Energy Transition

How Blockchain Is Enabling The Energy Transition

Srcful's Founders

Srcful, which bills itself as the first blockchain powered Virtual Power Plant, plans to use digital ledger technology and the Internet of Things to aggregate renewable  energy generated by consumers to help balance power company grids.

The Swedish startup, which is currently testing its technology with a power company, offers a way for individuals to earn tokens which they can sell on the open market, trade against other crypto assets, or hold as an investment, by connecting their home solar panels or  batteries to a Srcful energy gateway that is compatible with major inverter brands. The connection to the blockchain localizes the energy source and provides it with a digital identity to enable tracking of who contributes what.

To prevent spikes or dips and keep the grid balanced consumers will be asked to charge or discharge their batteries. Solar panels consumers can help balance the grid by shutting off their panels. By aggregating various solar panel and battery systems, Srcful intends to enable micro-producers to participate in restricted ecosystems that require sellers to power grids to have at least one megawatt of controllable power.

“We’re innovating to accelerate the transition to renewable energy,” says Johan Leitet, one of Srcful’s five founders (pictured here) .“We believe blockchain and distributed energy resources can help create a more efficient and sustainable model for energy production and consumption.”

It’s just one example of how blockchain can enable the creation of decentralized, efficient and secure systems for managing energy production, distribution and consumption, according to an April 10 report by the World Economic Forum’s Crypto Sustainability Coalition.

Through smart contracts, blockchain can, for example  facilitate peer-to-peer trading of energy, making it easier for individuals and businesses to generate and sell renewable energy to their neighbors and reduce reliance on centralized energy providers. (Srcful plans to offer this service  at a later date). Blockchain can also support the integration of emerging technologies, such as electric vehicles and smart batteries for energy storage, providing more flexible and resilient energy systems.

Other ways the report says blockchain can help the energy transition include:

  • Supply chain transparency: By enabling the transparent tracking of products and materials in supply chains, blockchain can help reduce the environmental damage caused by illegal or unsustainable practices, such as deforestation, overfishing or hazardous waste disposal.
  • Waste management: Blockchain can help track and manage waste streams, making it easier to monitor recycling, disposal and recovery efforts.
  • Conservation: Blockchain can facilitate the creation of decentralized, community-based conservation initiatives, allowing stakeholders to pool resources and coordinate conservation efforts.
  • More efficient use of local energy and resources:. Decentralization can enable stronger local economies that have less environmental impact, while ensuring they don’t miss out on the benefits of globalization.
  • Tracking the use of renewables: Blockchain-based systems can enable corporates to efficiently manage their ESG metrics, enable smart buildings and renewable energy systems and optimize clean energy consumption, attracting green investments.
  • Carbon offsetting: Blockchain can facilitate the creation, trading and tracking of carbon credits, which can help offset carbon emissions and encourage investment in renewable energy.

In order to deliver on these possibilities, however, the energy impact of blockchain itself must be correctly accounted for, ensuring that more environmental harm is not caused by the creation of solutions than is saved by them, says Evin Cheikosman a co-author of the report and one of the lead authors of  recommendations released this week for digital voluntary and regulated carbon markets by the Forum’s Crypto Sustainability Coalition.

The coalition is investigating how Web3, which includes technologies like blockchains, cryptocurrencies, and NFTs , can be leveraged to reach climate objectives and for climate accounting. The premise is that the core tenets of Web3 — transparency, coordination, trust, decentralization, inclusion and scalability — all have significant potential to combat the climate crisis and drive efficient and effective climate action at scale.

Helping Power Companies Balance The Grid 

Case studies outlined in the report show how blockchain systems can help balance the grid.

Up until now it has not been practical or cost effective for power companies to tap into energy produced by consumers. Existing suppliers typically purchase expensive proprietary equipment. They pay people to install and maintain the equipment and a massive back-end infrastructure for customer support, agreements and billing. All of these costs are passed on to the end-user, making it difficult for small-scale distributed energy resources to compete, saysLeitet. By utilizing blockchain technology, Srcful says it will be able to bypass many of these costs and create a more efficient and cost-effective system.

