Climate change /ˈklʌɪmət tʃeɪn(d)ʒ/: a change in global or regional climate patterns, in particular a change apparent from the mid to late 20th century onwards, and attributed largely to the increased levels of atmospheric carbon dioxide produced by the use of fossil fuels
On 7 January 2018, Sydney, Australia had its hottest day in almost 80 years. In most parts of the city, the temperatures topped 47°C. Less than a year before, on 11 February 2017, temperatures in Sydney also soared and reached a peak of 47.6°C. Half-way through February 2017, the maximum temperature for that month was 4° above average and the warm month followed Sydney’s second-hottest December and hottest January since the start of the records, dating back to 1858 [227]. Meanwhile, the North Pole was experiencing its own version of a heat wave. With temperatures rising to melting point, 0°Celsius, for the third time in the winter of 2017 [228, 229]. Finally, the USA also experienced an unusual heat wave in the winter of 2017. In Oklahoma and Texas, temperatures went up to 37°Celsius, which was a new all-time record for February high temperatures [230].
Although Australia and the USA are developed countries, according to the Global Climate Risk Index 2017, the countries affected the most by the impacts of weather-related loss events (storms, floods, heat waves, etc.) were poorer developing countries, for example Mozambique, Dominica, and Malawi. The 12th edition of the report confirmed that developing countries are generally affected more by weather-related loss events than industrialised countries [231]. As a result, developing countries face a relatively bigger impact of climate change than developed countries, while having a smaller environmental footprint and therefore not being as responsible for climate change. Often these countries already face several other Wicked Problems as well.
Despite a lack of acceptance by some policy-makers, climate change is a very real Wicked Problem. In the past decades, the impact of climate change on the world has been well researched and documented. According to many scientists, climate change will have an impact on the world’s food supply [232], human health [233], the world’s marine ecosystems [234], our biodiversity [235], and our economic systems [236]. The objective of this book is not to argue that climate change is a real problem. We believe that there is overwhelming evidence provided by thousands of scientists from around the globe that climate change is real and that we need to act now. The Paris agreement, which was signed in 2015 within United Nations Framework Convention on Climate Change (UNFCCC), underlines and confirms the problem. The agreement was negotiated by representatives of 195 countries and has the objective of ‘holding the increase in the global average temperature to well below 2°C above pre-industrial levels and to pursue efforts to limit the temperature increase to 1.5°C above pre-industrial levels’ [237, p. 2]. Instead, this chapter is about how we can use the latest technology, specifically Blockchain, to contribute to combatting climate change and reducing the effects of rising temperatures.
Climate change is not caused by one activity, but by a combination of, among other things, burning fossil fuels, deforestation, and farming. Climate change is a problem that is not easy to solve. Thousands of scientists with different disciplines all argue for their version of the story, albeit with most of them agreeing that climate change is real. As such, we are dealing with a Wicked Problem, because it involves many different stakeholders, sometimes with conflicting views, where the information provided can be confusing [238], and where the actual problem consists of many interrelated ‘smaller’ problems.
Although climate change might not affect you at all personally or you might appreciate a warm summer or winter, or burning fossil fuels might be good for your business, we concur with the overwhelming idea that climate change has an impact on all of us and everything that is alive on our planet. As such, we have a moral obligation to our children to try to protect the Earth as well as possible and pass it on to the next generation in good order. In addition, protecting the Earth and combatting climate change actually make sense economically because climate change also adheres to some simple economics.
It works as follows. Whenever a new technology is introduced, be it the printing press in the 15th century, the steam engine in the 18th century, or the mainframe computer in the 20th century, the first version is always extremely expensive, and most of the time quite big as well. As technological progress is made, the technology becomes cheaper, easier to use, and gets more applications (whether for good or bad). The printing press significantly improved access to knowledge and made education cheaper. The steam engine created energy and made a wide variety of activities easier, cheaper, and more accessible. The mainframe computer significantly reduced the cost of communication and finding information. In this way, technological revolutions tend to involve certain important activities becoming cheaper and more accessible [239].
