A necessity in everyday life, energy plays a vital role in the home and business worldwide but is often overlooked as an industry with options. The energy market is valued at $2 trillion worldwide and has been heavily monopolized by big players in the industry. Yet in recent years, renewable energy and sustainable practices have changed the conversation, placing power in the hands of consumers and energy producers. Today, microgrids and blockchain technology have emerged as the newest opportunity to increase energy efficiency and disrupt conventional ways of the energy industry.

Massive Power in Microgrids 

A microgrid is a smaller, local grid system connected to larger, traditional energy grids. Equipped with control capability, microgrids have the ability to detach from the traditional grids and operate independently.

How Microgrids Operate 

A microgrid works like a traditional grid in that it links major power sources to individual buildings. Often used as a supplement, microgrids can disconnect and operate independently to provide energy when traditional grids require repairs or experience outages, which typically affects all attached to the grid. Microgrids can also be powered by alternative types of energy like distributed generators, batteries, and renewable resources unlike the majority of traditional energy producers.

Benefits of Microgrids 

Despite being initially used as a backup energy source, microgrids have surfaced as an alternative to traditional energy grids due to its energy efficiency and minimal environmental impact. An obvious, major benefit of microgrids is its ability to provide emergency energy supplies in disaster and outage prone areas.

Yet, other significant advantages of microgrids exist, relating to energy costs, locations, and logistics. Financially, microgrids can decrease costs associated with distribution and capacity where conventional electricity distributors are unnecessary and emergency power sources are easily accessible. In less developed areas without traditional grids, microgrids are combined with solar panels and batteries to power basic lighting and to charge simple devices. However, when physical microgrids are not feasible, virtual microgrids can support P2P energy trading.

More importantly, microgrids have begun to take over as the main form of energy sourcing in areas where resources and space for traditional grids are limited, with companies like LO3 Energy developing modern grids for cities today. According to LO3 Energy’s project manager Karin Landstrom, “The growth of distributed renewable generation [like microgrids] completely turns the model of existing grids on its head and makes it obsolete”.

(Source: LO3 Energy)

In terms of blockchain usage, LO3 Energy actively combines blockchain and energy innovations to transform energy generation, storage, and purchasing. Creators of the first blockchain microgrid in Brooklyn, New York, LO3 Energy uses their blockchain-enabled platform Exergy, “to securely connect up consumption and generation within small local areas [and] create microgrid networks with their own local energy marketplaces in which efficient energy use can be encouraged and rewarded by pricing structures.” In other words, “local energy stays local, reducing the line losses suffered by traditional transmission and keeping value within the community,” to maximize the microgrid’s ability to balance out over and undersupplies of energy.

Benefits of Blockchain in Energy

The introduction of blockchain in the energy industry will not only disrupt the traditional structure of the market but also increase the efficiency of payment, energy usage, and energy storage.

Transactions with Cryptocurrency

By integrating blockchain into traditional energy transactions, consumers will have the option to use cryptocurrencies and energy tokens to facilitate transactions and payment methods via blockchain. Producers, whether owners of solar panels or energy plants, can raise capital via energy tokens for consumption or resale. This develops a multilevel platform for transactions and transfers of energy through a more efficient and protected system. “Tokenizing” energy transactions also allows cryptocurrencies to be accepted as payments, creating compatibility and consistency among the blockchain world.

Helping Homeowners

For the homeowner, blockchain technology offers several benefits and eases the process of obtaining and consuming energy. Traditionally, electricity rates have been controlled and dominated by energy monopolies. But under blockchain powered energy, the market itself will dictate electricity rates, creating more affordable options for consumers. Inside homes, blockchain integration into energy will support Internet of Things (IoT) appliances and increase interconnectedness of smart technology devices. With connected smart devices, homes as a whole can become more advanced technologically to use energy efficiently.

Supporting Energy Producers  

For energy generating firms, blockchain benefits those conducting in renewable energy projects while offering a simplified, efficient energy system. This shift to using blockchain encourages implementing renewable energy since hydro, wind, and solar producers can easily communicate with eager investors and consumers looking to live sustainably. It also eliminates the need for intermediaries of monopolizing utility companies. 

On the technical side, grid operators can receive greater information of resources and their consumption which allows them to constrain supplies when necessary with fewer fees. For example, Omega Gid provides a P2P energy system to easily connect consumers to clean, sustainable energy. Omega Grid’s CEO and Co-founder Killian Tobin believes that blockchain, “creates the opportunity for a more resilient grid because we can record local market data in a secure, auditable way that does not rely on communication with a central database. Our software will securely track all the financial aspects for any area with the right mix of generation.” This new P2P energy exchange platform results in lower transaction costs and network transparency for producers.

Overall, this energy sharing system powered by blockchain creates autonomy and automation for consumers and producers, transforming the way the industry will create, consume, and distribute energy.

Blockchain Uses in Energy

Direct P2P Trading

The introduction of blockchain into the energy industry also opens up the potential for P2P trading along the blockchain that is uninterrupted by intermediaries and their excessive fees. Currently, homeowners with solar panels have the option to sell excess energy produced back to utility companies. This process can be supported by the blockchain-powered energy trading system, furthering the advantages of owning renewable resource devices. Additionally, the blockchain inherently connects consumers and producers directly, which reduces transaction costs through inalterable smart contracts and uniformization quality and quantity of energy units.

Virtual Power Plants 

Virtual Power Plants, VPPs, are groups of electricity generators and storage units linked and controlled jointly. A system of VPPs can collect energy supplies which can be distributed optimally, especially when placed and used strategically. VPPs can be optimized further when used in conjunction with blockchain since the system can integrate local data and information to direct energy to certain VPP locations at a small cost.

Coordinating Supply Chains 

Blockchain and supply chain are also a good match. Complicated and prone to errors, energy-related supply chains and logistics require explicit communication and accountability, which blockchain can effortlessly supply. Physically, blockchain can track inventories and products throughout the supply chain instead of relying on the different information tracking systems of each member of the chain. For example, scanning codes can be attached to smart contracts to track assets, eliminating the chance of compromising information. Overall, synchronising information into the blockchain can create a smoother supply chain flow that reduces errors and increases speed of processing.

Trade Settlement 

Blockchain uses distributed ledgers that substitutes having a central administrator for transactions and data, securing trade settlement and record keeping. Approvals of trade exchanges of energy can be completed through a P2P process within a blockchain which results in fewer clearing requirements and speedy confirmations. Furthermore, blockchain can operate as a reporting mechanism to ease the stress of following strict energy regulations since it updates instantaneously and cannot be manipulated manually.

Energy permeates every part of life for humans today. Thus, it needs to be sustainable, controllable, and efficient. Luckily, blockchain and microgrid technology have revolutionized the industry as a whole by offering new solutions for consumers and producers without sacrificing comfort and safety of having electricity. As electricity continues to be created and consumed, blockchain and microgrid implementation will become widespread, impacting millions of lives on Earth. 

Microgrids and blockchain technology are amazing options to increase energy efficiency, but there are a lot more things going on in the energy sector. 

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