Our energy model is hopelessly outdated: it lives off fossil fuels and is inefficient. But it’s not too late, things can be done differently and better. Why not, for instance, generate energy yourself and sell it to your neighbor whenever he needs it? New technologies will give you a helping hand.
The centralized market in fossil fuels
Ever since the Industrial Revolution, our energy model has revolved around the burning of fossil fuels. We use pit coal, oil and gas to power our machines and to heat our homes. And we continue to do so: in 2014 oil and gas accounted for over half of European energy consumption (56 %), while renewable energy has not yet surpassed 16 %.
Furthermore, our energy market is inefficient. Energy production largely depends on a limited number of players and the distribution is highly centralized. The transactions between producers and consumers are always effected via a distribution system operator (DSO). In concrete terms, this means that you have to pass the meter readings on to the DSO so that the energy producer or -provider can bill you correctly.
The old energy model is under pressure
That energy model is increasingly being questioned. Fossil fuels are finite. So, in time, our energy supply will be threatened. Apart from that, it is beyond scientific doubt that by burning raw materials we are heating up the Earth’s climate. Not to mention other harmful environmental effects…
At the same time, we are failing to match our energy production to our rate of consumption. Consequently, Government feels compelled to elaborate extensive system shutdown plans. Last but not least, both local producers and consumers will continue to depend on the DSO for the detailed billing of their energy consumption.
Move to a peer-to-peer energy market
But there is another way... Everyone can, in their own way, become an energy provider themselves. You install, for example, solar panels on your roof while a farmer, for his part, builds a biomass plant next to his stables. If you, for a short while, produce too much solar energy, you could, for instance, sell it to your neighbors, and vice-versa. That’s what we call a peer-to-peer energy market.
Such a decentralized market would give a big fillip to renewable energy. It can be used on both a large and small scale and has a relatively small impact on the environment. People would also invest quicker in local projects in renewables if they could see a payback. This in contrast to the present policy that imposes standards from above.
New technologies as a catalyst
And now imagine that those transactions, between you and your neighbors, could also be affected automatically and efficiently. New technologies are making this possible. By installing smart meters, you – as a local community – collect, firstly, a whole lot of useful data about your energy consumption. That data, among other things, makes it possible to purchase energy more cheaply and to cushion peaks in that consumption. How? Well, based on your consumption patterns, an algorithm is able to efficiently distribute the generated energy over the network in your area. Does the company, just around the corner from you, need more energy at certain times during the day? Well, then it buys some solar energy off you. You, for your part, can purchase some energy off others, in the evening, to do your household chores.
So what about the reciprocal billing and payments? Well, they are effected automatically via blockchain. In that technology, users are connected to a network of secure databases or ‘blocks’. Each block contains separately the ‘truth’ and checks whether the transaction tallies with that ‘truth’. If no problem arises, the entire system will automatically validate the transaction. As a result, a third party, e.g. a DSO, is then redundant. We’re going back, in fact, to the system of direct bartering, but in a digital environment. This technology is, by the way, no utopia. Bitcoin and several financial institutions are already using it.
Technology democratizes the energy market
Although the days of the old energy model are numbered, an innovative vision of the future is still lacking. We are, however, in urgent need of a better, more efficient and future-proofed energy market. Nascent technologies, such as smart meters and blockchain, are, in that regard, serving as a catalyst. At long last, they are providing consumers and local energy producers with powerful tools in order to democratize the energy market, from the bottom up.
A democratic energy market… that is a diverse energy landscape in which, one minute, you’re a producer and then, the next, a consumer. In that landscape you’ll find solar panels, windmills, biomass plants…, as everyone is taking their opportunities to generate sustainable energy. And that landscape will become increasingly advanced and hi-tech, because we all want to move forward and make better choices.