As Eskom struggles with excessive debt, its ability to extend grid-power to rural communities remains limited. However, the country could take advantage of the power utility’s challenge by increasing the use of modern technology to turn sunshine into income for residents and businesses in these rural areas.
The way energy is produced and distributed is changing rapidly as the industry moves away from carbon-based energy production. Technological development in the production of alternative energy has also increased the rate of the emergence of decentralised systems. These systems build on a large number of power producers which generate small quantities of energy. But for a decentralised system to be sustainable, a flexible grid is required to accommodate variable renewable energy sources. A flexible grid also enables operators of the electricity system to balance demand and supply.
A decentralised energy system also requires an exchange mechanism to link buyers and sellers. In South Africa, the state-owned power utility Eskom currently fulfils this role. It effectively acts as a central clearing house. It does this by buying electricity from renewable power producers, adding it to its own generated energy and selling it to consumers.
But there are technologies being developed which could do away with the need for a clearing house like this. One is a distributed ledger technology, of which blockchain is an example. The use of this technology would allow small-scale transactions between buyers and sellers to be captured and recorded. In this way, it could facilitate the development of small-scale electricity trading markets.
Blockchain has been identified as one of the pivotal technologies alongside Artificial Intelligence (AI), the Internet of Things (IoT) and Big Data. Interest in applying the blockchain technology to energy markets is slowly picking up.
In South Africa, 15,6% of the households are not connected to an electricity supply. This is unlikely to change any time soon, because, with centralised power production major investments are needed to extend power lines to remote communities. For these communities, having their own decentralised grid solutions holds tremendous economic potential.
The good news is that South Africa is one of the most suitable places to harness the energy of the sun and convert it to electricity through photovoltaics (PV). The prices of PV panels have reduced significantly and they could be mounted on any shack. Individual storage solutions in contrast are currently unaffordable, but residents could sell excess electricity to those who have no panels of their own. In this way, householders producing electricity by means of PV panels on their roofs can trade their excess electricity and buy electricity when needed.
These trades can be recorded by the blockchain. The exchange mechanism would not be based on South African rand. Instead, the traded electricity units would be converted directly into a blockchain-based crypto-currency. The blockchain currency could then be converted into vouchers to pay for government services or to repay the loans taken to install the PV panels.
Blockchain would replace both the current billing and the trading systems. If householders see the economic benefit and start installing more capacity than needed by the immediate community, aggregators might bundle up the power generation to respond to demand and sell it directly to other consumers, which could even include nearby businesses.
Flexible electricity grid is key
For PV to contribute to grid security, PV plants must be run by operating systems which allow for better interaction with the electricity grid. They must be able to interact with other renewable energy sources and storage systems. Despite considerable progress, these required systems are still under development.
If South Africa positions itself well, it could become a test-bed for these technologies and benefit from investments in research and development by major international corporations which have an interest in driving these trials.
The integration of distributed ledger technologies into energy trading would be a logical next step for South Africa. As early as 2011, the National Energy Regulator of South Africa (Nersa) allowed municipalities to connect small-scale embedded generation of under 100 kW to their networks. Two years later, the updated integrated resource plan (IRP) stressed the need for adaptive energy investments. In particular, rooftop solar PV was identified as an interesting source of energy.
Developing countries have an advantage
The move to a decentralised electricity market with distributed ledger blockchain technology at its core will take much longer in developed countries – possibly as long as 25 years. This is because of their deeply integrated electricity markets and legal systems which cannot be changed easily in order to create the necessary environment. Nevertheless, interest in attractive reward systems for individual producers is also rising in Europe.
On the other hand, developing countries might have an advantage. Countries, including South Africa, which have sections of their populations which are not connected to the electricity grid, could make the transition to decentralised electricity markets much quicker.
This highlights the possibility that distributed ledger technologies might follow the same path as the dramatic growth of mobile phones in Africa. Blockchain would enable ways for alternative energy technologies to leapfrog the expensive centralised grid systems.
But the transition to decentralised electricity production and trading markets will not necessarily be smooth. One of the biggest challenges in getting blockchain applications up and running is trust. In most countries, consumers have already built trust in the centralised institutions. Not so in South Africa where trust in Eskom is declining. Undrer these circumstances, the country could take advantage of the power utility’s challenge by increasing the use of technology in the rural areas and so turning sunshine into income.
This article was first published by The Conversation and is republished here with permission.
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