Is solar blockchain going to revolutionise the way we buy energy? Or is it a load of overhyped bollocks?
Blockchain is a revolutionary new technology with the revolutionary ability to revolutionize our lives.
It was presented to the world in a revolutionary 2008 paper by Satoshi Nakamoto1:
Nothing particularly complex here. I could have come up with it myself given a million years or so.
In the 9 years since it was unleashed upon the world, blockchain technology has changed our lives by giving us:
- Bitcoin – the world’s first cryptocurrency2!
- Bitcash – Son of bitcoin!
- Etherium – a cryptocurrency like bitcoin!
- Litecoin, Zcoin, Dash (not the My Little Pony version), Ripple, Monero, Bytecoin, MonaCoin, Dogecoin, Siacoin, Syscoin, Digibyte, Bitdeal, Groestlcoin, NAV Coin, FairCoin, SmartCash, NoLimitCoin, AirSwap, I/O Coin, Dentacoin, ReddCoin, PotCoin, CoinDash, Skycoin, VeriCoin, BlackCoin, Chronobank, SIBCoin, PayPie, ToaCoin, GridCoin, E-coin, Energycoin, B3Coin, DubaiCoin, TransferCoin, WhiteCoin, Clams, DimeCoin, Solarcoin, KickCoin, BitBean, HempCoin, SexCoin, DopeCoin, DeepOnion, CryptoPing, SkinCoin, KekCoin, InsaneCoin, HoboNickels, TrumpCoin, FedoraCoin, Trollcoin, Cryptonite, SwagBucks, TittieCoin, GoldPieces, BitCoal, FuzzBalls… and many more.
Actually, now that I think about it, every application so far seems to be a cryptocurrency like Bitcoin. And while I have to admit that Bitcoin is handy for buying drugs or guns3 or getting to Alderaan without Imperial entanglements, for most of us blockchain has had no real effect on our lives at all.
This is not to say that blockchains aren’t useful and have no practical applications beyond creating an open contest for the world’s stupidest sounding PayPal substitute. They could have many applications as a decentralized record of transactions without the need for a central authority to keep a central record and make sure no one is cheating and ripping people off. Nothing specific comes to mind at the moment, but people are working on it right now. Top people.
But one area I am sure blockchain technology won’t be useful is trading electricity from rooftop solar over the grid. This is because I can’t see any way it will result in savings in the cost of using the grid to move solar electricity from a household producing a surplus to nearby homes and businesses consuming electricity.
Regardless of whether or not you think current solar feed-in tariffs are fair, if there are no savings to be had from using blockchains there will be no extra money available for solar households. Also, because blockchains cost money to run, if they are used the fees they require will be an additional expense.
I don’t see opportunities for savings because, while blockchain may have many interesting applications for decentralized record keeping, Australian grids:
- Are very definitely centralized.
- Already have a well established method of recording transactions which isn’t about to go away anytime soon.
- Are not prone to the sort of trust problems that blockchains can solve.
And the most important factor I can see is:
- No special breaks will be given to those using blockchain technology. They will be charged the same to use the grid as everyone else.
As installing electricity meters that can generate blockchains is probably the only sensible way to go about using the technology in the long term to keep track of electricity transactions, there will also be a considerable set up cost.
What The Hell Is A Blockchain?
A blockchain is a continuously updated electronic record of transactions that requires no central authority to maintain its accuracy. This ability to be an honest record can help to prevent fraud. To be clear, it’s not a magical cure for fraud, but will prevent the sort that requires fiddling with or faking records.
If you want to learn the details of how they work, you can read the wikipedia article, watch the TED talk4, read the original paper, or simply check the internet for crazy people who don’t have a clue what they’re blathering on about5.
Blockchain Can Help Prevent Fraud
By keeping an accurate record, blockchains can have the advantage of reducing the cost of fraud detection. But there is not a whole lot of fraud going on with surplus electricity from rooftop solar is concerned. No one’s getting rich by tampering with their electricity meter to make it look like they are exporting more solar electricity than they are. After all, it’s not hard for your electricity retailer to work out that your 5 kilowatt system probably isn’t producing a megawatt-hour a day. And when it comes to electricity distributors and retailers, if they want to rip you off they will do that legally and not by charging people for electricity they didn’t use.
