New York neighbours power up blockchain-based Brooklyn Microgrid

27 Sep 2017

Lawrence Orsini, the founder and CEO of LO3 Energy, on the roof of a row house in New York City that is connected to the Brooklyn Microgrid. Image: LO3 Energy

Neighbours in Brooklyn are buying and selling solar power from each other on a blockchain platform that will keep things going in the event of a disaster. Hubertus Breuer reports.

On sunny days, Martha Cameron’s electric meter runs backwards. There’s a simple reason for that.

On the roof of her brownstone, a row house that was built about 1900 in the idyllic Park Slope neighbourhood in Brooklyn, she has a solar installation. When the sun is shining brightly, she can’t use all the electricity from her 18 photovoltaic (PV) panels, so the excess power is transferred to the power grid.

When Cameron installed her solar system in 2010, she was a pioneer. But she was soon joined by five other buildings with solar systems on her leafy street, which is lined with Norway maples and sycamores.

LO3 Energy and the Brooklyn Microgrid

In April 2016, the first transactions occurred among neighbours who didn’t have their own solar systems and those who produced excess solar electricity. With the help of Brooklyn-based energy start-up LO3 Energy, residents of Park Slope and the adjacent neighbourhoods of Gowanus and Boerum Hill have founded the Brooklyn Microgrid.

This pilot project was possible because it was able to fulfil three criteria. First of all, thanks to LO3 Energy’s TransActive Grid, which is a blockchain platform (a technology that timestamps each transaction as a chain of secure blocks), every energy transaction was documented. Second, thanks to the Siemens Digital Grid Division, microgrid-specific technical solutions were offered. And third, Siemens start-up financier Next47 supported potentially disruptive technologies like this through financing, project expertise and advice.

But the Brooklyn Microgrid aims to do more than merely enabling small-scale trading of environmentally friendly electricity. In view of the devastation caused by Hurricane Sandy in 2012, the project plans to install battery storage units within the grid in order to keep the lights on, at least temporarily, during the next storm-related emergency.

If possible, local electricity demand will eventually be adapted to solar energy generation. For example, electric cars could be recharged when the sun is shining and the battery storage units need no additional boost.

President Street, Brooklyn – site of the world’s first peer-to-peer energy transactions via blockchain. Image: LO3 Energy

President Street, Brooklyn – site of the world’s first peer-to-peer energy transactions via blockchain. Image: LO3 Energy

Blockchain benefits

Self-sufficient microgrids play an important role in environments as different from one another as the Alaskan wilderness and New York City neighbourhoods. In an energy market that is growing through distributed energy systems – whether they are based on wind, sun, water or biomass – such grids are becoming increasingly significant.

LO3 Energy has been benefiting from Siemens’ development of microgrids – such as the one that has been operating in Wildpoldsried, a village in southern Bavaria – since 2014. These microgrids include network control systems, switchgear, innovative battery solutions and smart electric meters.

‘Microgrids play an important role in environments as different from one another as the Alaskan wilderness and NYC neighbourhoods’

Collaboration with Brooklyn Microgrid is bringing benefits to the Siemens Energy Management Division because the TransActive Grid platform is based on a decentralised, web-based bookkeeping system that uses cryptographic technology to save data in a way that is inexpensive and forgery-proof. For example, it can ensure that users receive original replacement parts, because it can seamlessly retrace a part’s journey back to its origins with the help of an RFID chip and blockchain – one of many potentially interesting applications for Siemens.

Such peer-to-peer business deals – conducted directly from computer to computer – are very cost-efficient and have great potential. The total value of the assets now being administered via blockchain all over the world is $1.6bn and, according to cryptocurrency platform CoinMarketCap, these assets grew by an impressive 1,600pc between 2013 and 2016. Seamus Cushley, a blockchain expert at PwC in Belfast, said that $1.4bn was invested in blockchain-related start-ups in the first nine months of 2016 alone.

Preparing for the next hurricane

These developments have brought a new dimension to energy trading. Households can now trade very small amounts of green electricity without any intermediaries. Prices can be determined by automatic auctions oriented toward the top price per kilowatt hour that an energy consumer is willing to pay.

However, with regard to the Brooklyn Microgrid, the electricity generated by local solar installations is not the only energy being used by its participants. The energy flowing from the sockets of the microgrid households that don’t have their own solar installations is still primarily electricity from the nearest conventional power plant. What they pay for instead are ‘environmental attributes’ from their neighbours’ PV panels, similar to a credit for green energy from renewable sources. Now, they can buy from the actual energy suppliers themselves.

‘A microgrid is a nucleus that sets the stage for an energy future consisting of networks of energy cells. Blockchain supports this process’

Installation of a TAG element in a prosumer household. Image: LO3 Energy

Installation of a TAG element in a prosumer household. Image: LO3 Energy

This method is by no means new. Consumers who purchase renewably generated electricity from utilities are helping to finance power generated from wind, solar, water or biomass that may have been fed into the grid at a very distant location. In Brooklyn, consumers’ electricity payments are now benefiting their neighbours rather than anonymous operators of wind turbines in distant states, for example.

However, money is not the main consideration for most project participants. “The neighbourhood wants to be prepared for the next hurricane, deal responsibly with the environment and strengthen its sense of solidarity,” said Scott Kessler, the director of business development at LO3 Energy.

If it wants to help make this vision a reality, the Brooklyn Microgrid can’t remain limited to just a handful of participants. Its goal is to have 1,000 participants – including brownstones, apartment houses, schools, a gas station, a fire station and factory buildings – by 2018. It also plans to install battery storage units and even more extensive PV systems.

All of this will be supported by the Siemens Digital Grid Division’s Microgrid Management System, which will make it possible to establish a self-sufficient power supply for the microgrid in the event of a city-wide blackout.

A network of energy cells

In order to be successful, blockchain platforms and microgrids require a regulatory framework. In New York State, such a framework is provided by the Reforming the Energy Vision (REV) strategy.

The platform’s objectives are to minimise the vulnerability of the power supply system that became visible during Hurricane Sandy, to use more sources of renewable energy and to reduce costs. The Brooklyn Microgrid is a good test case for these objectives.

“A microgrid is a nucleus that sets the stage for an energy future consisting of networks of energy cells,” said Stefan Jessenberger from Siemens’ Energy Management Division. “Blockchain also supports this process, because it makes it much easier to conduct energy trading within cells.”

Siemens Digital Grid, Next47 and LO3 Energy all believe in the potential of blockchain-based microgrids because this technology can be used wherever there are decentralised energy sources. “Our experiences with the Brooklyn Microgrid will certainly flow into future projects,” said Kessler.

Meanwhile, Martha Cameron is already very proud of what has been achieved. “We are electricity suppliers,” she said.

By Hubertus Breuer

Hubertus Breuer is a science writer who has appeared in several major German newspapers and magazines.

A version of this article originally appeared in Pictures of the Future from Siemens