We can see it. Climate Change is here. The recent IPCC Special Report has made clear the necessary paths in order to tackle the effects of global warming. Now, considering that around two-thirds of the Greenhouse Gas Emissions (GHG) comes from the energy sector, it is clear where the action is most needed. There is good news however, the industry is already shifting. Social, political and economic pressures, such as the record-low solar prices at Brazil’s latest auction, are not only making appearances but putting the sector on the spotlight. If you look at the numbers, alternative energy costs have decreased to the point that they are now at or below the marginal cost of conventional generation. This trend is expected to continue driven by three factors: The 3D’s of the Transactive Grid: Decarbonization, Decentralization, and Digitization.

For the energy grid to evolve to this Transactive Grid it must confront a myriad of technological challenges and find ways to use and apply the latest available tools to solve them:

  • Blockchain to track and share data in a trusted environment.
  • Sensors embedded in the Internet of Things (IoT) to digitize transactions between devices.
  • Machine Learning algorithms to automate, optimize and improve the grid.

Let’s take a quick look at what’s being done and who is making the moves.

Decarbonization – A Greener Footprint

The Paris Agreement on Climate Change included a commitment to reach greenhouse gas (GHG) emission neutrality between 2050 and 2100. As low-carbon electricity becomes the main energy carrier, it is expected that renewable electricity could provide just under 60% of total renewable energy use, two and a half times its contribution to overall renewable energy consumption today.

But how do we get there is the real question. Achieving an energy sector that meets the climate and global development objectives requires new business models, rapid innovation and the investment in technologies found in many sectors the economy. It is in this nexus where innovators and entrepreneurs are advancing in the technologies and market solutions that make this goal achievable.

Companies such as WePower, MyBit, and ImpactPPA are developing platforms to fund renewable energy projects through the sale and trading of energy produced by these systems through token(s) and other similar mechanisms. As the need for decarbonization continues to grow, the growth of such initiatives will follow, hopefully leading to a cycle of decarbonization.

Decentralization – Towards the Recursive Grid.

The constant increase of Distributed Energy Resources (DERs) is creating new challenges for our legacy 20th-century model of centralized, top-down electricity grids. DER’s are typically not dispatchable – That is, grid operators cannot tap into them on demand – and operators do not have visibility of what is happening to those systems at the edge of the grid.

This model is currently being rethought. With the objective of coordinating the increasing number of small energy producers and flexible loads, within a trustless, open and decentralized network, key energy players such as Grid Singularity, are leading the development of the future transactive market models, enabled by intelligent software agents that perform grid communication and control functions for all the new physical assets.

According to Grid Singularity, the building blocks of such markets are based on the assumptions that the grid of the future will be:

  1. Fully Decentralized – both in terms of physical infrastructure and operational management.
  2. Recursive – where each component and each boundary in the grid (eg. device, building, street, neighborhood, distribution grid) is a self-contained ecosystem, thus having operational decision-making capabilities.
  3. Transparent – defined by complete transparency of market conditions, including the physical state of the grid, external conditions, as well as the behavior of market participants, all while protecting sensitive information.

Digitization – The Power of Data

The digitization of DERs, together with the deployment of smart metering and an explosion of cost-effective IoT sensors means that there is a growing amount of data about how electricity is being created. Data is becoming an asset by itself. The vast amount of information about generation source and location, grid connection state, voltage, frequency and so forth, generated by the thousands of devices, will be collected and used to enhance the grid performance and to create new business models in which that data is the currency.

Knowing that the centralized grid control model is not designed to handle all the information generated by DER-related activity in the network, the Energy Web Foundation (a global non-profit organization focused on accelerating blockchain technology across the energy sector) is creating a public, open-source decentralized network, capable of securely managing the electricity grid transactions, customers, and devices in what is promised to be the “The Grid’s Digital DNA”. These networks are going to allow users, and ultimately devices, to buy and sell energy in a peer-to-peer fashion, providing not only increased security but increased trust as well.

Digitization on the grid is the first step toward device-to-device transactions and economics, whereby any smart appliance equipped with energy storage is able to interface with the grid, buying and selling electricity motivated by user or market conditions for a profit. Once you have such infrastructure in place, the concept of a “Virtual Power Plant (VPP)” emerges. Distributed Energy Resources will become “digital twins” or representations of the physical assets in these Virtual Plants, allowing their aggregation in order to enhance the grid performance through services such as balancing, frequency regulation, back-up power, congestion relieve, and so on. Microgrids built within these Virtual Plants are not going to be the exception, but the norm.

Decarbonization, Desentralization, Digitization

In Quantum Physics, retrocausality predicts that the future can influence the past as much as the past can influence the futurethat causation can run backward in time as well as forwards. So, if we truly believe in a good future for our kids and the next generations, does that make it real? If not, let’s make it so.