While electricity theft does occur, it generally happens by people bypassing or tampering with electricity meters and this is not something that blockchains, in of themselves, can prevent.
Disadvantages And Advantage Of Blockchain
As this expert points out, blockchains have a number of disadvantages compared to the centralized record keeping that is currently used for electricity. This is because blockchains are:
- Slower
- More expensive
- Less scalable
- Less user friendly
- Impossible to manage effectively due to their decentralized nature
As you can see, blockchains aren’t exactly selling themselves as effective tools for energy trading. Worse, these problems are part of the nature of the beast and can’t really be solved with improved programming or technology and so are likely to always exist.
But the one area blockchain excels in is that it can’t be controlled by outside forces such as governments, the CIA, the KGB, or the crab people who rule the world from the center of the earth. So if you don’t want Malcolm Turnbull reading your love letters, you might find using a blockchain messaging service is worth the hassle. But this really isn’t an issue when it comes to household electricity. My love life is extremely exciting6 so I can understand Malcolm wanting to read about it, but my electricity bills are really boring.
Blockchain Makes No Difference To How The Grid Operates
There are companies that claim blockchain technology can allow peer-to-peer energy trading which lets households trade solar electricity with each other. While peer-to-peer trading doesn’t require blockchain technology it seems fashionable at the moment to try to combine these two things into one product. Unfortunately, while companies may claim electricity has been traded with a specific person, it’s not something that actually happens in reality.
In the real world, surplus electricity from rooftop solar is sent into the local grid and consumed by the loads closest to the household exporting it. There is no control over where it goes. If anyone tells you they can use blockchain or anything else to enable you to sell electricity to your family and friends they are lying and taking advantage of your natural desire to help out the people you love. The only way that is going to happen is if these people happen to live next door to you and are consuming grid electricity while you’re exporting it.
What electricity retailers can do is claim a payment normally from the local electricity distributor for your surplus solar electricity and simply tell you they sold it to your friends and family as a con job. To me it seems like this is the sort of thing the Australian Competition and Consumer Commission (ACCC) might be interested in. One consumer guarantee that protects us is:
- Products must match descriptions made by the salesperson, on packaging and labels, and in promotions or advertising.
If they tell you your solar electricity has been sent to your niece’s flat for her to use when no such thing has happened then, as far as I can see, their description is not matching the product.
How Blockchains May Be Used With Household Electricity
Because of its disadvantages, blockchains won’t allow the grid to operate more efficiently and save money when it comes to distributing solar surplus electricity from households. Anyone trying it as a gimmick, which is what it will be, will just be adding the additional cost of running the blockchain on top of existing costs. With no scope for savings there is no way for households to use it to get a better deal for their solar electricity.
So if it seems like some blockchain company is offering more for your solar electricity than what you can get as a feed-in tariff, be very careful, because I’m certain they will be making up for it in fees and charges. If I am wrong about this, it would be wonderful, as everyone with rooftop solar would be better off, but I don’t think I’m wrong.
But perhaps there are ways blockchain technology could be of benefit in some situations. For example, microgrids might find it useful. As far as I can tell, a centralized system would be more efficient, but maybe it’s a microgrid full of paranoid people who don’t trust each other and so value the tamper proof method of record keeping blockchains provide. It’s possible this feature will be useful in countries that have serious corruption problems.
There may be other applications where blockchain technology could be useful when it comes to selling surplus electricity from rooftop solar. I can’t think of any, but I’m not an expert and there are almost certainly things I’ve overlooked.
If you can think of situations where blockchain could help solar households, please leave a detailed comment. I promise not to trade it with my family and friends.
