Last month, electricity—or the lack thereof—dominated the news after Texas’s winter storm left 4.5 million customers without power, in what politicians labeled a “freak”event.
The reality: It wasn’t a freak event at all. According to the US Department of Energy, roughly 147 blackouts occur every year. Texas itself had a different outage that left 100,000 without power just one month prior. And while natural disasters may seem like unavoidable disruptions, dozens of blackouts every year are caused by squirrels chewing on electrical equipment. Hardly catastrophic climate events.
These blackouts are not only expensive—costing American business roughly $150 billion a year— but deadly. At least 16 people died as a result of Texas’s recent blackout; more than 100 in the massive Northeastern blackout of 2003. Electric grid devastation can be weaponized, with former CIA Director James Woolsey warning Congress in 2015 that 30 percent to 90 percent of Americans could die in the event of a sustained electromagnetic pulse (EMP) attack taking down the national electrical grid. A frightening statistic when you consider that EMP weapons are a very real and growing option in China’s arsenal. And while the Department of Energy has been working through incremental upgrades with utility companies since Woolsey’s warning, our grid remains extremely vulnerable.
So how do we get ourselves out of such a precarious situation? By decentralizing our energy grid. By creating a grid that flows from the bottom up, we could live in a world without blackouts, along the way streamlining our electricity generation to be cheaper and less wasteful.
Here we outline the technologies and partnerships that will make the next decade of energy the most revolutionary since power lines were first strung up.
The Microgrid Paradigm
Imagine a world in which energy consumers are also able to produce, buy and sell energy from one another in the process weaving together one decentralized net of energy. This is the potential of a world built on microgrids.
Currently, electricity in the US is produced at roughly 10,000 generation facilities that “step down” voltages through smaller and smaller local grids before finally being delivered to homes and commercial centers. Ten thousand might sound like a lot of power plants, but the top-down structure of the system means a single outage at any of these origination points can cause energy disruption all the way down the chain—leaving tens of thousands without power.
However, if you invert the power supply so that each local grid can produce its own electricity— and then roll up its surplus to the regional grid to supply others in need—you eliminate the chance of any one grid’s failure cascading to another. This is the concept behind microgrids.
Also referred to as distributed energy resources (DERs), microgrids first garnered support from the US military, which began investing in renewables in 2007 as part of an initiative to reduce their vulnerabilities on what former Secretary of Defense, Marine General James Mattis has referred to as our “tether to fuel.”
While the military’s interest in renewables first came from the front lines—where solar power eliminated the need for vulnerable fuel conveys and easily detectable generators—the transition to renewables has shifted to their domestic military bases as well. The Marine Corps Air Station Miramar in San Diego just completed a $20 million project that aims to use gas produced from landfills to power its base, in the event of a natural disaster or cyberattack. It’s not just small-scale—the armed forces are currently on track to hit their target of 25 percent renewable energy generation by 2025.
However, despite its scale, military enterprise is still a very limited example of a microgrid. For one thing, military bases are still fairly large—hardly “micro” when compared to a single home. Second, their use of autonomous power isn’t transactional. Power produced on base remains on base. The stability of the larger grid isn’t as important as the autonomy of the single node.
The true potential of decentralized energy is unleashed when a grid collectively functions together. A potential made possible by the blockchain.
Harvesting Local Power On The Blockchain
Neighbors are great resources for borrowing tools or groceries, but what about borrowing your neighbor’s power? Or more specifically, buying their energy when they don’t need it?
That’s exactly what’s happening in Walenstadt, Switzerland, where a project funded by the Swiss Federal Office of Energy has enabled 37 households to produce and locally trade solar energy on the blockchain. Each house had solar PV cells installed on their home, along with a mini computer that acts as both meter and blockchain node, buying and selling power on a public exchange every 15 minutes according to price levels set by the owners. All households are also connected to the local utility, which both buys surplus energy from homes and supplies additional power if needed.
In the US, similar exchanges are underway in Vermont and Brooklyn, where phone-based apps allow energy producers/consumers to interact with each other on an exchange (in conjunction with a local utility). Internationally, blockchain energy exchanges have leapfrogged conventional utility infrastructure to power rural communities with no previous grid access. For instance, Israel-based Solar Dao is using blockchain platforms to crowdfund solar farm construction in Kazakhstan. In Kenya, Danish startup M-PAYG is deploying a phone-based payment system to fund solar-powered cooling systems for rural fishing communities.
However, these exchanges—while decentralized—are still homogenous. If the whole grid runs on solar power, a sustained storm could in theory cause all the homes in a grid to shut off.
The solution, according to blockchain energy startups like Grid Singularity and Lo3 Energy, is to provide a decentralized marketplace that transacts units of energy. The universal currency of power would enable the sale of electricity between any two producers—no matter how or where it’s produced. A smart contract system such as this theoretically opens up infinite sources of power exchange.
For instance, a program in London that re-utilizes trapped body heat from the subway could exchange electricity with a gym that captures the kinetic energy of its users. Homeowners in Arizona could sell their early morning solar energy to homes in Michigan—and then buy back wind energy after work when everyone out east is asleep and wind production is highest. Such a system would not only take advantage of geographic efficiencies, but also eliminate wasted energy production at night—a central flaw of fossil fuel plants which cost more to shut down than to keep running largely unused throughout the night.
Ultimately, in a world where smart meters can gauge, verify and transact units of electricity on the blockchain, energy stops being a one-way road, and instead an omnidirectional exchange.
In other words, kind of the way it works in the natural world: energy being transferred, but always captured in some other form.
The Distributed Future is Already Here…
While it may be tempting to view decentralized energy as a niche application, the truth is the movement to break apart our energy grid has stakeholders in virtually every level of society. Environmentalists looking for less pollution, municipal governments looking to avoid blackouts, militaries looking for self sufficiency, private businesses looking to save money and even energy producers themselves, including Siemens and GE, all are heavily invested in radically reshaping our current energy infrastructure.
With such a large buy-in, microgrids are not easily dismissable as temporary or partisan ideas. The movement itself has steadily gained steam during four different presidential administrations—and appears poised to accelerate further under Biden’s $40 billion push for renewable energy.
If Biden’s plan is successful, proliferation of household solar and wind could act as a steroid shot to microgrids. Add that to the accelerated adoption of cryptocurrencies during the pandemic, and the future of decentralized energy could manifest before our eyes in real time, years earlier than expected.
Ultimately, it appears the question of decentralized energy isn’t “if,” but “how soon?”