Today power companies can see how much renewable energy is being bought or sold at any given time, but it is impossible to know how much renewable energy is being produced. Thanks to information stored on the blockchain, Srcful says it will be able to tell providers that, for example, in this section of Paris, this much solar energy is being produced right now.

The Austrian Power Grid and Energy Web Foundation have separately tested a decentralized platform that could also enable customers to use their battery storage systems to help balance the grid and be compensated for their contribution, according to the report.

Aiding Corporates With ESG Requirements

Blockchain can also aid corporates fulfill their environmental, social and governance (ESG) requirements, says the report. That’s important because governments and regulators globally are actively considering or preparing new requirements for ESG disclosures. While many nations have for years required some level of ESG reporting, a relatively new feature of most of the future mandatory disclosures is that they must be provided within the context of regulated reporting such as  annual reports[1].

Blockchain could help corporates meet the more stringent requirements by expanding their access to decentralized energy, more reliably tracking their use of renewable energy and by bringing much needed transparency to the carbon credit market, says the Forum report.

For example, Mercados Eléctricos is cooperating with  Energy Web to build a pilot digital marketplace for renewable energy certificates (RECs) in El Salvador to assess a business case for and technical feasibility of a blockchain-based regional I-REC marketplace. Since El Salvador did not have an I-REC market at the beginning of the pilot (2019), Mercados Eléctricos also took the lead in establishing the I-REC standard in the country. There are plans to add up to 200 devices in El Salvador to this pilot platform in the near future.

The hope is that blockchain-based carbon credits could also address current flaws in global carbon markets, including the lack of transparency around carbon offsets for either providers or buyers; the failure of markets to remove carbon emissions at the scale and pace required; and the inability of millions of the world’s smallholder farmers, forest stewards and Indigenous communities to participate in or benefit from carbon credit markets.

Blockchain could help the carbon market adopt a common baseline taxonomy   and enable the creation of beyond-carbon tradable assets that include factors such as biodiversity, social value, and indigenous rights, says the report.

Emerging technologies are allowing for a tremendous shift from the legacy carbon market to one that is more transparent, equitable and can harness the important ecosystem services work of billions of people who previously were excluded from participation,” says Josh Knauer, one of the lead authors of the report and co-founder of ReSeed. Farm, a U.S. startup that is using Web3 technologies to help farmers quantity, verify and transform previously ignored carbon stocks into financial assets that can help provide extra income, improving the lives of farmers and their communities.

Digitalizing carbon credits and putting them on the blockchain can also potentially expand the market by enabling trading on open and accessible exchanges that highlight the auditable data-backed differences among the credits. “This promises to remove the considerable friction that currently exists to buying and selling credits, to increase visibility for price discovery and make it easier to fund the market’s expansion,” says the report.

Reducing Blockchain’s Carbon Footprint

But blockchain’s potential can only be fully realized if the technology is able to both accurately measure and reduce its carbon footprint, says Forum Fellow Cathy Mulligan, a digital sustainability researcher and a co-author of the report. What’s more, “in order to help blockchain solutions be truly sustainable, we need to think about social impact as well as environmental impact and create methodologies to measure those things and compare apples with apples,” she says. “We need to find ways for the industry to get together.”

Comparable measure of claims will help the industry meet the demands for ESG reporting for their own companies. It will also help corporates with their reporting as blockchain technologies are integrated into enterprise systems, says the report.

More work needs to be done in reducing the climate impact of several blockchain technologies, particularly Bitcoin, says the report. Some blockchains are significantly more energy-efficient than others, but because of the variability in methodologies, it is difficult to paint a single picture of carbon footprints across blockchains.

