How Blockchain Can Incentivise ‘Prosumers’ To Sell Their Own Electricity

How can Blockchain incentivise the prosumer by creating a transparent secondary market?

The concept of the prosumer (one who provides power and consumers power to the grid) is gaining traction through technological advances of renewables.

Other aspects such as investment preferences versus institution investment preferences will need to be solved, before further mainstream adoption takes place.

With meager returns on long discounted payback periods, prosumers are not incentivised to supply grids with photovoltaic generated power.

Institutional investors looking to diversify an investment portfolio are willing to park excess cash for much lower returns that are one per cent or greater. However, institutional investors would require absolute transparency in the investments.

One solution to this upcoming problem could be in the form of grouping large tranches of blockchain transparent energy generation and PPAs in a secondary market bridges this gap.  The payback period is then reduced enormously by selling future production to institutional investors hence turn incentivising the prosumer.

Building a secondary market

With increased transactions happening on a secondary market, positive externalities are added to quicker payback periods, especially when coupled with tax benefits in certain jurisdictions, returns could be higher than short-term cash deposits. The adoption in countries with regulated installation and maintenance providers will further incentivise the prosumer via regulated and standardised PPAs.

The internet of things – secured intelligent silicon chips – connected to a cloud can provide both real-time and application processors with built-in security and connectivity.

Blockchain, a distributed ledger technology can add a further dimension of trust to a network, and can then create tokens for a cryptocurrency as a way to securely pay for energy use, potentially even at the electron level.

Artificial intelligence itself is significantly reducing the cost of solar installations using satellite imagery to indicate the size, equipment and power generation of rooftops, and this coupled with IoT, intelligent chips, blockchain will only further push the concept of digital energy forward.

Artificial intelligence itself is significantly reducing the cost of solar installations using satellite imagery to indicate the size, equipment and power generation of rooftops, and this coupled with IoT, intelligent chips, blockchain will only further push the concept of digital energy forward.

This new form of transparency, ease of integration and use may provide immediate settlement in terms of contract liabilities between the prosumer/institution and the utility.

Hence this new ecosystem would enable the prosumer to automatically get in touch and transact with institutions willing to invest in transparent clean energy generation paid for by utilities of their choosing.

Many challenges still exist for such a concept to come to fruition, such as regulation and legislation, the installation of renewables within homes, digital technology setup, getting the ecosystem of investors, prosumers and utilities onboarded, and the setup of the crypto-currencies.

However, with the rapid pace of technological advances, this is a concept that may likely appear in the next five years.

This column is co-authored by Francisco Fernandez and Morgan Eldred, managing parter at Digital Energy, a firm specialising in digital advisory for the oil and gas industry.

 

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