Robyn Williams: Peter Newman is Professor of Sustainability at Curtin University in Perth. And one of his colleagues is Dr Jemma Green, who has always been bothered by the small percentage of apartments in Australia with solar. The problem has been how different each flat's needs may be for energy and how you divide both different expenses and different feed-in rewards to the grid, like splitting a bill between 10 people in a restaurant when some have wine, others not, and a few have three puddings.

Jemma Green: Well, in my PhD research I designed a solar and battery system for an apartment building, and then I couldn't find any software that would make the system perform as I had hoped, which was to allocate units of electricity to each apartment, and if you weren't home to consume your allocation, that you could trade it with your neighbours.

And then in January 2016, a former colleague of mine from my banking life introduced me to a couple of blockchain people in Perth, and they came over to my house, in this very room, and they started talking to me about the blockchain. I had only really understood notionally about the blockchain in terms of bitcoin and they started explaining how it could be used. I was a bit suspicious actually, going; what is this, have they drug some Kool-Aid? But I started investigating it further after the meeting and saw that it had applications in electricity markets and it could actually make the apartment do what I'd hoped, which is basically like when you go to a restaurant with your friends and there's a big group of you and some of you drink, some of you don't, some of you have entrees and desserts and others don't, and when the bill comes you either have to do that tedious thing where you count out who's getting what, or everybody just splits the bill equally and some people feel like they've kind of been…

Robyn Williams: Kind of been swindled perhaps, but blockchain will, the theory goes, give you an instant break-down of your true part of the restaurant bill. Everyone's happy. Dr Jemma Green is a research fellow at Curtin University. So how will this help solar?

Jemma Green: So it's basically like a database that is common to both buyers and sellers in a market. So if you buy and sell shares on the stock market, the settlement process takes two days, and that's because of the time taken to reconcile the data in the buyer and the seller's separate databases. What's the blockchain is is a database that's common to both the buyer and seller, and the actual recording of the transaction is the payment. So it's a real-time market that happens.

And why it's interesting for electricity is that you tend to get your electricity bill every 60 days, and so if you generate surplus electricity from solar panels you don't get paid for two months, and in the wholesale electricity market where you've got a big power station, the settlement process is up to 90 days. So they make electricity and they don't get paid for three months. And what that means is they need a lot of money in their bank account to run the business until they get paid. So it is actually a very inefficient market, and the reason it takes so long is because it's complicated to reconcile all the data in all the separate databases.

So a blockchain is a single database that's common to all market participants, and it can create efficiencies in a market, and also sophistication. So electricity markets are about as geared up to buy your electricity from your solar panels as a supermarket is to buy home-grown tomatoes. But the blockchain means that small market participants, like households, can be involved, and help solve some of the big problems. So a household with battery electricity could provide it in the peak and receive a premium return.

Robyn Williams: So that's more or less what you're saying about the argument in the restaurant, everyone is trying to split the bill having done all sorts of different ordering and so here is a system that makes that kind of cooperation effective, and so you work that out, you talk to your friends, your new friends with blockchains. And what happened next? Is it happening really somewhere?

Jemma Green: It is actually happening somewhere. Our first trial was in Busselton, then we've got a project in White Gum Valley in Fremantle, and we've done a trial in New Zealand. We've got one in Thailand, India, also Japan and now in Chicago, and a number of others in the pipeline. And actually the one in Chicago is at Northwestern University and it's actually a commercial deployment, so that's our first commercial project, which is very exciting.

Robyn Williams: How does it make it more efficient and effective for both the apartment dwellers and the electricity industry if you do it that way?

Jemma Green: It creates a record of the transaction and settles the payments between everybody without everyone having to get involved in the process. And for an apartment building, what it means is that you know that you are being allocated fairly an amount of electricity. If you don't consume that you can trade it with your neighbours and you get paid for that. So it actually incentivises good behaviour, and it encourages investment. So if you have purchased an apartment but it is tenanted, the tenant will pay the electricity bill to the landlord, and so it provides an incentive for them to invest in solar because up until now in tenanted properties, landlords are reluctant to put in the solar because it's the tenant that gets the benefits, it’s the split incentive problem.

Robyn Williams: What if in your dreams everyone realises this potential? What would Australia possibly look like in a few years' time if that began to work and took over the main burden of energy and suchlike?

Jemma Green: Well, electricity markets have remained relatively unchanged for about a century, where you’ve got big generation assets, transmission lines, distribution lines, bringing electricity to people's homes and businesses. But in the past 10 years in Australia a new paradigm has begun to emerge, which is characterised by citizen power stations and distributed generation. I don't think it will be an entirely distributed electricity market, it's going to be a hybrid, but this disruption that we are seeing in Australia is actually more rapidly forming here than in other countries, and the reason being is because we have very high electricity prices, and a lot of sunshine and cheaper solar than if you were importing it in other countries because the process to actually connect it, the regulatory process is very efficient here. So I think that we will be a test bed for what electricity markets of tomorrow will look like in other parts of the world.

Robyn Williams: And when you are hearing all this argument, politically and with people who own homes and have to pay bills, about the cost of electricity and some of the solutions, not getting anywhere, do you think it's absurd?

Jemma Green: I do because on the one hand you know that solar and wind is cheaper than new coal or gas, but the revolution hasn't come yet. And you have to ask yourself why. And the reason, I think, is because of the spikes in demand, and incumbent utilities price electricity at significant multiples of what it costs to produce because they say we deal with the spikes. But if consumers can help solve some of those problems, there's a potential for more supply coming from different sources which will actually drive down the cost. And so the opportunity I think is for low cost and low carbon electricity markets that are actually more resilient, things like hurricanes or natural disasters.

Robyn Williams: Well, now you are doing this practically, in Perth, as you said, and in various other countries as well, are these examples being looked at by the people who count to make things happen?

Jemma Green: Yes, I think they are. Power Ledger and also Curtin University and Murdoch and LandCorp won a Smart Cities grant with the federal government, and it was the second largest grant given out by the Smart Cities and Suburbs program, so it was $2.5 million for an $8 million project, which is very exciting. And we've got support from state and local governments here.

And internationally I think there's a recognition that electricity markets are being disrupted, and what the technology provides an opportunity of is disruption without as much destruction of value. And so I think that we are looking to partner with the incumbents to help them manage the disruption and look at what are the business models that will underpin ongoing viability.

Like, for example, Kodak invented the technology around digital cameras but it went bankrupt in 2011, because it wasn't just about digital cameras, they needed to understand what are the commercial models that will underpin that technology being scaled, and they hadn't figured it out. So I think that even though we know the future is about solar panels or renewable energy, how that looks from a commercial perspective is still to be worked out.

Robyn Williams: And you're working that out both as an academic and someone with your own company.

Jemma Green: Yes, so I'm supervising some PhD students that are working on this and it's very exciting to see the amount of research that has come out. When I finished my PhD, I think there were maybe a handful of academic papers on the blockchain, and now there is several hundred, and that's just in 18 months.

Robyn Williams: Dr Jemma Green is chairman of Power Ledger and a research fellow at Curtin University in Perth.