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 speeded up the emergence of decentralized systems. These build on large numbers of actors who generate small quantities of energy.
But for a decentralized 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 decentralized energy system also requires an exchange mechanism to link buyers and sellers. In South Africa, the state utility Eskom currently fulfills this role. It effectively acts as a central clearing house. It does this by buying electricity from renewable power projects, adding it to its own generated energy and selling it to consumers.
The creation of markets where households sell their excess electricity would stimulate demand for photovoltaics across rural Africa.
But there are technologies being developed that 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, Internet of things 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 in the near future with centralized power production because it requires major investments to extend power lines to remote communities. For these communities, having their own decentralized grid solutions holds tremendous economic…