There is no doubt that Blockchain has huge potential across the energy industry value chain. Scientists at Norvergence LLC have observed that blockchain use cases are growing—and pilot projects are proving successful. Let’s dig deeper to know more about blockchain and green energy financing.
Green energy financing is reaching new highs after the Paris climate agreement that sets out to limit global temperature rise to 1.5 degrees centigrade over pre-industrial levels. Green energy financing is crucial to achieving decarbonization of energy and electricity supply chains and it can thus protect humanity forever from the ill effects of climate change and global warming.
Rising adoption of Electric Vehicles, Decentralized power generation, large solar, wind power, biomass energy, small hydro, energy efficiency schemes, etc. are proving to have a cooling effect on the planet. These industries and their adoption depend on subsidy based market entry to compete with fossil fuels and innovative, efficient and scalable financing solutions. Rising awareness related to climate change, more emphasis by companies on climate change and sustainability are driving this change in financing from fossil fuels to green energy.
Blockchain technology-based financing platforms can be very useful in such transition in developing countries. Our current traditional financing arrangement only includes large investors, banks and governments, etc. while many aware citizens are actively taking part in this transition through demonstrations and strikes to demand more financing for clean energy projects. Blockchain-based asset ownership models can be a path breaker in this area.
Investors from any part of the world can own any amount of asset generation capacity for a clean energy project through solar coins/green energy coins (solar coins are similar to Bitcoins tracked in real-time as per the project performance). Such an arrangement provides stable returns to small investors, brings in a large pool of investors to table and also solves financing challenges in developing countries. German solar inverter maker SMA Solar Technology is pioneering this idea and incentivizing solar producers using Solarcoins. Many other companies in developing countries are also using this idea to enable better financing and rewards.
As of January of 2017, more than 34 million SolarCoins have been put into circulation, with that figure growing by about 5,000 per week, and some 240,000 SolarCoins have gone to solar producers in 23 countries. Besides, two solar-focused crowdfunding platforms, Lumo and TheSunExchange, are now incorporating SolarCoin, the Belgian energy monitor company Smappee includes SolarCoin in its features, and in March 2017, the French collaborative energy supplier ekWateur became the first energy company to accept SolarCoin as a means of payment.
Renewable energy projects in developing countries face numerous challenges ranging from the institutional, policy and regulatory levels to the market and project level which can impede the growth of the green energy sector. India has pledged to achieve 175 GW of renewable energy by 2022 under the Paris climate agreement and has been focusing on the financing side of this transition more. To go beyond 175 GW and achieve higher targets of 450 GW as announced by Prime Minister Narendra Modi, India will need innovative, efficient and scalable financing platforms and solutions.
The government of India has in June’19 removed the priority sector lending limit for the green energy sector, thereby ensuring smooth flow old capital to the green energy sector and reduced cost of capital. As per various reports, Distribution companies from India in states like Andhra Pradesh, Telangana and Karnataka owe country’s state-owned power generator NTPC $262.6 Million in dues for solar power supplied by projects under the National Solar mission.
Check out this post to see effects of climate change on pacific islands
Blockchain technology also has numerous other applications when it comes to green energy. It can and should be widely adopted by regulators, government and industry stakeholders in the following
- Monitoring of RE assets in real-time
- Management of RE certificates
- Management of green energy exchanges
- Monitoring and compliance for green energy schemes, mandates, regulations, etc.
- Utility bill payments using crypto coins to provide choice to consumers for incentivizing green energy procurement by distribution companies
- Blockchain-based forecasting and scheduling of RE generation by NLDCs, SLDCs, and other load centers
- Blockchain-based open access provision to remove industry bias and non-competition
Digital ledger-based applications for energy consumers to enable efficiency, adoption of green energy and self-production/trading of renewable energy
Green energy financing, while largely being driven by traditional fossil fuel companies who are rapidly divesting from fossil fuel assets, it can also be driven by citizens and small prosumers who can anonymously and efficiently participate in this transition. The sooner we move away from fossil fuel investments, subsidies, etc. The sooner we will be able to limit the global anthropogenic temperature rise below 1.5 degrees centigrade.