Blockchain technologies have been gaining notability due to the recent cryptocurrency hype. However, the same peer-to-peer networking technology that enables cryptocurrencies, like Bitcoin, provides a model for application across industries beyond finance; for example, the energy sector. New developments have seen blockchain technologies as a disruptive force for grid management. What could this mean for the solar industry?

(Source: greentechmedia.com)

Stepping back, it is important to understand blockchain technologies beyond cryptocurrencies. In his 2008 white paper on Bitcoin, Satoshi Nakamoto first introduced a new way of making transactions without a centralized ledger. He described what he called a "peer-to-peer electronic cash system" that is totally unique to our current financial institutions' ways of operating.

What is a centralized ledger? Traditional systems often use a middleman to control and account for transactions. In the financial system, a bank is this middleman. For the energy sector, it is the utility. These centralized bodies traditionally have been necessary to control and organize transactions, as well as determine the values and prices of things.

On the other hand, with blockchain technologies, there exists a distributed database (or distributed ledger) that is used to maintain a continuously growing list of transactions, called blocks. The distributed database is made up of all units in the network. As each translation, or block, is verified by all units on the network, it is added to the blockchain. Therefore, the blockchain is essentially a list of validated transactions.

The figure below depicts an example of how a transaction is completed using blockchain technology.

(Source: technofaq.org)

Now, what does this have to do with the solar industry? Much like Bitcoin creates a peer-to-peer cash exchange, blockchain technology could spell out a new method for peer-to-peer energy trading. Blockchain technology could solve many of the obstacles to integrating distributed energy resources across the grid.

In previous blogs, we have discussed the concept of distributed energy resources. Distributed energy is often on-site, or otherwise decentralized electrical generation and storage performed by a variety of small, grid-connected devices. Distributed energy resources are crucial for solar development as they allow smaller residential, commercial, or community solar installations to participate on the grid.

Of course, distributed energy and decentralized generation have created a need for monitoring energy production, use, and billing. One of the solutions for this has been net metering, which allows solar panel owners to sell excess energy generated back at market value. Currently, many states have net metering policies to provide an incentive for solar development. However, blockchain technology could, in the future, change the way we approach energy metering.

For example-- if a solar panel is generating power beyond what the owner can use, a blockchain-based application could measure that output in a distributed ledger and enable the owner to sell it directly to another customer on the grid. This technology could allow for quicker and more precise transactions, as the verified blockchain would reflect a more accurate energy price at that moment.

Beyond metering, blockchain technologies could have greater implications for grid management and distributed energy resources. Recently, many new companies are popping up in the novel "energy blockchain" field. Could blockchain change the way the future energy grid operates?