Footnotes
- Who turned out to be Australian. Or not Australian. Take your pick. ↩
- According to the Australian Tax Office, Bitcoin is an asset, not a currency. ↩
- While I make fun of Bitcoin because it can be used to buy illegal drugs and hire assassins, on a more serious note, it can also be used to pay for for life-saving illegal organ transplants. ↩
- I don’t know if the TED talk is any good. I wasted all my waiting for videos to load patience on Star Wars clips. ↩
- Fortunately for you, I know exactly what I am blathering on about. I just don’t know if it’s correct. ↩
- I totally kissed a woman once. You wouldn’t know her. She’s from Canada. I’m not pregnant because I used an eraser. ↩
About Ronald Brakels
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I’d certainly like to know how blockchain could work with an electric car charger as none of the existing options have covered themselves with glory.
I am wondering how the Blockchain (blogchain?) concept compares with LETS credits.
I also wonder whether the writer of the article had sought input from Jemma Green, a founder of Power Ledger, regarding the article and its content.
LETS credits was developed before blockchain and doesn’t use it. It is a centralized system.
I didn’t consult with Jemma Green of Power Ledger. She’s probably a bit busy.
Ouch. Such a bucket of cold water reality. Entertaining and rather accurate but so much less fun than the hype.
I do think blockchain for energy has a role in developing countries and microgrids.
Heard this pitch (blockchain and PV/battery power trading) a few times now.
Blockchain and (anything) really. You get lots of this sort of thing around technology investors who haven’t invested much in, y’know, reading or understanding how any of it works. Explaining energy’s storage, physics, costs and losses is like describing colour to the blind.
The ‘grid’ is some sort of conspiracy we must subvert with modern means!
It’s buzz word salad, often with ‘AI’ thrown in for good measure.
[Breathless]: Blockchain. Because. Blockchain!
PV. Batteries! AI! AI, batteries AND blockchain!
It’s OK. Just close your eyes slowly – and it’s *gone again* when you open them!
You will not need blockchain as more and more homes will be DISCONNECTING from the grid as more and more fees are attached to the solar PV user.
The perfect storm is coming as EV proliferate and used EV batteries become more and more available from wrecked EV’s that will cost a fraction of a new battery pack. Stay tuned. What we need is a battery management system and smart circuit breakers. OutBack has a great system (Skyboss not Skybox) that has been developed that ties your whole house to a electric panel that can be controlled to turn on and off appliances. That is the future of off grid systems. We nee dot be able to CONTROL our lands to maximize energy efficiency and thus lower the initial cost of a PV system.
In response to John;
”
You will not need blockchain as more and more homes will be DISCONNECTING from the grid as more and more fees are attached to the solar PV user.
”
I am not a supporter of blockedchain – it is a concept for others, but, regarding going off-grid; it is not as simple, or, as inexpensive, as some would portray it, I think.
I believe (and, others who know better than me, about this, may correct me) that, to go off-grid, and become independent for electricity production, while retaining twentieth century convenience, a household would need a combination of electricity generators, eg, PV and wind, in addition to battery storage sufficient to cover anything up to about three months (at a guess) of consumption.
In winter, and, on overcast/rainy days, not much electricity is generated from PV systems, alone. Depending on for what, in total, electricity is used, in a household, eg, water heating, cooking, fridges, freezers, heating, air conditioning, other whitegoods, the demand may be greater than the PV generating capacity, combined with the storage capacity.
I believe that to go off-grid, without losing twentieth century convenience, would probably require capital outlay of about $100,000, if not using combustion for electricity generation or otherwise using combustion (eg, for heating, cooking, water heating, etc).
Of course, what would be involved, and, required, to go off-grid, would vary by household.
But, I believe that it is not as simple, or, as inexpensive, as some portray it.
NQR, Brett. I put up my first (2nd-hand) panels in 1981, when anything to do with ‘alternative’ power was hugely expensive.. I also have a peasant’s instinct for not wasting ANYthing. I have set up/helped set up a few hundred systems under varying circumstances and costs. (eg an array 80 foot up a tree because the hippie owner refused to cut down rainforest to get the sunlight in!)