Climate change, and the resulting green energy revolution, is, in its essence, a production technology, so the economic shift will revolve around a drop in the cost of clean energy production. The impact of a reduction in price of clean energy production is that goods and services that rely on (clean) energy will become cheaper, whereas the value of products and services that complement clean energy will rise, such as the EnergyTech space. As long as the price of clean energy production drops and the value of related activities increases, the value of substitutes, such as fossil fuels, will eventually fall. So, economically it makes sense to start investing in clean energy or EnergyTech and reduce dependency on fossil fuels in your business models. Already, we see that, in some countries, the price of producing renewable energy is on a par with the price of producing fossil fuel energy. In 2016, solar and wind energy became even cheaper to produce than new fossil fuel energy in 30 countries [240], and it is expected that this ‘grid parity’ will be achieved by dozens more countries in the years to come. In fact, the average global cost of solar energy could fall below coal within the next decade. According to Michael Drexler, Head of Investors Industries and Member of the Executive Committee at the World Economic Forum: ‘renewable energy has reached a tipping point—it now constitutes the best chance to reverse global warming. It is not only a commercially viable option, but an outright compelling investment opportunity with long-term, stable, inflation-protected returns’ [241].
So, apart from the bare necessity of protecting the Earth from existential threats due to climate change, for the first time it makes sense economically to invest in renewable energy. As a result, we will probably see vast amounts of funding being invested in clean energy and energy-related technologies and companies or start-ups that develop the types of solutions from which we are likely to benefit. Apart from the ‘traditional’ clean energy solutions, emerging technologies such as big data analytics, Blockchain and artificial intelligence open whole new possibilities for organisations and governments to contribute to combatting climate change.
6.1 Life coming to a standstill
On 28 October 2012, life came to a standstill in New York. The governor of New York, Andrew Cuomo, had just declared a state of emergency and former President Obama had just issued a federal emergency declaration for the State of New York and New Jersey [242]. School was cancelled for the 1.1 million students living in the area, the New York Stock Exchange suspended floor trading and over 375,000 citizens were evacuated [243]. In addition, the New York transit system suspended service for several days and even the coffee-addicted New Yorkers couldn’t get their daily caffeine shot because Starbucks closed all its outlets for several days [244]. New York was preparing itself for the monstrous hurricane Sandy.
A few days earlier, hurricane Sandy, or Superstorm Sandy, had battered several Caribbean islands including Jamaica, Haiti, the Dominican Republic, and Puerto Rico. The effects of the hurricane on these islands were dramatic, leaving many residents without electricity, causing food shortages, and making hundreds of thousands of people homeless. During the following days, the hurricane increased in strength and, when it arrived in New York, it had become the largest Atlantic hurricane ever recorded [245]. In the days that followed, New York was severely damaged, reaching almost US$42 billion in damages [246] and leaving vast parts of the city without electricity. In total, 2.2 million people lost power due to the hurricane, which took up to several weeks to restore for everyone, leaving Lower Manhattan and other parts of New York in the dark—a surreal experience for those being hit by the sudden power outages. In the weeks following, the power grid was fully restored, but it came at a cost.
Wide-area power outages such as the incident in New York are a problem for any country or city, and restoring power after an outage can often be very difficult and time-consuming. As a result, governments and organisations are looking for new solutions that can prevent wide-area outages and restore power more quickly in the case of an outage. One way to achieve this is through the use of a smart grid, ideally consisting of multiple micro-grids. A smart grid is a power network that is equipped with all kinds of sensors at different points in the supply chain of electricity. Sensors monitor the production of electricity, the transportation of electricity, and the demand for electricity. Using big data analytics, energy companies can predict supply and demand for different areas as well as any upcoming maintenance, reducing the likelihood of a power outage due to failed equipment. A smart grid will automatically match supply and demand and in the (not-too-distant) future it is probable that the smart grid will determine when you can charge your electric car (if everyone who drives an electric car and comes home from work would plug in their car and start charging it, this would result in a peak demand, which could cause the network to default). Smart grids offer a lot of advantages for governments, organisations, and consumers in terms of reliability and costs of electricity, but they are also very difficult to develop, due to the existing complexity within our existing energy networks. Therefore, a great way to start is by developing a micro-grid. A micro-grid is a small, independent, energy grid, which most of the time uses renewable energy. A micro-grid can be disconnected from the main energy grid, so that, in the event of a wide-area power outage, a micro-grid remains operational. Developing a smart micro-grid is a lot easier than developing a regional or national smart grid, because often only a few houses or buildings are involved within the smart micro-grid. Within a micro-grid, individuals will harness solar or wind energy and so become energy neutral, or even energy positive, meaning that they generate more energy than they use. In such events, energy can be sold back to the main grid, or to different participants in the micro-grid. As selling or buying energy is basically a transaction, it is perfectly suited to the Blockchain making these peer-to-peer transactions in a trustless environment that is immutable, verifiable, and traceable.
