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We encourage everyone, even critics, to join and contribute to the discussion. I pride myself on being skeptical of opaque projects and calling out nonsense. I believe criticism is crucial and serves as an important check through which to constantly re-evaluate your work and ensure the project is on track. One of the most common criticisms we get for Grid+ is something like the following:

You can do the same thing Grid+ is doing with a centralized system. You don’t need to use a blockchain.

This statement is astute. In fact, it is partly true for our short-term model. However, it will stop being true as our system evolves and we start seeing more distributed energy resources (DERs) come online. Regardless, this is something on which I want to elaborate because it gives me a chance to outline how cool the future we’re building is going to be.

We all want a p2p energy future and there are several projects in the space that are working on it. What separates Grid+ from most other projects I’ve come across is that we want to build the future of energy using the existing grid infrastructure. This makes our roadmap considerably different from others, who mostly rely on building microgrids. I’ve already written about why I think microgrids are generally a waste of time and resources, so I won’t get into that here.

In the short term, we will be operating as a traditional utility (and also licensing our software/hardware to traditional utilities around the world). It would be much easier and cheaper to simply use an event-sourced database and record transactions internally. I have written about event sourced databases before — I think they’re neat and in many cases preferable to blockchains. So why are we building Agents and paying transaction fees on the Ethereum network? Well, allow me to explain. It all begins with net metering.

Net metering — how your retailer bills you

In case you didn’t know, your home is full of wires. If you were to open up a wall in your living room, you’d probably see something like this:

Why you have walls

Keeping track of electrical current running through each of these wires would be a nightmare. Fortunately, your power company doesn’t have to worry about this complexity because all they track for your electrical bill is your net usage as measured by the meter outside your house . In other words, your utility company tracks how much power goes into your house and how much power goes out of your house and then sends you a bill based on the net result. To them, your internal wiring and usage is a black box.

In deregulated markets with smart meters (i.e. the only markets in which we can operate — at least to start), your smart meter tracks your net usage and reports the data to your region’s Independent Systems Operator (ISO).

Your smart meter looks like this

Once the ISO receives the net-metered usage data, that data can be queried by the retailer who has signed up the associated customer. This is usually done with an authenticated web API — here is ISO New England’s API documentation.

Grid+ will take advantage of the ISO-provided smart meter data to operate — once we sign up customers, we query the ISO (ERCOT in Texas) and bill customers’ Agents based on that usage. Pretty cool, right?

Selling Power Back to the Grid

Customers who generate their own electricity and want to sell it back to the grid as a passive revenue stream also operate within this framework. The beauty of net-metering is that adding any number of solar panels fundamentally changes nothing to your input/output configuration — it just results in more power flowing out (i.e. back to the grid), which reduces your bill based on whatever pricing your retailer wants to set.

PV cells change your net-meter usage

And here is where the problem emerges — traditional utilities use fixed prices, which are not market driven. This causes residential solar to be overcompensated and subsidized by other rate-payers because flat pricing doesn’t account for the externalities of intermittent generation. Also, flat pricing removes the economic incentive to purchase a battery which would help to smooth out the intermittent generation from solar. A battery can be turned into a revenue stream if it purchased power when it was cheap and sold that power back when it was expensive.

Although this may not seem like an issue when a few homes have solar panels, the limit to how much solar can be used on the grid will ultimately be dictated by the corresponding amount of energy storage. Some utilities, such as those in California, limit the amount of revenue any single household can make by selling back into the grid. One member of ConsenSys installed PV arrays on his house about 10 years ago. Shortly after installation a new regulation was passed capping his income at $1,000 per annum, which is about 1/10th of what his true revenue should be.

This is the change Grid+ wants to make in the short term — introducing market pricing to all customers (wholesale pricing if you’ve redeemed GRID tokens). Grid+ will offer prices both for consumed and generated energy based on the wholesale price (with a relatively small markup for most customers).

Wholesale prices vary throughout the day based on the supply of electricity produced and the amount of electricity consumed. In some regions the price of electricity at night can be free or even negative, while the price at peak times can be as high as 5–10 times the average. If consumers do not have any ability to know the pricing and respond accordingly, a situation is created where the grid has to be vastly overbuilt which drives up costs. However, if a consumer has a smart energy Agent which is networked with a smart thermostat or an electric car charger, the smart energy Agent can modulate a household’s consumption based on market pricing. This creates a situation where the consumers can dynamically respond to supply and demand which will immediately lower direct costs, as well as lower the amount of total required infrastructure over time.

