How do blockchains promote clean energy?

Can Blockchains Promote Clean Energy?

One exciting application for blockchain technology is the potential of its connection to renewable sources on the energy grid. The blockchain used in this context becomes a peer to peer network for electricity, able to transform larger grids operated by massive energy companies, to smaller, more distributed microgrids, able to buy and sell energy from each other automatically and autonomously.


While our current electrical system has served us well for the last 100 years, it is now out of date and needs to be upgraded. At the moment, the electrical grid is a complicated system of crossing wires that do not fully meet rising electrical demands. There is a lack of efficiency in the delivery of fossil fuel-based energy, which leads to a lot of wasted power [source].

To add further, there is a growing concern regarding climate change, and current models for energy generation rely heavily on fossil fuels, or nuclear energy. What is needed is sources of cleaner energy, and a better way to keep track of that clean energy.

Using blockchain technology can do two things:
1) it can promote the use of renewable energy sources and
2) can be a better system for recording how much clean energy is being generated, which will pave the way for a system of energy trading that we can trust.


The following are are two brief examples of how blockchain technology will promote clean, renewable energy sources:


In an article written by MIT Sloan, the author mentions that “[T]he problem is this: Banks place conservative debt service requirements on the developers of renewables projects (because of uncertainties, some real and some exaggerated, about how dependable solar or wind farms are). The developers must keep a lot of cash on hand to ensure that they can meet loan payments.” 

Using a distributed database that is updated in real-time will lower the perceived risks associated with renewable energy sources and as a result, will cut costs needed for renewable energy sources to start up. By doing this, startups will have an easier time to get financing for related projects, and so more of them will spring up. This will pave the way for…


Imagine that the person across the street from you has solar panels on their building, and they are absorbing an excess amount of electricity. Blockchains can allow them to sell their abundant energy to others on the grid, thus creating a peer-to-peer trade network for energy.

As blockchain tech news reports, “…until now, people have never been able to upload electrons to the grid and sell them to the guy across the street.” But with blockchain, this becomes a reality.

One startup already underway is LO3 Energy. They developed the idea that they named TransActive Grid to make energy trading a reality, and are already in the process of installing photovoltaic cells all across Brooklyn. This “is a proof of concept that could lead to a rearchitecting of electric grids globally.”

The previous system allowed only for the purchasing of electricity from centralized companies. This new model allows neighbours to trade energy autonomously.


One major problem that comes up is, how do companies keep track of the energy produced by renewable sources? Once electricity is produced, it is impossible to tell what its source is from. To incentivize renewable energy sources, governments need to be able to tell where the electricity is coming from.

The current model for doing this involves tradable certificates, which are supposed to keep track of energy generation and allow for the sale of excess electricity. Brett Larsen of Stanford writes,

“the certificate system has many problems that hinder the growth of clean energy, such as requiring the existence of centralized authorities to track and validate certificates and the sharing of data that many companies and individuals would rather keep private. Furthermore, the certificate system can be expensive to run, inconsistent across countries and subject to double spending.” 

The solution to this problem may be to incorporate blockchain technology to keep track of the trading of renewable energy certificates. This will cut costs, increase transparency, prevent double spending and remove central authorities from the equation.

Dominic Rose

Dominic first entered the crypto space in 2015, and is now looking to make trading a successful career. His current interests involve writing on the subjects of blockchain and artificial intelligence. Outside of crypto, he is a serial entrepreneur.

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