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Blockchain Is Not Invincible

Adaptations in Blockchain technologies can help change our energy infrastructure

News provided by Eloncity
August 13, 2018 13:45 KST

SINGAPORE--(Business Wire / Korea Newswire) August 13, 2018 -- No one has ever said that changing the world is a simple matter, and no one should ever think this way. If one thinks that changing the world is so simple, then he does not know the complexity of the problem at all.

Over the past few decades, more than one trillion U.S. dollars has been spent trying to shift the world‘s energy structure towards using more renewable energy. But when we look at where we are in term of the adaptation of the renewable energy, we shockingly realize that renewable energy represents only 1% of the primary energy that we consume today. Why is there so little renewable energy in our daily lives? Are we short of renewable energy generators like wind turbines or PV panels? The answer is a very obvious no. Why can’t we utilize more renewable energy after spending so much money? What can we change so that we can make significant progress in making renewables our primary sources of energy?

If we examine the wholesale electricity market in United States, the wholesale price for each megawatt-hour electricity is roughly $21~$23, but the production cost of gas peaking power plants that deal with peak electricity consumption are as high as $165 ~ $212 per megawatt hour. The peak electricity consumption period is from 4:30 in the afternoon to 8:30 in the evening - an interval of 4 hours. There are altogether six four-hour intervals, or blocks, in each day. If we spread the cost of peak hour electricity production cost to all six blocks, the unit price will have exceeded $27.5 per megawatt hour. Why then the wholesale price is only $21-23 dollars? The reason is simple: government subsidies, tax refunds, and carbon taxes all help reduce prices during the non-peak hour blocks. If these subsidies are eliminated or reduced significantly, almost all wind farms and solar power plants will lose money. In other words, without government subsidies, it is unlikely that anyone will invest in these large-scale renewable energy power plants that lose money, regardless whether they support renewable energy or not.

So, what is going on in the market for so many energy blockchain projects? Can BlockChain alone make renewable energy profitable? Would using BlockChain for financing solve the mismatched supply and demand issues that prevent renewable energy from becoming our primary source of energy? Or, are these energy blockchain projects just trying to solve some minor problems in the energy industry so there is no more comprehensive consideration of their architecture? Whatever they have in mind, they should never forget what they set out to achieve, even when they run into issues they cannot resolve because of the poor architecture.

At ELONCITY, we firmly believe that most people support renewable energy. This support is however very much conditional. If cleaner energy is more affordable than ordinary energy, people will certainly use more renewable energy and make our sky blue. However, since the financial crisis has significantly reduced people’s disposable income, expecting them to spend more money to support the development of renewable energy is very unrealistic. The Foundation strongly believes that the only way to get renewable energy massively adopted is to make it affordable, if not free. We therefore believe that simply using BlockChain to crowdfund photovoltaic or wind power plants is absolutely wrong. This is not a decentralization at all, nor does it address the basic contradiction of renewable energy.

While blockchain technology can effectively change our electricity infrastructure, especially replacing existing electricity infrastructure with millions of self-sufficient microgrids, transparent transactions are however only a portion of the solution. We must carefully consider how energy flows and where the exchange can take place. We also have to find ways to encourage residents to actively participate in energy trade, and how to increase the advantages of decentralized power infrastructure, whether it is to reduce the cost of locally produced renewable energy or to modify electricity applications so that they can work better with locally produced renewable energy. The decentralized power infrastructure needs the support of the people and communities. It needs to solve the regulatory barriers (especially the franchise law) and obtain low-interest loans from the financial industry to accelerate the return on investment of distributed energy resources. Otherwise, the locally produced renewable energy cannot be used very effectively.

We believe that if we can narrow the gap among community support, financial solutions, technology and local government support, we will be able to change our existing power facilities and make renewable energy our primary source of energy.

View source version on businesswire.com: https://www.businesswire.com/news/home/20180812005032/en/

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