Blockchain and clean energy - how distributed ledgers benefit renewables

Blockchain offers potential to support renewables development across the world.
Published: Tue 08 May 2018

Renewable energies are being sought increasingly in all parts of the world, whether to shift away from fossil fuels in order to meet carbon targets or simply to provide basic electrification for the fifth of the population without access.

And blockchain appears to have the potential to support both of these ambitions, alongside the myriad use cases, many economically based such as peer-to-peer trading and electric vehicle charging, that are being pursued in the energy sector.

Data on the blockchain

Ultimately the basis of the blockchain is data and a growing number of energy use cases aim to exploit this aspect.

One early project from London-based Electron was focussed on electricity and gas smart meter registration and the potential to facilitate and accelerate customer supplier switching.

Chile’s energy regulator the National Energy Commission (Comisión Nacional de Energía) is developing the use of blockchain to make energy data and statistics publicly available.

Another opportunity, so far a proposal, has come from Kay Hobbs, Partner in UK law firm TLT's Clean Energy team. In an interview Hobbs suggests that blockchain could be used to accelerate the processing of renewable obligation certificates (ROC).

She explains that currently processing for project owners can take from two to three months. Thereafter, the ROCs need to be transferred from the project owner to the ROC purchaser, which may occur in bulk once a year.

For the seller or purchaser of a renewable energy project, this can be problematic, Hobbs says. “The revenue generated by selling ROCs makes up the vast majority of the financial value and this delay can therefore have a significant impact on cash flows and pricing as the project switches hands.”

Another issue is the consideration to be paid when acquiring a project and whether the seller is to be paid for the ROC recycle payments from electricity generated prior to the change of ownership.

“If Ofgem was to decentralise the database by using blockchain, this problem could go away,” Hobbs says. “A seller would be certain of exactly what ROC recycle funds were theirs and what would be the buyer's right up to the minute.

“Buyers would easily be able to carry out their due diligence around generation, as all data and transaction details would be available on one ledger, giving certainty to pricing and less need for post-completion adjustments and deferred consideration.”

All the proposal needs now is for a company to take up the challenge and demonstrate this is practice.

Clean energy project development

An early example of blockchain being brought to bear on renewables development to advance electrification comes from South Africa’s Sun Exchange. The Cape Town-based company uses blockchain to crowdfund and run industrial and commercial-scale solar PV projects. Once developed, these are then leased to the holders, from which a return can be provided to the original investors.

To date, five projects have been completed for operations including a school, wildlife centres and businesses, and “plenty more projects” are said to be in the pipeline.

Another company bringing a broadly similar approach is the North America-based ImpactPPA. However, whereas Sun Exchange works on a project-by-project basis, ImpactPPA has secured an initial pipeline of over 200MW of projects.

What the company calls the core of its platform is the SmartPPA (Power Purchase Agreement), through which project proposals are submitted, whether by individuals, businesses, communities, etc. These details are then submitted to the ImpactPPA community to define its merits – again unlike the Sun Exchange which does internal validation before putting a project out for funding.

ImpactPPA is currently running a token sale and according to its roadmap, will launch the SmartPPA in beta version in Q3 of this year with full launch in Q1 of 2019. The company envisages that over time the selection and approval process will become more autonomous.

According to a recent paper from the United Nations Development Programme’s Blockchain Commission, the potential of blockchain to create decentralised mini-grids can “play an important role in creating scalable, resilient and efficient solutions worldwide”.

“A range of technological advances and innovations - from smart meters to ever more efficient renewable energy sources - suggest an alternative approach: local mini grids and markets. Underpinned by blockchain technology, these can back up existing suppliers, and also ensure independent, consistent and affordable energy in underserved areas.”