The small Baltic country of Estonia may be blazing a trail for the world to follow in terms of creating a framework for promoting the use of renewable energy.
Already famed for being one of the world’s most extensive blockchain adopters, Wired reports on October 25 2018, that the country is now the host to a company that uses blockchain technology to connect Estonian consumers to renewable energy sources by making energy markets more efficient.
WePower and Estonian Renewable Energy
The company, called WePower uses the Ethereum blockchain to connect bulk buyers of electricity directly with producers using a tokenized setup that links energy consumption and production data to the blockchain.
In only a few months of operation, WePower has successfully recorded over 26,000 hours and 24 terawatt-hours of electricity consumption on the blockchain through a partnership with Elering, which gives it access to data from the smart meters present in every Estonian household, creating 39 billion smart energy tokens in the process.
According to WePower CEO Nick Martyniuk, even though the cost of producing renewable energy has dropped significantly, before WePower introduced its blockchain framework, there was little or no way for smaller companies and households to navigate their way through the energy purchasing system in order to buy renewable energy, in a country where about 72 percent of power generation still comes from burning fossil fuels.
What WePower does to fundamentally alter the status quo is to make energy data available and accessible so that people know exactly what they are buying from where, and are also able to share their smart meter data with service providers.
Speaking about the advantages offered by using blockchain technology, Martyniuk says:
“Blockchain makes it easier for people to trade on the renewable energy trading platform that connects energy buyers directly with energy producers, giving people and companies a possibility to decide what green energy project to buy from, “hour by hour – token by token.”
Possible Scaling Problems
Despite WePower’s initial success, a number of questions still surround the long-term workability of the solution, especially given that it runs on the Ethereum blockchain which makes scaling up a significant challenge. IF the solution were to achieve the desired scale, vast amounts of data would need to flow through the blockchain at high speed, which raises a problem for the Ethereum public network whose transaction speed currently averages at about 15 txn/s.
Apart from the lack of transaction capacity, there is also a question surrounding the Ethereum blockchain’s PoW hashing mechanism, which has a well-documented trail of criticism and condemnation for its perceived wastefulness and high energy consumption. Using an energy-hungry proof-of-work process to help along an environmentally-friendly project would seem to be inherently contradictory.
There is also a question of creating an effective governance framework for the energy industry which in Estonia and elsewhere is heavily regulated by the government. In addition, the notorious inefficiency of blockchains in recording micro-transactions could potentially defeat the purpose of the entire project if it scales as it is completely dependent on large volumes of small data packets coming in to be recorded on the blockchain.
For now, it does seem as if while WePower has found an innovative solution to a key problem, the blockchain infrastructure to scale this solution into a workable reality is still on its way.
Featured image by Kevin Yang