Associate Expert, UN Environment
Will blockchain technology help to curve the continuous increases in energy consumption and realise the transition to more efficient and low-carbon energy systems? This question is drawing growing attention in the energy sector. To discuss this issue, the United Nations Environment Programme (UN Environment) and co-organised a conference, entitled ’Technology and Innovation Dialogue – Exploring Blockchain Technology and Environmental Sustainability’, on 23-24 July 2018 in Paris. This article outlines what blockchain technology is and how it can accelerate energy efficiency.
A REVOLUTION FROM A CENTRALISED TO DECENTRALISED ENERGY SYSTEM
A blockchain is a decentralised ledger that is maintained by a network of computers without the support of any central authority such as centralised grid operators. Compared with the traditional method of electricity supply that is distributed to the demand-side through a centralised system operated by major energy and utility companies, blockchain technology brings the possibility of decentralised energy supply. This technology enables the digital transaction that provides the secure and automatic execution of digital contracts, or smart contracts, on peer-to-peer networks. The flexibility of blockchain technology can be well utilised to improve energy efficiency.
BLOCKCHAIN TECHNOLOGY IMPROVES ENERGY EFFICIENCY BY ALLOWING FLEXIBLE ENERGY TRADING THAT SCALES UP ENERGY SAVINGS ON THE DEMAND SIDE
Demand-side efficiency can be improved through the use ofblockchain technology, which can scale up the energy savings made by consumers. Blockchain technology enables the real-time coordination of data on supply and demand of electricity in the grid. This helps to match a consumer who wants to sell excess energy with another consumer in the same grid who needs additional energy. Smart-contracts are used for the execution of the transaction. In this way, blockchain technology can facilitate the peer-to-peer energy trading between consumers without the intervention of centralised record keeping. Consumers are now able to become more active actors, or prosumers, in the decentralised energy system.
Some companies have already applied blockchains-based peer-to-peer energy trading. For instance, the TransActive Grid, a joint venture between LO3 Energy and ConsenSys – two private companies-, demonstrated solar energy trading in a micro-grid developed in New York, USA. In another case, Power Ledger, an Australian blockchain energy solutions provider, has worked on the commercial deployment of its energy trading platform in Chicago, partnering with a local university. Power Ledger has also launched a pilot project of peer-to-peer energy trading in Bangkok, Thailand, between four participating entities. Furthermore, the company partnered with a Japanese major utility, the Kansai Electric Power Company (), to test the clean energy trading between consumers.
BLOCKCHAIN TECHNOLOGY INCREASES ENERGY EFFICIENCY BY UPGRADING ENERGY MANAGEMENT SYSTEMS (ENMS) THAT ADVANCE ENERGY PERFORMANCE ON THE SUPPLY SIDE
Supply-side energy efficiency could also be increased through the application of blockchain technology. Energy management systems (EnMS), which are systems used by property asset managers and operators of electric utility grids to monitor and control energy performance to maximise grid efficiency, can be improved by using blockchain technology. For instance, a virtual power plant (VPP), a network of decentralised power generation units, could be built with blockchain technology alongside other advanced technologies including Internet of Things (IoTs) and smart meters. The VPP is structured with clusters of distributed energy resources, loads and storage systems that are jointly controlled by a central operator. The intelligent control of the clusters can be achieved through the aggregation of those assets distributed in the grid. The central operator can use those technologies for the enhanced monitoring, control and optimisation of the electricity flow through real-time analysis. Furthermore, blockchain technology has the potential to transform a VPP that is connected to the main grid and controlled by a central operator to a fully decentralised grid management system. In other words, blockchain technology could ultimately facilitate the mainstreaming of decentralised energy systems, or digital grids, that are disconnected from a central grid. This will make energy monitoring more efficient and more accessible by every individual.
The benefits of blockchain technology for environmental sustainability are not limited to its potential to improve energy efficiency. Blockchain will also accelerate decarbonisation and address energy poverty reduction by improving universal energy access through decentralised energy systems. This technology will be one of the most cost-effective solutions to allow people in rural areas to gain access to sustainable energy. The United Nations Environment Programme will continue to draw together various stakeholders to develop potential case studies on the use of blockchain and to facilitate the innovative transformation of energy systems to address today’s sustainability challenges.
By Toyo Kawabata, Associate Expert, UN Environment