These days, though demand for electricity is greater (computers, TV, etc) the price for components is relatively minuscule…..and there are massive savings available by simply adjusting your usage. (and…by DIY you avoid the ridiculous ‘professional’ costs of installers and such. (a half-witted chimpanzee could set up a plug-and-play solar system, especially given the huge amount of help/advice online. …Give Tonto a call and make a booking to speak to young Ron.
I recently helped dismantle a 10KW solar system that had been running a country pub for some years ~ including refrigeration, umpteen (energy-saving lights, etc. Shop around and you’ll get 40×250-watt panels for way under $10k. Simple, reliable lead-acid batteries can be bought for under $2 per AH. Do the arithmetic…..whilst keeping in mind the alternatives/supplementaries to a stand-alone system. The variations on a theme are almost endless. (I knew a bloke once who ran a dairy-farm almost exclusively on a wood-gas setup, including during the winter…….which also helped in clearing scrub off his property
But you are correct about avoiding ‘blockchain’ and other concoctions which…..er, ‘chain’ you to other people’s attitudes, rules and practices.
…and a ps –> shifted house recently and unearthed an ‘energy-efficient’ light globe I bought way back in the early 1980s……It weighs something over a kilo, and cost about $38 (from memory), and still works, as do the 2nd-hand panels for which I paid $13.80 PER WATT. (ie a little under $1000 for a 64-watt panel ~ the biggest available at the time ~ at the time the dole was about $110 per fortnight..again from memory)
Never forget the KISS principle.
……..and on the day before he created Adam god created Stupidity.
The bitcoin system ~ or anything like it ~ has all the failings of ANY currency system…..Plus one.
The ‘Plus one’? —> …… Any (conceptual) ‘currency’ is only worth what somebody else will give you for it, something that can change with mood or masturbation.
Bitcoin ~ or somesuch ~ has the added risk of sending your ‘wealth’ off into deep/nameless cyberspace at nearly the speed of light.
Moreover If the shit hits the fan you suddenly realise you can’t eat currency, nor even wipe your a`rse with it. (AND THAT INCLUDES GOLD).
Anyone who remembers the Great Depression WHEN a bucket-full of 10-BILLION Mark banknotes (in Germany) wouldn’t buy you a loaf of bread. The ‘Cold-War’ era raised similar concerns: How much are your hard-earned life-savings worth if the nukes start falling… and how will you feed your kids?
….and I also remember waking up one morning to the large headlines that Australians had lost 18% of their financial worth because Keating floated the Australian dollar on the world markets….and the world didn’t like the looks of it very much. (Still doesn’t, but at least we know what it ISN’T worth to begin with.)
Of course there are those who will argue that your Bitcoins are safe…….somewhere or other…..maybe.
After all that I can’t believe you didn’t even mention the Australian company who created one for the electricity grid?!
Power Ledger.
Cmon Aussie!
There has been more unadulterated crap published about the cost of off-grid solar than any other subject in recorded history.. Three issues are installers expecting to get filthy stinking rich before smoko, corrupt government – corporate rackets determined to keep the sheeple enslaved, and the apparent inability of consumers to do their own research. FWIW, my initial installation cost me around $5,000. That ran my admittedly more efficient than most house 24 x 7 most of the time. I’m now replacing the original battery (which I’m selling for near the purchase cost) with a much bigger one to get several days autonomy. My outlay then will be around $7,500. The average energy-inefficient household with a tribe of rugrats and yard-apes might need double my expenditure, still light years away from the suggested $100,000.
What has helped with the costs is my ability to do everything myself although its hardly rocket science. Whether or not installing an off-grid system is ‘simple’ obviously depends on the technical acumen of any given individual. Those who can’t distinguish between a volt and an amp would be best advised keep right away from this stuff.
OR, Young Brackles, In the REAL real world, surplus electricity from rooftop solar systems is plugged into an extension lead and fed to the little-ol’-lady next door who spends a lot of her pension-money (and energy-supply) on looking after rescued animals. We often spend evenings together, and coincidentally save on the power-usage ( lights, tv, etc ) of an entire household. It’s the way this country used to operate….and was a pleasure to live in.
