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Could blockchain shape the future of decentralised energy? Pierre Telep, Renewable Energy Senior Specialist at Green Climate Fund, looks into the Internet of Energy.

Crypto assets, a new class of assets that are traded on peertopeer (P2P) markets, were exceeding a total market capitalisation of $750 billion by December 2017. And it seems the momentum for decentralised trade solutions still has promising times ahead. At the pace at which things are currently moving, it’s safe to ask whether the predicted and long-awaited transformation of the energy industry is not overdue. Especially now that various studies and experiments have contributed to reassuring grid operators that the rise of distributed generation is not a threat, but rather an element of grid stability.

This article originally appeared in Issue 1 2018 of our print magazine. The digital version of the full magazine can be read online or downloaded free of charge.

Indeed, most experts agree that the energy sector transition that we need is the one that has increasing amounts of renewables in the generation mix. While the focus has so far been on the supply side, the digitalisation on the demand side using the opportunity offered by the P2P realm seems to offer new perspectives. A sustainable decarbonisation of the energy industry will eventually require leveraging end users’ participation in the entire value chain. Utilities in Europe are now replacing their metering infrastructure with second generation smart meters that will enhance services to end users.

Is this a sign of entering a new era that we have been waiting for?

Internet of Energy

First movers in the Internet of Energy started on the financing side, with the tokenisation of renewable energy projects. Whether the tokenisation of projects is the first step towards a revolution or merely a surfing activity on the Initial Coin Offering waves is a discussion that time will clarify. One thing is nevertheless certain: there is still a long way to go on the ‘all renewables’ journey, looking at the scale of the financing challenges ahead. Also, fears that tokens’ value could be manipulated by miners or issuers do not help much – which suggests that impact oriented or concessional funding will still play a key role in filling the financing gap for renewable energy projects, at least for a while.

On-going pilots for blockchain-based energy markets in which producers and consumers can trade energy packages through smart contracts are also promising. This so-called Internet of Energy approach would work best where smart grid infrastructures can back the delivery of energy packages. But the main setback at this point is not technology. Whether we will all use an app soon to order the exact amount of energy we need for the next week, day or hour, directly from a producer with solar cells on their rooftop and pay with crypto tokens is not a dream anymore. The approach is technically feasible today. Whether a blockchain can accommodate all such P2P energy transactions, the answer is clearly yes, as evidenced by the records now set by the crypto-currency industry.

The cryptocurrency stumbling block

The positive outlook aside, the blockchain energy enthusiasm may still have a major setback to deal with: it’s called regulation. Issues related to privacy, data protection and anonymous messaging streams through decentralised platforms are challenging for regulators. More, the rise of artificial intelligence with all its associated risks does not help the picture. Who really wants to compete against fast thinking machines taking control of our destinies by dictating their will on our energy supplies?

Before comforting answers are brought to the table, it seems electric utilities that operate today under regulated markets can still rely on their old business models. Good planning will nevertheless require such regulatory risks to be incorporated in the Internet of Energy picture. As soon as the regulatory frameworks evolve, the blockchain energy technology would have reached a level of maturity sufficient to fundamentally change the entire picture. Interesting times lie ahead for financing energy projects and the trade of power supply to consumers, or even how it can transform regional trade between the continent’s various power pools. ESI

This article originally appeared in Issue 1 2018 of our print magazine. The digital version of the full magazine can be read online or downloaded free of charge.