Efforts are already under way to try and overcome some of the challenges. For example, Seattle-based startup Carbonara, a carbon data management platform, aims to provide transparency for all blockchain technology by making granular emissions data accessible.  The project has three main objectives: to generate knowledge about blockchain energy usage, to encourage the blockchain industry to be more energy-conscious and sustainable, and to motivate individuals to contribute to CO2 compensation initiatives, says the report.

“There is long- term thinking and real stewardship in the blockchain community to reduce emissions,” says Hayagriv Sridharan, cofounder and CEO of Carbonara. But the sector needs data to make changes, he says. Carbonara can help blockchain providers calculate carbon emissions per transaction, compliant with all global standards such as the Greenhouse Gas Foundation Protocol, which measures the carbon footprint of a network based on the electricity it uses as well as the carbon that goes into the building of the hardware. “The only way to take actionable steps is through usage-based carbon emissions and that is what we are doing,”  says Sridharan.

Another project, Green Proofs for Bitcoin led by Energy Web, a not-for-profit founded in 2017, enables miners to apply for and share sustainable mining certifications. Miners can then selectively disclose their certifications and/or underlying sustainability data with crypto market participants and business counterparties.

“Bitcoin mining is an energy-intensive industry, and its climate impact has been widely discussed,” said Amy Westervelt, Senior delivery lead and head of the Green Proofs for Bitcoin initiative at Energy Web. “Yet, as large consumers of electricity Bitcoin miners are uniquely positioned to support energy transition. By recognizing miners who use clean energy and help balance the grid as demand-side resources we aim to inspire further leadership in this area.”

There is also a growing interest in using heat, produced as a by-product of blockchain mining through computational efforts, as sustainable energy for other purposes, says the report. Because Bitcoin miners operate at maximum capacity every day of the year, they can offer district energy systems a dependable and eco-friendly heat baseload.

Many mining companies are now investigating various methods of recovering and repurposing waste heat. For example, in 2021, North Vancouver[2] became the first city in the world to use Bitcoin mining for district-specific utility heating through using waste heat recovery to power local buildings. Lonsdale Energy Corporation collaborated with Canadian cleantech company MintGreen and converted heat electricity from Bitcoin mining to help heat residential and commercial buildings. The goal is to support the city’s ambitious greenhouse gas reduction targets.

Demonstrating Blockchain’s Social Impact

To fully leverage blockchain’s ability to enable more flexible and resilient energy systems and prepare for new ESG regulations, the blockchain sector will also have to demonstrate real-life evidence of sustainable social impact at scale, says Cheikosman.

“We are at an exciting time when blockchain and Web3 innovation is reimagining traditional economic, environmental, cultural and social systems,” she says. “As the boundaries between on-chain and off-chain solutions intertwine the blockchain industry will have to consider the real risks and opportunities from the impact their solutions actually have.”

The message of the reports is that it is not enough for blockchain providers to assert they are having a positive impact on climate change or on a community, says Cheikosman. Going forward they will have to prove exactly how they will propel a future that is responsible, inclusive, and socially equitable, she says.

This article is content that would normally only be available to subscribers. Sign up for a four-week free trial to see what you have been missing.

To access more of The Innovator’s Energy Transition articles click here.


About the author

Jennifer L. Schenker

Jennifer L. Schenker, an award-winning journalist, has been covering the global tech industry from Europe since 1985, working full-time, at various points in her career for the Wall Street Journal Europe, Time Magazine, International Herald Tribune, Red Herring and BusinessWeek. She is currently the editor-in-chief of The Innovator, an English-language global publication about the digital transformation of business. Jennifer was voted one of the 50 most inspiring women in technology in Europe in 2015 and 2016 and was named by Forbes Magazine in 2018 as one of the 30 women leaders disrupting tech in France. She has been a World Economic Forum Tech Pioneers judge for 20 years. She lives in Paris and has dual U.S. and French citizenship.