Implications of a machine economy

The importance of free value transactions for renewable energy grids

The energy grid is experiencing problems in dealing with the increase in production of renewable energy. There’s a common argument against solar panels and wind turbines. They produce energy when the sun shines or the wind blows, but not necessarily when we want to use it. Luckily the ever-increasing fleet of electrical cars – including hybrids – can help solve that problem, now and in the future. And it will not cost money, but actually make money.

Summary

The grid suffers from volatility problems, because more and more renewable energy is available. Electric cars can balance the energy grid. In a smart energy system with price variations reflecting current status of supply and demand, a car can earn money by buying and selling electricity as part of a smartgrid. Transaction fees could however discourage this behaviour. Not just the car owner, but the energy system as a whole loses out on a great opportunity. If the charging station would use IOTA the transaction fee can be zero. We all benefit financially through lower network costs and perhaps better use of our car battery.

Electric cars balancing the grid

We use our cars only for a short while each day. The rest of the time the car battery is sitting idle. Instead it could also help balance the electricity net, and make some money while doing that. How? By charging and discharging its battery according to network needs. Right now countries all over the world are investing huge sums of money to help balance networks1. Imagine spending this money on better utilizing the batteries currently available, in electric and hybrid cars. Right now electric car battery capacity is underutilized.

In the near future I expect technology will solve this problem. The driver sets what time he wants the car charged and the minimum charge needed. For example: “I need to be able to drive 30 km around 17:30 (when I drive home from work.)” The rest of the day the car could support the smartgrid. Charge when the price is low (because supply is high) and discharge when the price is high. Depending on your battery capacity and use pattern, your big(-ger) battery could pay for itself.

How about fees?

Every charging station in the Netherlands currently charges a transaction fee (sometimes expressed as a “start rate”). If electrical cars are used to balance the grid several smaller transactions throughout the day are probably needed. What if the transaction fees of buying and selling energy are too high?

The difference between charge and discharge price can some days be very low. If the fee for the transaction is higher than the price difference it will not be rewarding to participate. If it’s not rewarding the car owner will not bother to do it. The energy system and all participants as a whole lose out. This is where IOTA comes in: a protocol with no transaction fees. A charging station for electrical cars where payments are done with IOTA already exists2 (but is not yet live at the time of writing). ELaadNL showcased it at the 1st IOTA Meetup in Amsterdam on Oct 25 2017.

Determining prices

The next question is: “How will the price be determined?”
The usual answer is: “By the market.”

In reality most (western European) energy markets are not ready for this paradigm shift. Or maybe it’s the companies that are not ready. The big old energy giants are still predominant in the market and change tends to be slow for them.

My city has charging stations for electrical vehicles from a range of different companies. Each company is free to set their own price. Right now the price does not change over a longer period of time. Instead it differs per company and charging speed. When smart grids and smart pricing for electricity becomes more advanced, this will change. The price will vary depending on the time of day, but also on the portfolio of each supplier. But for this to become reality low transaction cost is crucial, otherwise there’s no financial incentive.

As I explained in my previous post there is a risk the lower transaction cost would be eaten up by exchange rate risk premiums. Charging would thus still have a transaction cost. With this we would lose out on a good opportunity to create more balance.

Edit:

Energy transactions in a self-sustained crypto-eco-system might be closer than I thought. Enerchain is an initiative to trade energy on the blockchain with over 30 participants. Hopefully it won’t take them long to realise the feeless advantage of the Tangle, and the energy waste disadvantage of blockchain.

About the author

Hanna van Sambeek

Economist with a passion for renewable energy, looking for the next challenge. My goal in life is to leave the world behind a lot cleaner, healthier and fairer than I found it.

Add comment

This site uses Akismet to reduce spam. Learn how your comment data is processed.

Implications of a machine economy