6.2 The world’s first peer-to-peer energy transaction
On 11 April 2016, Lawrence Orsini went to work, knowing it would be a day unlike any other. The New York-based entrepreneur has a deep understanding of the energy sector and aims to apply the latest technologies to bring change in this traditional and often conservative industry. Lawrence Orsini is the founder of LO3 Energy, an energy- and technology-centric company that builds tools and develops projects to accelerate the proliferation of the emerging distributed energy and computation economy. On that sunny spring day in Brooklyn, Lawrence went to work, with the objective of creating a world first.
In the previous weeks, Orsini had built a micro-grid on President Street in Brooklyn, New York. Ten homes on President Street had been connected to each other, five on each side. One side of the street produced renewable energy, independently from the state grid, whereas the other side did not have solar panels but wanted to buy local solar energy. The objective of the pilot was to produce renewable energy using solar panels on rooftops of the homes and sell any excess to the houses on the other side of the street using Blockchain, without the involvement of national energy companies. As Lawrence explained, ‘Blockchain technology is rapidly advancing across many sectors, but in the energy market, things are comparatively different. With our micro-grid solution in Brooklyn, we’ll demonstrate just the beginning of what blockchain can do in the transactive energy world’ [247]. As it happened, on 11 April 2016 the first paid energy transaction took place between two individuals: long-term local and social justice activist Eric Fruman traded his excess solar energy from his rooftop installation to ex-Energy Star National Director Bob Sauchelli [248]. The use of Blockchain technology enabled the participants in the micro-grid to see exactly who consumed or produced what amount of energy and exactly what transactions took place when. The micro-grid in Brooklyn was based on the Ethereum Blockchain to record the buying and selling of any electrons that were generated by the solar panels using trading energy certificates. As such, the blockchain enabled the residents of President Street to buy and sell renewable energy directly to and from their neighbours, without having to go through a centralised party such as a large energy company. However, rather than exchanging the actual electrons, the solution was developed to exchange energy certificates, that is the right to use a certain amount of energy. As Orsini explained during the launch of the project, there is no ‘billing component around it, you don’t have the infrastructure losses or the accounting losses in the system, while the energy and the money goes to benefit the community. When you buy energy from the community, the money goes back to the community’ [249].
Since the pilot of the micro-grid on Presidential Street, Orsini has partnered with Siemens. They have combined the micro-grid solution developed by Siemens with the peer-to-peer trading platform based on the blockchain to develop micro-grids that enable locals to trade energy using Blockchain, and balance out local production and consumption. The benefits of a decentralised and distributed energy system is that it enables transparent, efficient, and effective trading between different, local stakeholders while taking grid-specific requirements into account [247]. As a result, these micro-grids may become more resistant than centralised energy grids when natural catastrophes happen, such as Superstorm Sandy, allowing people to keep their energy, during major infrastructural failure [249], and also making some extra money from the excess renewable energy.
The micro-grid developed in Brooklyn was just the start. Smart grids are the future of energy production and consumption, and offer tremendous advantages over the traditional energy grids. Smart grids will consist of billions of endpoints such as solar systems, micro-grids, smart appliances, houses, etc. that are constantly interacting with each other over the internet. Apart from selling any excess energy, Blockchain can also help improve smart grids, and the management of those smart grids, by cryptographically ensuring trust among connected devices and actors in the smart grid. Quite a few start-ups are working hard to develop a decentralised solution. The UK start-up Electron wants to use smart contracts on the Ethereum Blockchain to develop a smart grid that will always deliver energy. In 2016, they were in the testing phase, using 53 million metering points and 60 energy supplier data to run experiments to test the platform.
