While peer-to-peer distributed renewable energy systems rapidly become a reality, challenges remain in terms of transaction costs and throughput of the distributed ledgers. Both these issues are at the core of tomorrow’s energy world. A group of DLT developers, scientists (electrical engineering, math, AI), and energy professionals has formed the Selber team to address these challenges, following #Hack4Climate 2017.

Selber test setup 02/2018, managing various consumption and production elements of a distributed power system on DLT. The red cubi are Power Blox, a cool battery system for microgrids, including swarm intelligence.

Few informed and independent experts today would doubt that the future of energy is not renewable. Most also believe that that future will be largely decentralized and distributed, with solar photovoltaics (‘PV’) becoming the predominant generation technology. With PV panels, we have seen what may be called the ‘first wave’ in the global rollout of renewable energy. Increasing production volumes and learning curves, in manufacturing, planning and installation, have led to incredible price drops. PV is now becoming the world’s cheapest form of power generation (beating all fossil energy forms, even without pricing carbon emissions, yet).

The ‘second wave’ in renewable energies is now rolling in full swing. The same dynamics are at play, but this time for batteries. More PV and, finally, the breakthrough of electric cars/trucks, lead to growing production volumes, which in turn lead to learning effects. Prices are currently tumbling as a result. New products for the household market and large-scale projects such as Tesla’s ‘big battery’, storing solar power at grid scale for nights and rainy days in Southern Australia, are groundbreaking examples.

The ‘third wave’ is just starting, and we have not seen anything yet. It concerns the integration of PV in everyday appliances and devices. Integration, for certain, into things like roofing structures, window shades and façade elements; likely even into windows, streets and train tracks (in addition to mobile phones, brief cases and clothes). This means energy generation will become a fundamental element of design. Whether you want it or not, chances are high that you will transform from a pure ‘consumer’ of energy into a ‘prosumer’, one who also produces power.

The three waves together will rapidly transform energy flows. Today, energy flows largely from central power stations, ‘top down’ over lengthy networks and transformer stations, to individual consumers. The more consumers become prosumers, the more this top down system changes to one that is driven ‘bottom-up’. The brutal truth is that, even in climates as ‘north’ as the North of Switzerland, already today investing in PV and batteries beats utilities in terms of prices. Well-dimensioned systems here can cover 50% of a household’s power needs with a price advantage, which is great for the prosumer, but also implies substantial revenue loss for the utility. In locations where a household could provide for all of its energy with a combination of PV and batteries, and where the price of connecting to the grid is high, a household could even decide to become physically independent of the grid (known as grid defection), and the utility would lose a customer completely. There are different examples of such households already.

This 7-unit apartment building in Brütten (the North of Switzerland), was completed in the summer of 2016. It is fully energy independent, with no connection to the power grid. A portion of the solar power generated on its roof and facades during summer is converted to hydrogen and used to heat and power the house in winter (for more, see this explainer video).

The ‘fourth wave’ towards renewable energy, distributed power management, is what will drive the overall speed in adoption of distributed power systems. The combination of affordable, and integrated solar power production, with batteries to level demand and supply on the one hand, and IoT (Internet of Things), DLT (distributed ledgers, ‘blockchain’) and AI (Artificial Intelligence) on the other, is what will bring distributed renewable energy to full adoption. It is clear today that the ownership, management, and pricing structure of our electricity systems for both generation and distribution is going through a massive transformation.

DLT is particularly relevant in this, as it allows the energy transformation to happen in a fair, secure, and truly distributed way. Most importantly, DLT changes the incentive structure of information shared by distributed prosumers — which is very relevant for peer-to-peer trading as well as overall grid management (loads, etc). Rather than smart meters that share information in the interest of utilities, we should all have energy hubs at home, through which we ourselves determine which information relating to our power we share, and how.

Sharing makes the most sense where distances are small, which will lead to local energy communities. Inter-community networks will still be needed, but their network management dynamics and the pricing structure of the network infrastructure involved, will fundamentally change — indeed, from top-down to bottom-up.

Simulations at the Swiss university ETH started in 2016, illustrate how community power sharing leads to significant advantages for individual participants in terms of reduced power costs, improved levels of autarky, and resilience. In many places around the world, pilot installations with peer-to-peer distributed energy systems are already emerging. But, significant technical and regulatory challenges remain to be addressed.

For the mass adoption of renewable energies to reach its full potential, distributed systems need to be both fair (control, privacy, incentivisation) and efficient (in terms of the energy they themselves require and, most of all, in terms of the data that is shared and thus can be analysed for the optimisation of the larger network system). The adoption of renewable energies, in turn, is highly relevant for addressing the world’s most pressing challenge — climate change.

This is why we have made ‘distributed renewable energy’ a challenge area in the #Hack4Climate innovation program, at the intersection of climate and the disruptive technology troika IoT, DLT and AI. In 2017, #Hack4Climate included preparatory workshops in 17 global technology hubs, and a large-scale hackathon (the first ever linked to a climate conference, during 5 days with 100 hackers from 31 countries).

One #Hack4Climate team working on distributed energy stood out, and now continues to build their use case. Called ‘Selber’ (the German word for ‘by yourself’), they are entering Cleantech21’s incubation program, in partnership with the Fraunhofer Institute for Industrial Mathematics (ITWM). A fortnight ago, Selber held a weekend workshop to further develop the modalities of building a decentralised energy future and performed tests towards building a proof of concept.

Watch team coordinator Micah Melnyk report on testing activities. At the workshop, Micah reviewed the large number of new ventures that are bringing distributed ledgers to distributed energy. However, many work with technology that presents both cost and scalability challenges. Good p2p models let people trade energy, and at the same time manage the quality of power in the network, bottom-up. For this to work, however, the underlying technology has to be capable of processing a very large number of transactions.

Arsam Aryandoust, who leads research on network management, explained how current research shows, that the quality of load management significantly improves the shorter the time-scale of operation is, or the more fine-grained a system can be tuned. If done correctly, the flexibility of storage boilers, heat-pumps, batteries, etc. can work together to provide power system stability from the ground-up, by control actions on very many IoT devices on a millisecond to minute timescale. Such quick control actions can include demand and response (DR), voltage control, virtual inertia (frequency control), and more. Arsam’s further research shows, how a measurement node on IOTA’s marketplace, e.g. at each transformer substation, could provide information for all prosumers connected to the same low voltage community distribution grid to balance their local voltage levels, transformer, line loads, etc.

Research by Qianchen Yu reveals that most existing ‘blockchain energy solutions’ don’t have the power to control a large number of devices on short timescales. Moreover, the transaction costs and energy needs for such frequent exchanges are too high to make sense economically and ecologically. Hence, DLT alternatives become an important focus, and the Selber team is out on that mission. One of the main contenders is IOTA, and with it, the IOTA data marketplace (Disclaimer: I am an advisor to the IOTA Foundation).

Fraunhofer’s experience in the areas of IoT abstraction and control (including PV, battery systems, heat pumps, combined heat and power systems, and the charging of electric vehicles), decentralised energy system forecasts, simulations, and optimisations, as well as both community-based and large-scale business models, directly addresses the problem. Alexander Klauer, who leads the Fraunhofer team in the Selber project, has now replicated the testing infrastructure setup from Zurich at Fraunhofer in Germany.

In the spirit of a truly decentralised bottom-up future, the Selber team welcomes input. For those interested in learning more: hello@selber.com.