Over the past decade, the global energy sector has begun to witness rapid decarbonisation and decentralisation, enabled by various clean energy policy instruments. Despite the crashing halt to the world’s economy brought on by the COVID-19 pandemic, the European Commission has decided to leverage this change to bring on transition within the energy sector.
During an IEA webinar in October, the European Commission’s Executive-Vice President Frans Timmermans said: “we’re in the middle, not just of a pandemic, not just of a climate crisis, not just of a biodiversity crisis, but we are also in the middle of an industrial revolution.” The Commission intends to use the EU recovery plan from the coronavirus pandemic as an opportunity to accelerate the energy transition with more ambitious targets for CO2 emission cuts.
The economic crisis demands vast investment to restart the economy and within that having a clean energy focus will enable Europe to make positive leaps toward its goal of carbon neutrality by 2050.
A major step in green recovery to kickstart renewable energy transition is through the implementation of a green stimulus using blockchain technology in a new decentralised energy network. This could drive the growth of renewable energy microgrids, producing a varied sustainable energy supply. The application of blockchain in the energy sector is a burgeoning field of research with several active pilots launched over the past few years involving energy microgrids.
A green energy transition has been a central pillar of EU policy-making, highlighted by funds released under the European Green Deal, EU’s action plan to reduce emissions and deliver a sustainable economy. These funds have supported a number of smart grid projects.
For Europe to transition to a clean economy, it is necessary to adapt energy infrastructure to the future needs of the energy system, within a decarbonised and decentralised network. It is thus essential to create an integrated EU energy market increasing the security of supply, removing dependence from single suppliers.
In light of the coronavirus pandemic, the European Green Deal is now the foundation of Europe’s post-pandemic stimulus-response built around a green transition with government focus shifting from support to the recovery. This has brought forward the timeline on which major utilities must rethink their strategy in the energy transition, speeding up the phasing-out of fossil fuels, especially coal. A recent report by the researchers of Cambridge Econometrics and the We Mean Business Coalition assessed the green recovery plan post-COVID, highlighting the long-term economic and environmental benefits afforded by such a strategy. The report estimates that if all major nations developed strong plans for a green recovery post COVID-19, global annual emissions would be 7 per cent lower in 2030 than in 2019 and millions of new jobs will be created. Renewable energy offers a pathway to economic recovery and emission reductions.
The combination of a more electrified energy system and a higher share of intermittent renewable generation will lead to a need for improved electricity grid infrastructure. Rather than risk this need becoming a bottleneck on energy system development, in the Green Recovery Plan grid improvements are accelerated within a new green industrial revolution.
Blockchain and the renewable energy transition
In essence, blockchain technology acts like a digital, distributed ledger, grouping transactions into blocks which are chain-linked chronologically. Blocks are verified and the data encrypted on the blockchain cannot be tampered. Importantly, the scalability of blockchain facilitates the adoption in such a major industry as energy (and renewables).
Full energy market decentralisation is dependent upon the combined applications of blockchain and the Internet of Things (for example smart meters) with affordable renewable energy production (for example rooftop solar panels) and storage equipment (for example batteries).
A renewable-centred energy network has led to new challenges in the management and operation of electricity systems. Blockchain can streamline the management of demand and supply with smart meters providing accurate monitoring of demand and supply from prosumers. A decentralised energy sector allows for new small-scale renewable energy production to enter the competitive energy market previously dominated by monopolistic fossil fuel interests. Blockchain allows the tracking of renewable energy from the point of generation to the point of trade transforming a currently opaque energy supply chain. This enables flexibility measures in a modern energy grid by allowing more stakeholders to participate in a transparent energy system, accelerating the development of a more connected and digitised energy grid. Furthermore, the increased visibility drives efficiency to the complex process of creating renewable energy certificates.
The application of blockchain within the energy sector is contingent upon favourable regulation, to allow for the integration of microgrids into energy markets.
Global Case Studies
The world’s first blockchain-based microgrid is the Brooklyn Microgrid created in 2016 by LO3 Energy. The Brooklyn Microgrid enables residents to sell excess energy to their neighbours using blockchain integrated with smart contracts. These programs are essentially self-executing and facilitate the exchange of anything of value. They automate P2P energy trading by providing an automated marketplace where neighbours can bid among each other to purchase renewable energy. LO3 Energy pushed the concept further with its Exergy Project dedicated to fundamental data sharing and permissioning with other market players such as solar PV installers. This permits many more new energy services to become possible.
In Australia, a similar trial ran for more than one year indicated that peer to peer solar trading using blockchain technology has gained popularity among the users and is technically feasible. The result suggests that energy autonomy increases by more than 30 per cent and a cost-effective network is established. In Bangladesh, where 3 million people rely on the energy from solar panels, a local start-up has successfully promoted P2P trading domestic solar panels in the rural areas that allow individuals to share their electricity in affordable and efficient ways.
The action of governments regarding such commitments will greatly govern the direction of economic recovery post-COVID. However, the opportunity to utilise the disruption caused by this pandemic to recover through a green transition is highly exciting. The application of blockchain can foster a modern decentralised energy network predicated on renewable energy sources. It is thus crucial to now develop blockchain-related strategies that will enable more efficient integration and trade of both utility and behind-the-meter renewables generation. Certainly, there remains the opportunity to overhaul current energy systems into more decentralized smart grids, with renewable generation at their centre.