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CEO of Enosi Foundation
It's Time We Stop Treating the Energy Space as a Monopoly
Steve Hoy
One of blockchain’s most beneficial characteristics is its ability to distribute processing authority and ownership over a multitude of servers. In many industries, one single party or a few large parties have control over the entire market. Instead of putting the power in the hands of one single source, blockchain allows the power to be spread out so that no single party has all of the control. Removing the third party and thereby providing transparency and ownership is an attractive quality that blockchain technology provides. Which industry has been cursed with centralization and an imbalance of power since day one? Which industry comes to mind when a ‘natural monopoly’ is mentioned? It’s the electricity industry, of course!
Historically speaking, the electricity industry has been viewed as a natural monopoly due to its high infrastructure costs and barriers to entry. Even where choice of supplier has been introduced, large oligopolies have an overwhelming advantage over potential competitors. From something that started as a simple science experiment, an entire industry was born. In order to understand the deep-rooted issues within the energy industry, it’s important to grasp the foundation from which the industry was built upon.
Planting the Seeds of the Energy Industry
Thomas Edison, the greatest pioneer in electricity gave rise to a new industry when his incandescent electric light bulb was patented in 1880. In 1882, J.P. Morgan funded his efforts and Edison launched what is now known as General Electric, the 14th largest firm in the world according to Forbes Global 2000. In September of 1882, Edison opened the United States’ first central power plant—the Pearl Street Station. Edison connected generators to homes and buildings through a network of underground copper wires. The Pearl Street power plant signified a revolutionary shift from on-site generation to large scale energy generation, which laid the foundation for the entire power generation industry we have today.
This process for energy generation, storage, and transportation was beyond the scope of imagination for 19th century United States.
Incorporating blockchain technology into the energy industry provides a solution that takes advantage of the trustless nature of the technology
Today, we have new energy resources, innovative technology and a ton of scientific research showing that our planet is suffering from the overconsumption of energy. With all of this in mind, it is apparent that an industry shift is long overdue.
Renewable Energy and New Cleantech Innovations
New innovations in clean technology aren’t being used to their greatest ability because the outdated industry isn’t really allowing for it. A good example of a relatively new cleantech innovation is rooftop ‘photovoltaic’ power stations. Solar rooftop electricity is one of the lowest costing forms of electricity generation across the world. Unfortunately, the widespread uptake of this low cost and sustainable electricity is hampered due to the inability of new service providers to enter the market.
Other extraordinary and sustainable innovations such as low cost battery storage and electric vehicles have great potential, but the traditional industry model is no longer a feasible or cost effective approach to delivering these forms of electricity. These sustainable and renewable innovations in cleantech allow for an abundance of energy that is simply not being put to optimal use.
Environmental and Monetary Disadvantages
The cost of energy generation and distribution has risen dramatically. Beyond the monetary damage, air pollution due to fossil fuels has risen as well. Electricity generation and supply is one of the largest sources of air pollution worldwide. As far as monetary loss goes, in 2016, 81 percent of Australian consumers rated electricity as the number one greatest cost of living concern. Yet, as previously mentioned, we are still relying on a heavily regulated and outdated model. With the current model, the energy industry is dominated by a small number of incumbents that exercise oligopolistic control. In order to transform the energy industry, we need to lower the barriers to entry, thereby enabling new participants to compete in the value chain; and beyond that, a fully decentralized and affordable Renewable Energy
needs to be put in place.
Blockchain Technology—The New Entrant
Blockchain technology will be the bedrock on which this energy transformation will be built. Blockchain will allow peer-to-peer transactions meaning that the incumbents will be taken out of the mix, and buying and selling to energy companies will no longer be the default. Instead, energy will be bought, sold or ‘traded’ between parties or communities based on the resources they have available at the time. This sort of trading system will permit businesses and communities to optimize the value of their excess generation.
Incorporating blockchain technology into the energy industry provides a solution that takes advantage of the trustless nature of the technology. Essentially the blockchain allows transparency and eliminates the need for a central authority to prove that the same unit of energy is not sold twice. This is the equivalent of the original bitcoin idea of using a distributed ledger or blockchain to solve the ‘double spend’ problem.
A new, decentralized model will disperse the power, reducing the need for grid infrastructure, allowing peer-to-peer energy trading, and putting the emphasis on sustainability and communities.
Our view is that the ideal electricity blockchain platform will be a completely open source platform that can be deployed without an incumbent grid partner and encourages development of a multitude of solutions tailored for each specific market need. This global accessibility will foster innovation and competition, and speed up the transition to a truly democratic grid model with fair pricing for the providers and consumers of decentralized energy resources.
It’s time that we let go of the legacy systems and pave the way for a new, clean energy industry that will provide the entire world with sustainable, decentralized, and low cost energy.
The articles from these contributors are based on their personal expertise and viewpoints, and do not necessarily reflect the opinions of their employers or affiliated organizations.