The company Grid Singularity aims to develop a decentralised energy data management and exchange platform for the developing world. This platform will enable regulators, operators, investors, traders, and consumers to collaborate efficiently on smart grids. The Austrian company targets developing countries to offer them a pay-as-you-go solar energy system and they use Blockchain to authenticate energy transactions [250]. Samsung and IBM are also working on Blockchain solutions for smart grids. They developed a platform called ADEPT, which uses smart contracts on Ethereum to manage micro-transactions between smart appliances on a smart grid, because they autonomously react to changing grid conditions. The platform is a Blockchain–Internet of Things initiative and so very suitable for smart grids. These interactions will make a smart grid more stable, because peaks and lows in energy production and demand can be flattened out.
Smart, blockchain-enabled (micro) grids offer a lot of advantages for consumers and organisations. The possibility of selling surplus energy to other members directly in a (micro) grid, without the need for an intermediary taking a percentage of the revenue, creates a great incentive to move towards renewable energy and install solar panels or windmills because they offer an additional return on the initial investment. If more individuals and organisations move to renewable energy as part of a smart (micro) grid, it will have a positive effect on climate change. Having said that, this is a long-term solution, although Blockchain-enabled smart grids are not the only way that Blockchain technology can help reduce the effects of climate change.
Anything that becomes digitised will adhere to the exponential rules of information technology. Once something can be represented in ones and zeros, it becomes a data product, or service, which means that it opens up to the same exponential growth as we have seen with information-based technology [251]. Traditionally, energy production and distribution have been very centralised and analogue. Fossil fuel production requires large corporations to invest billions of dollars in equipment to retrieve oil from the depth of an ocean or to frack gas from deep underground. Apart from the analogue process, the distribution of that energy is done by centralised, often government-owned, grid companies. These companies move energy around the globe and determine the pricing, which has an impact on the world economy; if OPEC decides to reduce or increase oil production, it has an impact on everyone. However, energy production is moving away from a centralised approach to a decentralised one and is rapidly becoming digitised as well, thanks to new start-ups and new technological breakthroughs. Such breakthroughs include the smart micro-grids developed in Brooklyn or the solar energy roof tiles developed by Elon Musk. These solar roof tiles eliminate the need for expensive solar panels to be installed on a rooftop and Musk aims to make them as expensive as traditional roof tiles [252]. As a result, the energy world is opening to the exponential rules of information technology and consequently (Clean) EnergyTech is rapidly changing the way we produce, store, consume, or trade energy.
Clean energy technology offers a lot of opportunities for reducing climate change, and it appears that Blockchain could play an important role as well. Apart from blockchain-enabled smart grids, there are multiple other ways that Blockchain can help reduce carbon emissions, affect carbon pricing, enable energy data analysis, improve energy distribution, or enable, as we have seen, distributed and decentralised smart micro-grids. Already, there are multiple start-ups and research initiatives that try to understand how Blockchain enables custom, distributed, and decentralised value flows and which, if successful, will benefit each of these energy-related aspects and so positively contribute to reducing the effects of climate change.
6.4 Carbon emission, pricing, and energy trading
The Industrial Revolution, which started with the invention of the steam engine, completely changed how people lived and worked. The transition, which involved moving from hand production to machine production, offered citizens energy to improve their daily lives and resulted in a new organisation design that ensured more efficient and better production of goods. The Industrial Revolution propelled humankind into a new, more prosperous era. Unfortunately, it also resulted in a massive increase in greenhouse gases because human activities have resulted in a 40% increase in the atmospheric concentration of carbon dioxide, from 280 parts per million (ppm) in 1750 to 400 ppm in 2015 [253]. The emission of carbon dioxide affects everyone. CO2 released in India will affect the people in the USA and coal factories operating in Beijing will have an impact on the climate in South Africa. It has been estimated that, if the emission of greenhouse gases continues at the same rate in the coming decades, the Earth’s average surface temperature could exceed historical values by 2047 [254] and the limit of a rise of 2°C could be reached as early as 2036 [255]. This highlights the importance of the Paris agreement. We are dealing with a global problem that requires a global solution and Blockchain can enable the achievement of some of the key global solutions.
