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Taking energy trading local

X minute read

How the blockchain could pave the way to a sustainable energy economy.

Taking energy trading local

If we could use the National Grid more efficiently by using energy near where it’s generated, money could be released to fund sustainable power generation.

Credit: Fre Sonneveld for Unsplash

What the blockchain does is ensure that I can’t cheat and sell that same unit of energy more than once.

Professor David Shipworth

If you find the blockchain a rather nebulous concept, David Shipworth, Professor of Energy and the Built Environment at The Bartlett’s Energy Institute, has an example that will help.

This one is worth getting your head round. Shipworth’s research into peer-to-peer energy trading and the blockchain is proving highly influential: it could hold the key to the future of sustainable energy generation, where many of us will both generate electricity as well as use it.

Think of the blockchain, Shipworth suggests, simply as a way of exchanging data that ensures an accurate and secure record of that exchange. “Let’s say I generate a unit of energy – from the solar panel on my roof, say – which you buy and consume. My smart meter registers one more unit of energy exported to the grid; yours registers one more consumed. What the blockchain does is ensure that I can’t cheat and sell that same unit of energy more than once.”

The register, in this case, is an electronic crib-sheet: one unit is added to my ‘produced’ column and one unit is added to your ‘consumed’ column. But it is a crib-sheet of which everyone has a real-time copy, making the system perfectly suited to making a market: you and I don’t even need to trust each other, since the transaction has been recorded on everyone’s crib-sheet, meaning that transactions are virtually impossible to forge.

Overcoming the generation gap

At the moment, the crib-sheet – being simply a register – doesn’t care about where the electricity comes from or who uses it. I simply feed it into the central bank – the grid – from which you then draw. You don’t use ‘my’ unit of electricity any more than when you transfer £50 to a relative in Australia through the international banking network.

The grid, a national infrastructure, is the key to making this work, since it is the means by which centres of supply of energy can reach centres of demand, which may be hundreds of miles away.

However, as electricity generation becomes increasingly distributed – think of all those household solar panels and small wind farms replacing huge centralised coal- and gas-fired stations – all this is set to change. And the blockchain is particularly well suited to a future world where the consumption of electricity is matched locally with its generation, as Shipworth’s opening example demonstrates.

Taking energy trading local

Allowing consumers and generators next to each other to trade energy through a blockchain register will reduce transmission losses.

Credit: Maria Godfrida for Pixabay

Until the way energy is taxed and regulated changes, the economics of this model will be hard to stand up.

Professor David Shipworth

This is important. Maintaining a grid that can correct that geographical mismatch between generation and consumption is a heart-achingly costly business. The bigger the mismatch, often, the greater the cost. “One example is the huge ongoing investment required to clear the bottleneck in the transmission network connecting Devon and Cornwall, which are the source of huge amounts of wind and solar generated power, to London, where much of it is consumed,” says Shipworth.

Local power economies

Over the next few decades we need to spend roughly the same amount of money in the UK on keeping the grid running – strengthening wires, replacing transformers and pylons and so forth – as we need to spend building all forms of new energy generation. If we could use the grid more efficiently by using energy near where it’s generated, a huge pot of money would be released to fund sustainable power generation.

Allowing consumers and generators next to each other to trade energy through a blockchain register, will also cut out a lot of waste. Moving energy around the country means some gets lost along the way. Using it locally reduces those losses. These savings in infrastructure investment and transmission losses could also make local energy cheaper.

Moreover, combine the blockchain with a more local power economy and you uncover handy ancillary benefits, like socially responsible investment. One way a householder might chose to support her local primary school, for example, could be to buy the energy directly from the school when it’s available and from an energy company when it’s not. This keeps money in the local community, supports the environment, and strengthens community relations.

The next part of the jigsaw is regulatory. “Until the way energy is taxed and regulated changes, the economics of this model will be hard to stand up,” says Shipworth. But Ofgem is currently consulting on how to reform network costs and taxes. It could be time to swat up on those blockchain tutorials.

The Energy Institute delivers world-leading learning, research and policy support on the challenges of climate change and energy security. It is part of The Bartlett School of Environment, Energy and Resources (BSEER) in UCL's Faculty of the Built Environment. Find out more: https://ucl.ac.uk/bartlett/energy

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