ELONCITY’s goal is not to replace centralized power generation. Instead, it hopes to reduce residents’ dependence on a centralized power supply system and improve overall resource utilization
Under the supervision of the state, China’s electricity market has achieved “village to village communication.” While this may not be the most efficient method, it does allow more and more people to enjoy the comforts and convenience of electricity.
In the United States, the marketization has brought with it issues of fairness. But at the same time, it has also given families and institutions the possibility of self-sufficiency or even distributed power generation. Odaily recently contacted blockchain microgrid program, ELONCITY, and they shared similar stories with us. Founder Andy Li believes that blockchain can transform distributed renewable energy supplies into a real possibility.
Some states in the United States are undergoing a debate between distributed power generation and centralized power generation.
According to public reports, California approved a law this past January to maintain “net electricity metering” (Net Metering 2.0), which requires electric utility to continue to purchase excess electricity from homes with solar power installations. However, Arizona, California’s neighboring state, abandoned the policy.
In recent years, reports have shown that an increasing number of American households are now installing solar panels. Improvements in energy efficiency and an optimization of the capacity of China’s battery plates has lead to the sharp decrease in solar energy costs. In states with plenty of sunshine, such as California and Nevada, solar power generation enjoys certain advantages. But Andy Li believes that assembly costs of the photovoltaic industry in the United States is far higher than in China, making the cost of rooftop power generation higher than the cost of centralized power generation. However, because solar power is a renewable energy, power generation has been subsidized by both federal and local governments.
For example, with the net metering policy, users can use electricity for free and can also sell excess electricity to the grid: for every kilowatt-hour (kWh) of solar electricity you feed into the grid, you get a bill credit for one kWh of utility-generated electricity. Andy Li told Odaily that, taking into consideration the electricity lost in the transmission process, one kWh of electricity send out from the user side will eventually become least then one kWh after pass through the power grid. Additionally, most of the power stations in the United States generate electricity and then immediately transfer it to users, so the electricity cannot be stored. In societies with undeveloped manufacturing and heavy industries like the United States, peak electricity consumption occurs at night, whereas solar energy is generated during the day.
This situation leads to three possible situations:
Firstly, the centralized power generation market is largely inefficient, and energy isn’t fully utilized due to an imbalance in supply and demand. The power market is divided into three parts: power generation, transmission, and distribution/retail. Since electricity distribution companies are required to purchase electricity from residents, only a small amount of electricity can be bought from IPP (independent power producers). Then, those power stations that are not able to make ends meet choose to shut down. Traditional power stations in the United States transmit electricity with a constant power output, which leads to an excess electricity supply during the day and an insufficient electricity supply at night. Because of this phenomenon, IPP has started investing in natural gas regulating power stations within the past decade.
Secondly, the electricity rate of charge is unfair for whom have no bargaining power on centralized power supplies. As mentioned above, users who install solar panels will be able to enjoy various subsidies, and more and more people will opt to install solar panels. Since electricity bills, in reality, include infrastructure and municipal costs, as a result, users with a centralized power supply will incur higher fees. This means that the solar power subsidies are actually beared by centralized power users. “When the number of paying customers goes down, power transmission and distribution costs as well as infrastructure costs then become higher than the cost of energy itself as is the case in Texas and California.” Andy Li thinks this is extremely unfair for central power grid users. They have no option other than to use the centralized power supply due to their own economic situation or location, and are forced to pay increasingly expensive electricity bills.
Thirdly, unreasonable electricity pricing lead to the unmoderated use of electricity, aggravating the issue of blackouts. As Andy Li said, new energy sources such as Solarcity are priced based on their historical electricity records, which are to be paid off in 20 years. This kind of monthly electricity consumption package makes users consume more power at peak hours during the night.
In order to solve these problems, ELONCITY has tried to build a community micro grid to reduce residents’ dependence on centralized power generation. The overall idea is to promote photovoltaic power generation and energy storage systems in places like California, and to develop community microgrid systems and dynamic pricing agreements. With this, users could freely set prices and sell and purchase excess electricity.
First of all, energy storage systems can store electricity generated during the daytime, and then users can use or sell it at night to avoid energy waste. Secondly, ELONCITY wants to build a community DC microgrid using blockchain, with a community radius of about 1 mile (1.6 kilometers). The hope is to reduce the middleman in electricity sales and allow direct energy trading between families. Thirdly, the community microgrid transaction network will be built on blockchain. With an artificial smart dynamic price adjustment system that can set prices according to supply and demand, the market mechanism would naturally guide users to choose off-peak hours for power consumption. The network medium of exchange is the Token ECT released by ELONCITY. Every community microgrid is like a side-chain network, and cross-community transactions need to go through the main chain.
ELONCITY targets the infrastructure of the community microgrid. ELONCITY hopes that in the future, application developers can develop more smart power applications based on their hardware and software products. For example, indoor smart devices could automatically start or stop according to electricity prices. In addition to providing the underlying transaction and pricing systems, ELONCITY also provides designs for things such as storage equipment, community DC power grids and its scheduler, and endpoint equipment (nodes) in order to help manufacturers produce competitively-priced hardware. All hardware and software facilities in the ELONCITY model will be open-source in order to reduce deployment costs for community DC microgrids.
ELONCITY’s vision is ambitious, however, distributed solar power is not suitable for most cities with high-rise buildings. Andy Li, in his interview with Odaily, emphasized that ELONCITY doesn’t intend to replace centralized power generation, but rather intends to reduce residents’ dependence on centralized power supply systems, improve resource utilization, and promote clean energy.
In the future, ELONCITY is likely to face difficulties such as: 1) Regulatory barriers; 2) High microgrid electricity prices; Microgrid electricity prices need to be cheaper than grid prices, so ELONCITY hopes to use communities to reduce sales costs; 3) In order to reduce the financial barrier for users, ELONCITY needs to introduce low-interest loans on its hardware equipment; 4) Ordinary user promotion may require incentives such as low prices and energy storage; 5) Other competitors like Solarcity may not only want to become a rooftop photovoltaic power company, but to also become a photovoltaic energy platform, covering all aspects of electricity generation, electricity storage, and supply.
Open-source may be an advantage of the ELONCITY model, as it allows more manufacturers and developers to work together to build the networks. In addition, ELONCITY’s team largely comes from the energy storage equipment manufacturer, POMCube, who is known for its well-established hardware products. The DC microgrid is scheduled to complete its demo in November of this year and the blockchain trading network is scheduled to be released in January of next year. Also, small-scale testing will begin next year and large-scale promotion will launch in 2020.
Andy Li, founder of the ELONCITY program, joined Cisco in 1995 as an engineer and later moved on to serve as the Chief Technical Officer (CTO) of ChinaCache, a Chinese CDN service provider, and as a Research Fellow at the Alibaba Cloud Computing Data Center. More recently in 2014, Li founded POMCube, which works to develop cloud computing energy management systems, household energy storage systems, microgrid distribution systems, and off-grid power supply equipment.