralised Energy Marketplace, 17 March 2017. https://powerledger.io/energy-blockchain-go-global-utilities-startups-use-cases/.
• Groarke, David. ‘Energy and Blockchain: The Most Promising Applications’. EnergyPost.Eu, 24 May 2017. http://energypost.eu/energy-and-blockchain-here-are-the-most-promising-applications/.
• The Sun Exchange: Interview @ engerati 04 May 2017 and Powering Africa through blockchain crowdfunding 25 April 2017
• Mougayar, W. (2016). The Business Blockchain: Promise, Practice, and Application of the Next Internet Technology. John Wiley & Sons. Link. This book lists a few companies involved in “Energy & Block chain”. It states that “Blockchain applications can help achieve a more efficient management of the power distribution grid, low-cost microtransactions between peers or machines, secondary market creation, or rule-based payments.”
  • TransActive Grid, a joint venture of LO3 Energy and ConsenSys, developed the first application for a mini-grid: delivers real-time metering of local energy generation, enables residents to buy and sell renewable energy to their neighbours. In March 2016, 5 home owners with solar panels in a Brooklyn, New York neighbourhood started to sell to 5 customers across the street their left-over energy.
  • Accenture has developed a smart plug that coordinates and monitors power use of appliances in the house. When demand is high or low it searches for energy prices and then uses the modified blockchain to switch suppliers if it finds a cheaper source. It could help many people on lower incomes who pay for their power via meter.
  • Grid Singularity is experimenting with the blockchain to authenticate energy transactions. The company is targeting developing countries where it wants to make pay-as-you-go solar more secure. Its eventual goal is to build a blockchain platform for energy systems that can be applied to any type of transaction on the grid. The new platform will support forecasting for grid balancing (smart grid management), facilitate investment, trade of green certificates/certificates of origin and eventually energy trade validation.

• Hasberg, Kirsten. ‘M-PAYG: Next-Generation Mobile Payments for Rural Electrification’. LinkedIn Pulse, 9 May 2016. https://www.linkedin.com/pulse/m-payg-next-generation-mobile-payments-rural-kirsten-hasberg.
• M-PAYG presented in the webinar of NEETS (Facilitating New Energy and Electrified Transport Solutions): Webinar Blockchain Technology in Energy (29th August 2017).

• World Bank’s Energy Access Global Solutions Group organised a webinar with presenters from leading fintech and blockchain companies M-PAYG, Coinify and Chainalysis to discuss the potential of using blockchain technology as a tool for World Bank’s operations on energy access and related projects.