Market-based pricing will incentivize customers to purchase DERs and earn revenue passively — in so doing these consumers will turn into “prosumers”. We hope that over time, Grid+ will have many prosumers acting like nodes on a new distributed mesh — in essence a second grid built into the existing one.

Grid+ pays the distributor for your power and then charges you for it later

Net Settling via Grid+

Being a normal utility, Grid+ purchases large quantities of electricity on behalf of its customers over some period of time (either 1 hour or 15 minutes in Texas). If Grid+ customers can anticipate their future demand, they can also purchase energy in advance (day-ahead) at typically lower and less volatile prices. Of course, this is not a perfect science and it is part of the motivation for creating an Agent that gets smarter over time. It is tricky to know how much electricity to purchase ahead of time, which is partially why day-ahead markets are cheaper. This provides an immediate benefit to both Grid+ customers and the electrical grid. If Grid+ customers can predict their energy usage more accurately than a traditional retailer, as well as respond to market pricing, they will not only save money but will also increase grid reliability.

Grid+ is also credited for any power sent back to the grid by its customers. If Alice nets -5 kW for an hour long period (i.e. she net-generates 5 kWh in excess of her consumption), the ISO recognizes this and deducts Grid+’s bill by 5 kWh. If Bob consumes 5 kW over that same hour, Alice’s generation is balanced out and Grid+ owes the ISO nothing for those two customers because there was net 0 kWh of net usage between them.

What about Ethereum?

I know, I still haven’t gotten to the fundamental question: why do we need a blockchain?

Ethereum becomes useful for the future state of the electrical grid where there are more distributed energy resources and dynamic distribution charges which will create more localized pricing. Currently in Texas there are 7 wholesale markets or geographic pricing nodes. This geographic pricing is referred to as locational marginal pricing (LMP) and takes into account localized supply and demand as well as congestion within the transmission and distribution system. It is pretty clear that the LMP is not very specific or granular given the number of nodes and the size of Texas. However, as pricing becomes more localized prosumers can charge their own rates and all customers can take the best rate available. In this setup, a prosumer offering a local rate lower than the nearest wholesale rate will get bought out by another customer — the prosumer’s Agent would bill the taker-customer’s Agent directly through a payment channel running through our BOLT hub on the Raiden network.

It is worth noting that p2p transactions can initially only happen between Grid+ customers — Grid+ acts as the bridge between the old world of traditional energy suppliers and the new world of prosumers and p2p transactions. In the future, Grid+ does not need to be a party to p2p transactions and only a small Raiden hub fee is taken for routing BOLT, our stable coin. In a future world where there are many localized markets with dynamic pricing based on supply/demand and distribution congestion, centralized administration of settling is neither economically efficient nor technically feasible. The distributed p2p nature of Ethereum provides a complementary settlement layer to the distributed geographically specific p2p energy markets.

But Aren’t We Dis-intermediating Ourselves?

Nearing our roadmap’s finish line, we are confronted with an existential threat of our own making. Although p2p transactions are more economically efficient and will be the bedrock of a thriving distributed grid, it leaves us as just one electricity provider in a mesh of prosumer nodes. Where do we go from there?

As it turns out, Grid+’s position will likely be strong as long as people use our network. Recall that p2p transactions may only be carried out by Grid+ customers since we are the institutional bridge to the traditional grid. Even with 100% p2p transactions (not happening any time soon, by the way) we still have several options for business models including:

Charge a subscription (sorry, but you’re free to bootstrap your own utility business and smart grid) Make money selling Agents Charge a small transaction fee to run general stable-coin commerce through our Raiden hub (traditional payments processors charge ~3% so we have some room to work with)

However, this brainstorming session is likely an exercise in futility because the future is always uncertain and we’re talking about a future that is likely a decade or more away. Nevertheless, we at Grid+ are primarily motivated by bringing forth the future of energy. If Grid+ is so successful that our customers eventually dis-intermediate us and we really have no way to make money, then perhaps we’ve accomplished what we set out to do. We as a team would be happy with an outcome that empowers the people and establishes a new, transactive grid because that would mean we will have proven the power of decentralizing technologies — as far as we’re concerned, that’s a win for humanity.

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