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Blockchain and Energy Efficiency: A Match Made in Heaven?

Blockchain technology could transform energy efficiency (and the world as we know it), but lately it’s been getting a bad rap. Many recent news reports have focused on how much energy is being used (and wasted by some accounts) to make Bitcoins. But Bitcoin is not the only use of blockchain and most of them are not energy intensive. Blockchain is a software technology that can enable many things, including the secure communication of important information such as financial, commodity, shipping, and energy transactions (for a quick tutorial, check out this PCMag video). Bitcoin is just one of many uses of blockchain to ensure the security of transactions.

In fact, there are at least as many ways to structure blockchain as there are to send a text, and most of them do not require very much energy. When built into the security of a network that is connected to the appropriate data sources, blockchain can enable the tracking of energy generated by renewable energy technologies, reporting of cost savings from energy efficiency investments, or trading pollution-mitigation credits.

What is interesting to me as a researcher is whether blockchain can improve the valuing of energy efficiency. It has always been very difficult to properly value distributed energy resources (DERs) like energy savings because much of the value accrues to a grid system or a community, not just the DER owner. It is also technologically challenging to determine and communicate that value. Can blockchain be used to exchange negawatt hours (energy savings) of power in the same way the Brooklyn Microgrid pilot project is using it to exchange kilowatt hours of renewable energy? In this Brooklyn project, neighbors can purchase power generated by their neighbors’ solar panels. Blockchain enables this peer-to-peer, or more precisely, neighbor-to-neighbor exchange.

The challenge with energy efficiency is the need to document the counterfactual (what did not happen), and that requires a baseline. If a baseline can be determined in an automated way using information and communication technologies like those we’ve discussed in prior research, could negawatt hours be encrypted and shared using blockchain? If so, would it help us address our market’s failure to properly value energy savings? Would it lower the transaction costs for energy market participants to buy and sell negawatt hours?

Conceivably, blockchain could also enable us to link co-benefits, such as increased reliability or environmental benefits to energy efficiency and other resources. It could enable markets to value these benefits based on the time and location of their delivery.

In the energy efficiency program space, blockchain could add security to the exchange of information among customers, program administrators, and evaluators. The same way that blockchain authenticates that a token or unit of cryptocurrency is valid, it can authenticate the validity of a volume of customer energy savings.

More efficient markets, more effective programs: such a future would give individuals, companies, and collaboratives mechanisms to monetize the value of their energy resources (including energy savings) — ones with lower costs of entry and more fluid transactions than our current energy trading platforms.

Here at ACEEE, we see this as a great time to start contemplating how blockchain might make energy efficiency quicker, better, faster, cheaper. We want to explore how policies and programs may need to change to leverage blockchain to improve administration, reduce costs, and improve evaluation, measurement and validation (EM&V), and how this might facilitate more fluid energy markets. We can imagine countless research questions to answer. What are yours? If you want to explore these issues with us, please contact me at erogers@aceee.org.

By Ethan Rogers, Program Director, Industry

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