Digital currency for green energy can boost the renewable economy
A disruptive novel technology based on Bitcoin promises to increase profits and reduce costs for stakeholders in the smart grid via the trade of renewable energy.
Complex multi-agent systems known as smart grids represent a novel paradigm for electricity networks of the future. To meet environmental targets, our dependence on fossil and nuclear fuels must be offset by increased reliance on renewable energies. The integration of small-scale renewable resources into domestic households enables consumers to become producers of green energy. These households (`prosumers’) can collectively reduce their carbon footprint and dependence on fossil-fueled power plants by trading locally produced renewable energy. Incentivizing the trade of green energy is a necessary step towards the decarbonization of the power sector.
To comply with environmental targets, many energy retailers now implement feed-in tariffs to motivate prosumers to inject their own produced energy into the grid. With the growing decentralization of renewable energy production, however, these tariffs should be carefully revised to ensure a profitable and balanced grid. On the one hand, insufficient incentives to prosumers will cause slower adoption of renewable technologies. On the other, large potential economic gain from renewables could trigger overproduction of green energy, thereby causing a higher load on the power line and the waste of renewable energy and its related subsidies.
A relatively new take on incentive mechanisms for energy trade is the idea of using energy as currency. A number of energy-related currencies have been proposed for the reduction of CO2 emissions, such as Ergo and CarbonCoin, as well as for the in-feed of renewable energy, most notably DeKo and SolarCoin. While these proposals address environmental issues, they overlook the economic implications to stakeholders in the low-voltage grid, namely prosumers, consumers and energy retailers.
Focusing on these economic aspects, we have developed a trading platform called NRGcoin, a Bitcoin-inspired decentralized digital currency for renewable energy.
The innovative aspect of our incentive mechanism is that prosumers are able to automatically generate their own NRGcoins by injecting green energy into the grid. Similar to Bitcoin, our digital currency has no central issuer. It is instead governed by a cryptographic peer-to-peer decentralized protocol running on each smart meter. For every 1kWh of injected energy, the prosumer earns 1 NRGcoin with which she can purchase energy at any time in the future, regardless of the cost of energy at the time. Prosumers can also sell their coins on Forex-like markets to consumers who can in turn use the currency to pay their energy consumption to the retailer. The monetary value of the currency is determined by free market forces, following the principle of supply and demand.
Our approach incentivizes consumers to use the cheap renewable energy when it is available and rewards prosumers for injecting energy when it is needed, thereby reducing the requirement to fire up emergency coal or gas peak-power generators, which are costly and polluting.
Given the trend of rising energy costs, NRGcoin allows you to save money by buying coins at present price and spending them on energy in the future, when it is more expensive. On a global level, NRGcoin allows anyone to invest in the energy sector by purchasing the currency and thereby increasing its value on the market. In the long run, industries can even offer discounts for green products and services purchased with NRGcoin, boosting the renewable energy economy.
Using real data in the Repast Simphony simulator, we compared our concept to state-of-the-art mechanisms. We determined that our approach provides sufficient economic benefits while motivating the consumption of renewable energy. Our other findings suggest that energy markets that provide flexibility in bidding and price negotiation can maximize the amount of green energy being traded.
We then deployed our concept in a model replica of a typical Belgian neighbourhood, featuring mini solar panels and Raspberry Pi-based smart meters. This interactive demonstration won the best demo award at the International Conference on Autonomous Agents and Multiagent Systems in Istanbul in May 2015. Our project was also featured in a popular science article in Intel’s iQ Magazine.
Incentive mechanisms for local energy trade are a vital stimulus in the race to meet our environmental targets. We believe that digital currencies for energy are a promising newcomer in the smart-grid scene and may prove to be an important ingredient in the design of future-compatible incentive mechanisms. Nevertheless, a shift towards renewable resources alone is not enough to completely offset our emissions, as we must also reduce our overall demand for energy. In essence, raising awareness about the way in which people interact with energy and renewables is a critical issue and represents the inspiration for our current and future work.
This project has received funding from the European Union’s Seventh Framework Programme for research, technological development and demonstration under grant agreement 324321, project SCANERGY.
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