Tokenization & Distribution of Energy

As it stands, the energy market in the US alone is worth 2 trillion dollars. The distributed ledger investment in the sector is currently at $100 million dollars. Constellation is leading the path on tokenized solution that will allow consumers and businesses to effectively earn and distribute their energy consumption, minimizing wastage and dismantling the current monopolies of the sector. Below are a number of approaches and use cases constellation is looking into.

We’ve entered an age of abundance with traditional renewable energy sources providing more power than ever before.  This, coupled with the rise of consumer technologies like solar panels, calls for a radical rethink of how we manage and distribute energy on this planet.  Constellation’s technology allows for the tokenization of energy consumption across disparate networks improving the current hierarchies of production and consumption.

Modernizing Grids

While blockchain may seem at first too disruptive for power utilities, it can actually help them keep up with rising power demand in smaller, lower-value blocks. Blockchain can also make existing energy industry processes more efficient by serving as the backbone for the smart grid systems that automatically diagnose and respond to network emergencies and problems.

Green Finance and Carbon Trading Systems

Blockchain can be deployed to both schemes, which are crucial to support the implementation of developing member countries’ Nationally Determined Contributions under the 2015 Paris Agreement against climate change. The technology can help provide guarantees of origin, emission allowances, and renewable energy certificates, and also help organize, coordinate and secure resilient peer-to-peer power systems.

Emergence of Variable Electricity Rates

Presently, electricity rates are stipulated by centralized authorities. Blockchain technology has the potential to decentralize the market such that rates will no longer be fixed by these centralized bodies, but by the market itself. Electricity tariffs will begin to behave like tradable commodities that respond to demand and supply signals in a fully functioning distributed electricity market.

With this sort of model, consumers will be presented with an array of choices when it comes to selecting electricity service providers. Consumers will be able to scan through blockchain listings to find the best deals for themselves.

Tokenization of Energy

Cryptocurrencies are the native currencies of the blockchain environment. By incorporating blockchains into the energy ecosystem, cryptocurrencies can be used to make energy payments. By “tokenizing” the grid, cryptocurrencies can then be used to facilitate different types of energy market transactions.

There are quite a number of sub-applications to this model. One is the tokenization of electricity by energy producers. WePower, a European-based blockchain enterprise that focuses on green energy trading, is one of the companies that is pursuing this model. Energy producers will be able to sell electricity in the form of tokenized cryptocurrencies which can be bought and traded like other cryptocurrencies.

Peer-To-Peer Energy Trading Platforms

With the electricity market decentralized and electrical energy becoming an asset on a blockchain, consumers can begin to trade electricity within a peer-to-peer market. This has the potential to introduce a greater economic potential for both energy companies and consumers as far the energy market is concerned. By making electricity a tradable asset on a blockchain, consumers can benefit from the many advantages of the blockchain commerce such as low transaction costs and network transparency among others.

There are a number of blockchain-based enterprises that are already working on solutions tailored to the peer-to-peer electricity trading market. Electron, which is a UK startup and Power Ledger an Australian blockchain-based energy company are some of the firms that are working to implement the peer-to-peer energy trading marketMicrogrids are popping all over in places like New York, Sidney, Perth as well as communities in Germany and South Africa.

These microgrids allow trading in electricity within a specified area. One of the main advantages of microgrids is that it can be used as an emergency backup in situations when there are issues with the main grid. Natural disasters like floods, earthquakes, and hurricanes can cause service disruptions by affecting centralized grid infrastructure. In such an event, microgrids can sustain the community until the main grid is back online.

Renewable Energy Certificate Tracking

To respond to commercial interest and government regulation, renewable energy certificates and guarantees markets have emerged in the United States, Europe, Australia and elsewhere. While these markets have noble intentions, their administration is highly manual and costly, rendering the markets opaque, high-cost and inaccessible for most smaller participants. In addition, these analog, largely manual markets are not able to support any higher-level functionality such as consumption-linked purchasing, carbon-impact selective purchasing, or renewable generator aggregation.

“Why can’t buying renewable energy credits be like buying an airline ticket–allowing buyers to search for exactly what they want and allowing sellers to join forces to get a buyer to their desired destination?” EWF researchers ask. “Blockchains can create such a system for renewable energy.”

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