A $7 extension lead instead of a $17m blockchain? Don’t be daft!
Good article – the key is that people with a blockchain thingy won’t get special concessions from the electricity distributors. May have application in embedded networks and microgrids.
Whilst I have immense respect for Ronald and his very detailed articles, on this rare occasion however, I tend to disagree with him.
I feel Blockchain would work very well and efficiently in a distributed power generated network, where massive amounts of battery storage and real time generation could be sold and dispatched immediately upon the satisfaction of a bid and ask being successfully transacted (i.e. with Blockchain).
The key to this is a market that has high levels of liquidity (i.e. a high level of participation of buyers and sellers) that allows for the rapid dispatch and consumption of small blocks of energy (say 1KW blocks) …. that are sold / dispatched and brought/consumed directly from the grid in real time. In other words, the transaction of buying and selling becomes seamless to individuals participating in the market …. it becomes a real-time transaction of releasing a block of energy onto the grid as it is demanded. The greater participation and penetration of buyers and sellers onto the grid (i.e. liquidity) then the better and more stable the grid becomes. With a higher penetration of participants then the grid potentially becomes increasingly more survivable … with an added and inherent ability to repair itself.
The thing that must be understood here, is that with high levels of liquidity, then the location of the buyer and seller becomes less relevant as there is more energy that can be dispatched and demanded in every location all over the network. The added benefit that becomes apparent is that transmission losses that are inherent in the current base load generated system are potentially eliminated. Indeed, the implementation of a mature Blockchain potentially provides the means upon which a very stable network manifests itself for the benefit of all.
Ethereum is probably the most likely Blockchain currently suited to such a task … though I may stand corrected here.
Hmmm…. if I remember correctly, ‘ether’ at one time (about 60 years ago) referred to an imaginary substance that magically allowed equally invisible radio waves to spread everywhere.
The same word also describes a gas, which is described in the Oxford dictionary as: ‘A pleasant-smelling colourless volatile liquid that is highly flammable. It is (also) used as an anaesthetic.’ (ie numbs all the conscious senses).
No need to worry about getting your Bitcoin wallet (or its equivalents) hacked in the future though.
That’s already happened – and a July 2017 page at hacker9,com will keep you up-to-date with the latest methods hackers are using.
And Oh dear… the IRS have learned how to follow blockchains, according to an article at: https://www.technocracy.news/index.php%5B…]coiners-new-blockchain-analysis-tools/
Thanks for your important contribution Des.
Funnily enough, I worked as HF Radio technician in my early working life and so I know a thing or two about the ‘ether’ you speak of. I also worked in, amongst other things, as a network engineer in remediating large IT networks so as to avert the then proclaimed “Y2K disaster”. Perhaps I am now revealing my age :-/
In any case, and irrespective of my background, your citations of the vulnerabilities of ‘Bitcoin’ … or the rightful scrutiny of the IRS and/or other authorities … completely misses the point about the soundness of the underlying Blockchain technology … a potentially compelling mechanism that I believe could help facilitate a maturing distributed energy market … providing not least … some of the advantages I have cited above.
Whilst analysing vulnerabilities is an important step in considering such technologies, let’s not forget that we must compare those vulnerabilities to that of current network vulnerabilities, where in current networks we have:
1. single points of failure (e.g. a failure of an interconnector and/or the downed transmission towers / lines due to a gust of wind); and
2. the fact that most utilities, and not just electricity I might add, are just as vulnerable to network processor attacks. The initial deployment and the wider penetration of the ‘Stuxnet’ virus remains a classic example here.
Once these vulnerabilities have been identified and acknowledged, then the analysis generally reverts back to truly understanding and appreciating how a Blockchain implementation might provide a more resilient and survivable network into the future. Indeed, none of the vulnerabilities cited diminishes the true value of what a Blockchain means to a market that is clearly yearning for a new business model … and I can say this with some confidence as an Economist also.
PS My point number 1 above should read as: ….’Single points of failure in power generation and/or transmission’….