Man-made climate change has been linked to higher global temperatures, sea level rise, and extreme weather events, all of which pose an existential threat for the fate of humanity. In tracing the root causes of climate change, the energy sector was found responsible for producing most of the greenhouse gas (GHG) emissions — as much as 72% — that are responsible for the global warming phenomenon.
Despite the overwhelming evidence linking fossil fuel combustion to GHGs and, in turn, climate change, the recent G20 summit held in Osaka, Japan at the end of June resolved to triple coal power subsidies. Member states blatantly reneged on their environmental sustainability pledges made a decade ago to phase out all forms of aid for fossil fuels.
Despite the dire situation, emerging technologies like blockchain may hold the key to empowering renewable energy and allowing the industry to wean itself off of fossil fuels.
Green energy, which refers to electricity generated from renewable resources such as hydropower, wind, solar, geothermal, and biomass, is rising in prominence. In April this year, green electricity generation surpassed that of coal-derived electricity for the first time ever in the United States. Nonetheless, generating green energy is one thing; distributing it is another. However, the autonomous, decentralized and tokenization features of blockchain technology have opened the door to the establishment of a peer-to-peer (P2P) green electricity trading system.
According to a report by Navigant Research, P2P green electricity trading is leading the way in terms of blockchain use in the energy sector, leveraging smart contracts that can be pre-programmed to enable the automation of green electricity trading transactions. Moreover, a decentralized platform removes the need for any intermediaries, thereby allowing green electricity to be transferred directly via a P2P network. For instance, in the Brooklyn Microgrid Project, solar panels were installed on five buildings and the electricity generated was sold to neighboring buildings. From a commercial perspective, the tokenization of electricity has led to technological disruption in the trading of green electricity, as illustrated by the following use cases.
In terms of green electricity, Australia’s PowerLedger has established a blockchain-based platform that facilitates green electricity trading. The platform uses a dual token model whereby POWR tokens grant holders access to the platform and SPARKZ tokens are representations of green electricity credits, whose value is tied to the local fiat.
In Thailand, PowerLedger has collaborated with BCPG, the renewable energy arm of domestic petroleum refiner Bangchak Corporation Plc, and the country’s Metropolitan Electricity Authority (MEA) to launch an “across the meter” energy trading initiative dubbed the “T77 Project.” The first of its kind in the ASEAN region, the T77 Project entails PowerLedger establishing a platform for trading excess green electricity among the project participants.
As for the tokenization of electricity, the sheer scale of WePower’s pilot project under which a year’s worth of Estonian grid data was tokenized certainly outshines the rest. Under the project, each digital token represents one kilowatt-hour of power and serves as a self-settling contract for the purchase of electricity.
Now that blockchain has paved the way for the development of the green power grid of the future, the vision of a world free of fossil fuels has become a plausible reality within our reach, and with that, there is hope for the continued sustainability of our planet.
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