Carbon emissions are a significant contributing cause of climate change; the carbon footprint is defined as the total set of greenhouse gas emissions caused by an event, organisation, or country. In the past years, governments around the globe have worked hard to try to limit the emission of greenhouse gases. As such, carbon pricing was invented, which is a certain amount of money that must be paid for the right to emit one tonne of CO2 into the atmosphere. These rights can be traded if an organisation has any left or if an organisation or country is emitting more carbon dioxide than allowed. However, there are significant challenges with the system because they take place in international markets. As a consequence, taxation arrangements, fraud, crime or currency fluctuations, and transaction settlement costs affect the success of carbon credit transactions [256]. The global carbon market continues to grow and, in 2015, the total value rose by 9% to US$52.6 billion [257]. Next to that, voluntary buyers traded a total of 84.1 million tonnes of carbon dioxide equivalent (MtCO2e) in 2015, representing a 10% increase over 2014 [258]. This continued growth, as well as the associated challenges of a global carbon marketplace, require a new approach to carbon credits trading. Blockchain is the perfect technology for improving the system. It enables reduced transaction settlement times (because anyone with access to the Blockchain instantly has an updated record), increases efficiency and transparency (currently carbon trading is notoriously not transparent) because all transactions are verifiable and traceable on the blockchain, and significantly reduces the costs of carbon trading, virtually eliminating fraud in carbon credits trading, because transactions are immutable and governed by smart contracts. The use of smart contracts could automate a large part of the trading process, while at the same time removing any taxation or juridical uncertainties, because the code of the smart contracts is universally readable and understandable.
Various initiatives around the globe are exploring the possibilities of a blockchain-based carbon credits trading platform. In Russia, collaboration between AiraLab and Microsoft Russia resulted in the development of an Ethereum-based trading platform. The objective of the distributed trading platform is to enable private companies to buy and sell carbon credits. Those transactions are then recorded on the blockchain. In 2016, the first test carbon credit transaction was carried out on the platform, and valued at US$120,000 [259].
In 2016, a partnership between IBM and the Beijing Energy-Blockchain Labs resulted in the first Blockchain platform for carbon trading in China. It is no surprise that China is experimenting with Blockchain technology for carbon trading. It is expected that the global market for carbon trading will grow to US$3.5 trillion by 2020 and China will become the world’s largest carbon trading market [260]. The objective is to make it more efficient to develop and manage carbon assets, and so reduce carbon emissions. In addition, recording carbon assets on a blockchain will offer transparency and ensure that transactions are valid and settled in minutes.
However, carbon credits are not the only things that can be traded on the blockchain. As we have seen in the example of the micro-grid in Brooklyn, any energy-related transaction can be recorded on the blockchain and become immutable, verifiable, and traceable. Multiple start-ups are developing peer-to-peer renewable energy trading platforms to increase the usage of renewable energy. The Australian company, Perth-based Power Ledger, is developing a peer-to-peer renewable energy-trading platform, using the blockchain. The platform enables consumers to buy, sell, or exchange excess renewable electricity, directly with each other. This works via crypto-tokens, which are tradable digital assets representing a certain energy production. These can be sold to others via the Blockchain to prevent double spending and ensure valid transactions. As a result, Blockchain enables Power Ledger to offer a transparent, auditable, and automated marketplace that settles and clears transactions between consumers in minutes, without the need for a trusted centralised third party such as an energy company which charges a fee for its services. The objective of the platform is to empower consumers in relation to their energy consumption and production.
