Electricity and blockchain - FFC Media
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Electricity and blockchain

Sometimes it seems that there is no distance to the beautiful future, when people will not only consume electricity, but also to produce it, selling surplus to neighbors. However, the beautiful future is hampered by a lack of trust between people and the need to develop an extremely complex system to account for the flow of energy between millions of small suppliers and consumers. Perhaps, the beautiful future can be brought closer with the help of blockchain technology, which was developed to solve such problems.

Today, humanity has two methods for obtaining electric energy: using natural resources or using renewable resources. Developing countries are huge consumers of natural resources, which incidentally causes serious environmental problems.

Coal power plants pollute the air with harmful chemicals. That’s why China has decided to get rid of them in the near future. Other supporters of a ban on coal include France, where they plan to shut down all coal power plants by 2023, the United Kingdom, where they plan to do the same by 2025, and Canada, where they will phase out coal by 2030. After the Chernobyl and Fukushima nuclear disasters, several countries got rid of or are getting ready to give up atomic energy. Even though hydropower is a renewable energy source, it also hurts fluvial ecosystems — to say nothing of the fact that they’ve already built one everywhere they can.

The alternative to traditional power plants is obtaining electricity from renewable sources of energy: wind, water, and solar. In August 2018, solar and wind energy producers produced their first trillion watts. Granted, they needed 40 years to accomplish it, but the next trillion will be produced in a mere five years.

Alternative energy could be placed several kilometers from a city to supply its buildings with electricity, or even be housed in a specific building to supply the needs of its residents.

Energy paradise

In 2017, excess surpluses of alternative energy drove electricity rates in Germany so low that suppliers paid consumers to take their electricity more than a hundred times. So much electricity had been produced that the power grid was simply not prepared to handle it.

Germany supplied their electric surplus to neighboring Poland and Czechia, who had connectors with their power systems. All other countries in Europe don’t have the same power grid as Germany and we’re unable to take advantage of the energy boom.

A similar situation happened in Chile, where solar panels produce too much electricity.

A surplus, but not for all

But not all countries are ready to boast of an energy surplus. Egypt, for instance, has only now found methods to decrease its energy deficit. Building power plants on traditional fossil fuels will provide them with enough energy. However, Cairo still sits in the dark at night to the present day.

But energy deficits are by no means the fate of third world countries alone. Iceland, a developed country, has already warned about potential difficulties supplying energy to the public.

The majority of African countries have problems with electricity, since they lack even the most basic infrastructure. But the lack of electricity directly influences the region’s development — major businesses won’t go into an area where there is no electricity or where it costs too much.

The electric market

What’s more is that energy surpluses and deficits can occur on a much smaller scale. Let’s imagine, for instance, that Bob and Alex have settled down in a new suburban development. Bob is waiting for utilities services to reach his home and install electricity meters, while Alex decided to put up solar panels.

A week later, Bob has to move into his house, which still doesn’t have electricity — the refrigerator doesn’t work, there’s no light at night, and electric pumps aren’t working, so no water, of course. On the other hand, Alex generates enough electricity for his own home and then some.

For Alex, it’s entirely logical to help his neighbor. He thereby decreases his expenses by offering to share the cost of maintaining his alternative energy system, based on how much Bob consumes. Bob, of course, will agree, and the neighbors will start up power supply to the off‐the‐grid home.

A month goes by, and Alex notices that he now no longer has enough electricity. Stopping by to visit Bob, Alex sees that only the refrigerator and water pump are hooked up. But he notices that there is a television and air conditioner hooked up as well. Returning home, he realizes that his neighbor is deceiving him, but the meter he installed says very little electricity is being used.

Bob reprogrammed the meter and now it shows a lower reading. A smart meter using blockchain, which would not allow to change the data, and making mutual settlements using a smart contract, would avoid this problem.

There are plenty of cases like this in reality. As one example, the Russian company MRSK Center reported in August that they thwarted 3,618 cases of illegal electric consumption in 2018, totaling 100.15 million kWh.

Nor are individuals averse to getting free energy. In August, Californian police arrested a group that had stolen $200,000 of electricity. They had been using the electricity to grow marijuana.

The civilized rules of the game

The only thing left for Alex to do is cut ties with Bob or find a way of accounting for the electricity supplied to a neighbor, which would not depend on the honesty or dishonesty of the companion. The problem is solved by blockchain technology, that it makes it possible to conclude and execute transactions between the parties, which do not trust to each other. Any attempt to reprogram the metering system or retroactively change the energy consumption information will be doomed to failure. The smart contracts, automatically executed programs, recorded in the blockchain, help to make impossible to change the terms of their work retroactively. It is guarantee the parties that mutual settlements will be made, and exactly on the conditions that were in force at the time of its conclusion.

This is what the project Power Ledger does. It offers to customers to trade electric energy using blockchain for transparent settlements between suppliers and consumers. The idea behind the project is quite simple: you can sell surplus energy from alternative sources to your neighbors at your own rates.

To buy or sell energy, you use Power Ledger’s software which allows consumers to flip the supplier’s energy on or off at their discretion. The entire essential code is built into the power management unit, like into the system of a smart home or a smart meter which contains payment terms and and supplier changes.

Then, consumers acquire special tokens which are automatically written off in favor of the supplier after the consumption of a certain amount of electricity. The supplier is chosen by the consumer on the service exchange.

The company has a working example in Precinct T77 in Bangkok, which covers 8 hectares. The precinct contains Habito, Bangkok International Preparatory & Secondary School, Park Court Serviced apartments, and Dental Hospital Bangkok. BCPG, a local company, will supply the energy, while Power Ledger’s value‐add is keeping track of energy consumption on blockchain and managing accounts.

The Grid+ project allows ordinary people to buy and sell electricity through a mobile application. For that, you need to buy a smart meter and control station, download the app on your phone, and then sell your excess energy which you are not using to other people.

Grid+’s control station is an Ethereum‐based cryptowallet, which executes smart contracts to buy or sell electricity. The device has a built‐in account which users can fund. Once a certain amount of energy has been consumed, funds are immediately debited from the balance. The project is helping to simplify bookkeeping, and you can see your balance on the app and top up when necessary.

Blockchain will help, but not today

One should understand that Power Ledger and Grid+ are experimental projects. But for now, blockchain technology is fairly expensive to process transactions for relatively small amounts between ordinary people.

For enterprises where the amount of transactions is much higher, it will fit much better: due to the introduction of smart contracts, you can unload accounting departments‐because the funds for the consumed electricity will be written off automatically, and the supplier will not be able to arbitrarily change the terms of delivery. Both the supplier and the consumer can translate all the terms of their relationship into a smart contract on the blockchain and fully automate the procedure for controlling the issued and received electricity.

Suppliers will be able to identify energy leaks along the line and stop attempts to embezzle electricity. The above‐mentioned MRSK Center did not mention for nothing that the majority of stolen energy, 79.51 million kWh to be exact, was stolen by companies.

It’s the same in every country: litigation between energy suppliers and consumers is now the norm. Blockchain could help both sides agree on a unified electric meter system. After all, accounting mistakes can often cost companies millions of dollars in expenses on lawyers and court procedures.

Simplifying settlement procedures will help new players come onto the market while also developing energy infrastructure. If they really manage to lay the groundwork for P2P electric energy exchange, and, thus, dramatically reduce non‐production administrative costs, it will decrease the cost of electricity and consumers will pay only to maintain infrastructure.

In the meantime, Bob and Alex will have to wait for improvements of blockchain technology to establish relations and exchange fair payments.

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