Blockchain: Power To Renewables

"A match made in heaven", "Driver of the solar energy boom", "Entirely new energy models". These are some of the terms that have been used to describe the relationship between Blockchain and renewable energy1. But why is Blockchain so important in the renewable energy industry and what are the legal issues in the associated insurance sector? We take a look at three key areas of development to explore these issues.

First, what is Blockchain?

Blockchain is a public distribution database, or digital ledger. It is the software behind bitcoin but has a much wider application. Identical copies of data are stored on multiple computers around the world with no central hub or master copy, meaning it is decentralised. Any update to the information is made on every single copy, which is validated by cryptographic technology. This offers transparency and makes it extremely difficult to hack.

For further information about Blockchain generally and in a legal context, including a glossary of key terms, see Clyde & Co's Blockchain and the Law series at http://www.clydeco.com/insight/article/blockchain.

Three key areas of development

P2P

The effect on peer-to-peer trading is perhaps the most significant impact Blockchain will have on the renewable energy industry. It allows consumers to connect to and buy and sell energy without the need for third parties. This uses smart grids and virtual trading platforms to circumvent the traditional structures. Most energy is currently transported through grids, from power plants directly to either private or business consumers. The transmission and distribution of energy over large distances however is very inefficient, with around 5% of energy on average being lost between the power plant and the consumer. While it is not economically feasible for each home or business to become self-sufficient, with its own solar panels or wind turbine, Blockchain will facilitate the use of so-called "microgrids" whereby communities can produce and trade energy. For example, where one solar-powered household reduces energy consumption by turning off appliances when on holiday, the surplus energy produced can be sold to a neighbour. The system is altogether faster, simpler and more fluid, and gives prosumers (i.e. consumers who also produce energy) more control, leading to a more stable, less wasteful flow of energy. The possibility of local microgrids could have a particularly significant effect on solar energy in developing regions...