Jemma Green, the co-founder and chairman of Power Ledger, as well as a prominent Western Australian CleanTech evangelist, believes that ‘consumers want to become “prosumers” and become citizen utilities and that this is a technology that will enable them to do that’ [261]. The blockchain-enabled, energy-trading platform removes the need for trust between individual energy traders, and energy transactions can be carried out frictionless among people unknown to each other. For consumers to participate in the energy-trading platform, they would need to install a piece of hardware, which must be connected to a standard digital energy meter. This sensor will track the amount of energy created, bought, or sold, and convert this into tokens that can be monetised into any fiat or digital currency. However, peer-to-peer energy trading still has some legal challenges. Many incumbent energy companies do not favour empowering their customers and decentralising energy creation and distribution. Despite these challenges, Power Ledger is steadily expanding its pilot projects for peer-to-peer energy trading, with a new pilot project starting in Auckland, New Zealand as well as Fremantle, Australia to take part in peer-to-peer energy trading. Fortunately, there is a tendency towards opening up government regulations around peer-to-peer energy trading. The New South Wales government, for example, is pushing for a renewable energy, rooftop, trading scheme, which will enable individuals to trade energy that they generated on their rooftops with other individuals or businesses within their local community [262]. When households can be turned into mini-generators and electricity retailers, it could result in reduced costs for everyone and an increase in available renewable energy—a win–win situation for the people and for the Earth.
6.5 The Internet of Things and energy distribution
One aspect of peer-to-peer trading platforms is the generation of big data. In order to trade energy, smart meters are required to monitor any energy creation, storage, or trading. The data is stored on a blockchain and can then be analysed to improve the energy distribution in the (micro-) grid. A more efficient energy distribution network, with a reduced energy loss, can help reduce energy consumption. The reduction of (traditional) energy consumption will have a positive effect on carbon dioxide emissions, especially given that it will take at least a few decades before we will have moved completely to renewable energy. Therefore, in order to gain insights into energy consumption, we need to turn to the Internet of Things. The Internet of Things is a distributed network of devices that are connected to each other over the internet. As a result, these connected devices can communicate with each other, understand their needs, and adopt their behaviour accordingly. Before we dive into the advantages of energy data analytics, let’s first, briefly, discuss the Internet of Things and the impact it will have on energy consumption.
In the coming years, the number of smart devices in our households could grow drastically and Gartner predicts that a typical home could contain more than 500 smart devices by 2022 [263]. The falling costs of sensors and the upcoming domotica platforms, such as Apple’s Homekit, will contribute to this growth. However, this is just the beginning. IDC expects the market for the Internet of Things to grow to US$3 trillion by 2020 [264], whereas Cisco believes that the Internet of Things is a US$19 trillion opportunity [265]. The reason why the Internet of Things has become such a buzzword with such inflated expectations is because the required infrastructure, cloud computing, is easily available, scalable, and relatively cheap. The required sensors are becoming smaller, better, and cheaper every year, and all Internet of Things manufacturers, of course, claim that it will make everything in our lives ‘smart’ and our lives easier. In the coming years, the Internet of Things will experience enormous growth, because of (among other reasons) the expanded internet connectivity [266]. With the 4G roll out completed in most developed countries and experimentation with 5G already begun, the Internet of Things will get the network required to transmit trillions of messages in real-time.
We can therefore say that we are at the brink of a completely new, connected world—a connected world where billions or even trillions of devices are connected to the internet and to each other, in real-time. This connected world will change how organisations should be managed. It will change how organisations should approach innovation. And it will change how organisations should connect with their customers. The Internet of Everything will change innovation as we know it which will drastically impact energy consumption. Once there are dozens, or hundreds, of smart devices in your home, it becomes possible to optimise their energy consumption through smart meters. A smart meter is an electrical meter that monitors the energy consumption every 15 minutes or every hour. In the (near) future, smart meters will, however, be able to monitor the energy consumption of each individual product in a house in real-time and suggest, for example, a better timing to do your laundry based on real-time demand, forecasts, and pricing.
Of course, the Internet of Things will not create only smart homes, but also smart offices, smart manufacturers, or even smart cities. The new Deloitte Head Office in Amsterdam, the Netherlands, was certified as the most sustainable office building in the world in 2016 [267]. The building, called the Edge, is packed with 28,000 sensors that monitor everything in real-time, while generating gigabytes of data daily. As a result, the building optimises itself based on the number of employees in the building or the weather, significantly reducing the energy consumption in the office [268]. The South Korean city Songdo takes smartness a step further. The city has been built from the ground up and is completely connected to a smart grid. Songdo is located 40 miles from Seoul and will become a completely connected city, where almost any device, building, or road will be equipped with wireless sensors or microchips that generate massive amounts of data, which help reduce the energy consumption of the city [269].
As a result of the Internet of Things, we will see more smart homes, offices, and cities in the future, and this will enable us to drastically reduce energy consumption. Once hundreds of smart devices have been connected to smart meters, which in turn are linked to a smart grid, it becomes possible to optimise the energy consumption, demand, and distribution in real-time. The analysis of massive amounts of energy data will help organisations such as universities, meteorological organisations, and financial institutions to gain insights from energy consumption. This information can help create new applications and reduce energy consumption. It will become possible to link a smart grid to a blockchain platform and when tokens or crypto-coins are used, it becomes possible to have connected devices perform transactions among each other automatically through smart contracts. Imagine a connected device that automatically pays for a little bit of energy consumption when it performs a certain activity using a cryptocurrency. In the future, the analysis performed by the connected device can be sold automatically using micro-transactions to anyone interested and, with the revenue made, it can pay for the energy consumed. Everything will work automatically and instantly using smart contracts and all transactions will be recorded on a blockchain. Price differentiation can be used to incentivise connected devices to use renewable energy instead of traditional energy. The Internet of Things in combination with Clean EnergyTech and the Blockchain will drastically change how we, and connected devices, consume and pay for electricity.
The Finnish energy company Fortrum has developed a blockchain solution to empower consumers to control their connected devices over the internet. Consumers living in connected homes can use Fortrum to optimise heating inside their houses and get insights into their electricity consumption. A dashboard offers real-time insights into their energy consumption and, by connecting to weather forecasts and real-time electricity pricing, it automatically optimises the heating of their homes, increasing the heating when prices are low, or limiting heating when prices are high. Blockchain and smart contracts are used as a push for renewable energy and to be better able to respond to small loads required by connected devices [270, 271], enabling micro-transactions using a cryptocurrency, which would not be viable with fiat money.
The South African company Bankymoon has developed a typical African solution for an African problem. In South Africa, many individuals pay for the electricity after they have consumed it, as happens in many countries in the world. However, in South Africa, many middlemen are involved in the billing of energy, thereby significantly raising the price. As a result, many South Africans have difficulties paying their utility bills, resulting in large losses for the energy companies. Therefore, Bankymoon has developed a pre-paid solution that enables citizens to pre-pay for their energy. However, as most of the Africans don’t have a bank account, and paying in cash is too expensive, Bankymoon reverted to pre-paid blockchain smart meters. Individuals send bitcoin to the bitcoin wallet attached to their smart meter, and in exchange the user receives credits for energy consumption. In the end, such a solution will empower Africans, making them more aware of their energy consumption, which, in the long run, could reduce their energy consumption [272]. Although this solution is only carried out on very small scale (after all, more people still have bank accounts and use cash money than use bitcoin), it shows the potential of blockchain and energy for the developed world.
Another EnergyTech start-up working on using Blockchain in combination with the Internet of Things and renewable energy is the company ElectriCCHain. ElectriCChain is an open solar energy generation data project with an initial focus on verifying and publishing data from seven million solar energy generators globally and on an open Blockchain. ElectriCChain uses a crypto-coin, SolarCoin, to incentivise solar electricity generation. In February 2017, SolarCoin had a market cap of US$9 billion and was the world’s largest community solar electricity reward programme. SolarCoins are rewarded to anyone generating solar electricity and 1 MWh of solar energy represents 1 SolarCoin. Any verified solar energy producer can get SolarCoins for free and 99% of the SolarCoins will be distributed to 97,500 TWh over the next 40 years. The data provided by the connected solar installations enables ElectriCChain to empower its users to deliver cheap and clean energy. The objective of ElectriCChain is to gather non-confidential energy data related to solar energy and build a network of millions of solar installations worldwide. In 2017, they had 7 million solar installations connected to the blockchain, which they aim to increase to 200 million in 15–25 years.
6.6 A future for decentralised energy
The energy sector has tremendous opportunities for change and improvement using Blockchain technology. Clean energy tech start-ups are developing new solutions and applications that focus on renewable energy, reducing carbon emissions, and developing smart grids. Blockchain can assist these start-ups in offering a decentralised solution that is reliable and effective thanks to the usage of cryptography to ensure trust and crypto-tokens to trade value. As such, Blockchain has a significant chance to help combat climate change because it enables the creation, usage, and exchange of renewable energy in a trustworthy and reliable manner. However, it should be noted that blockchain also costs a lot of energy, especially the bitcoin blockchain that uses a Proof of Work consensus mechanism. The computational power required to calculate the mathematics of Proof of Work needs a tremendous amount of energy. Different consensus mechanisms, such as Proof of Stake, require significantly less computational power and energy, and many start-ups are working on more environmentally friendly consensus mechanisms. Eventually, the application of Blockchain in the energy sector could result in Virtual Power Plants (VPPs). VPPs are independent energy-generating resources that are connected using the Internet of Things across a smart grid. These renewable energy installations are geographically distributed and not concentrated at one central location as is the case with traditional power plants [273]. VPPs bring together different technologies such as the Internet of Things, big data analytics, and Blockchain to develop the power plant of the future.
A decentralised and distributed power plant offers significant advantages over a traditional power plant, for example it will be a lot more resilient in the case of a natural disaster. If one node is taken out of the distributed network due to a hurricane, the other micro-grids can remain operational and even take over energy distribution to the affected area. In addition to this, smart contracts will enable fair and immediate payment for any creation, distribution, or usage of energy across the grid using crypto-tokens, and enable individuals or organisations to trade any surplus energy that they generate, thereby creating an additional revenue stream. Furthermore, Blockchain will prevent fraudulent actions, while at the same time offering transparency in energy usage across different stakeholders because any energy transaction data will be recorded on a (private) Blockchain and become immutable, verifiable, and traceable. Insights into how renewable energy is created, distributed, and used will enable the VPP to flatten out energy demand and prevent peak demands, when at the end of day everyone connects his or her electric car to the grid. In addition, smart homes, offices, or cities can optimise their energy consumption based on real-time energy pricing, thereby reducing energy consumption as well as the energy bill.
The future of energy is a decentralised and distributed one. Once individuals and organisations can generate, use, and distribute their own renewable energy it will significantly reduce the need for fossil fuels. Governments should, therefore, stimulate the development of VPPs, as long as they generate only renewable energy. The pilot projects of the different micro-grids are a great start, but there is still a long way to go.
Climate change is a real Wicked Problem that has the potential to significantly impact our lives, anywhere on Earth. We have a moral obligation to solve climate change, regardless of some of the disbelievers who have risen to power in the past years. Thanks to the uncontrolled use of fossil fuel in the past decade and the initial reluctance of many governments to tackle this problem, we are now left with a mess that urgently needs to be cleaned up. We are obligated to our children to do so and hand on the planet in good order. We have one Earth and it is our obligation to protect it, no matter how different we are, the different viewpoints we have, or whether we personally are affected by climate change. We can, and should, all play our part in solving climate change.
A distributed and decentralised solution, based on the Blockchain, smart contracts, Internet of Things, and big data analytics offers a chance at winning this game, but it will require significant investments to move to 100% renewable energy and create smart (micro-) grids. Fortunately, thanks to technological advancements, clean energy technology adheres to standard economic principles. As a result, it is now more interesting to invest in clean energy than in traditional, polluting, energy. Once the potential to make a lot of money becomes visible, the first step towards success will have been made.
Therefore, how can you help? What can you do? Join the smart grid movement, become energy neutral or even energy positive, so that you can give back. Join start-ups such as SolarCoin and start generating a real income by doing the right thing. Exchange your petrol-guzzling car for an electric car, use smart, secure, devices to create a smart home that is more energy efficient, and trade your surplus renewable energy on the Blockchain to make an extra buck. We can, and should, all play our part. Even for those disbelievers in climate change, let’s give you one reason why you should take part in this: it will make you money! Climate change is good for business.