Ethereum Enabled Community Energy Market Sharing Economy Phase 1; Renewable Energy Certificates (RECs), Microgrids, Smart Meters and Ethereum. Renewable Energy Certificates (RECs), also known as Green tags, Renewable Energy Credits, Renewable Electricity Certificates, or Tradable Renewable Certificates (TRCs), are tradable, non-tangible energy commodities in the United States that represent proof that 1 megawatt-hour (MWh) of electricity was generated from an eligible renewable energy resource (renewable electricity).
How do RECs work?
All grid-tied renewable-based electricity generators produce two distinct products:
- Physical electricity
At the point of generation, both product components can be sold together or separately, as a bundled or unbundled product. In either case, the renewable generator feeds the physical electricity onto the electricity grid, where it mixes with electricity from other generation sources. Since electrons from all generation sources are indistinguishable, it is impossible to track the physical electrons from a specific point of generation to a specific point of use.
RECs serve the role of laying claim to and accounting for the associated attributes of renewable-based generation. As renewable generators produce electricity, they have a positive impact, reducing the need for fossil fuel-based generation sources to meet consumer demand. RECs embody these positive environmental impacts and convey these benefits to the REC owner. The following is a list of the inherent primary and derived attributes that a REC can convey to an owner:
- Renewable fuel source
- Emissions of the renewable generation
- Geographic location of the generator
- Vintage of the generator
- Eligibility for certification or RPS
- Reduced carbon footprint
- Price stability
RECs can be sold, traded or bartered allowing the owner of the REC to claim to have purchased renewable energy. The certificates represent environmental attributes of power produced by renewable energy projects and act as a mechanism to incentivize carbon neutral renewable energy by providing a production subsidy to electricity generated from renewable sources. This is in contrast to carbon emission programs that use penalties and incentives to achieve emission targets.
Double Counting the Value of ‘Green’ Electricity
The approach encourages developers to build renewable energy projects like wind and solar farms in order to claim RECs which are sold on to wholesalers and ultimately consumers at a retail profit. It is important to understand that the energy associated with a REC is sold separately and is used by another party. The buyer of a REC receives only a certificate and not necessarily the electricity generated from the renewable energy project.
The RECs program has been controversial because of the double counting problem wherein utilities receive credits verifying that a local source of power is renewable and then sell those renewable energy credits to other utilities out of state.
When a renewable electric generation project sells electricity, it sells the juice — and it sells the value of the credits separately. These “green” credits are basically a label that utilities buy with the power to verify it meets “renewable” standards set by a state.
To all of my New York friends who buy ‘green energy’ and therefore feel good about leaving your air conditioner running all day because you believe the electricity (you’re pay a premium) for is ‘green’ … I have really bad news for you; the electrons that make it to your house are almost certainly not green. You’re paying a premium to buy an environmental attribute of power produced by renewable energy projects rather than buying electricity from a renewable source.
Enter Microgrids (Distributed Energy Resources)
Microgrids are defined by the U.S. Department of Energy as a group of interconnected loads and distributed energy resources (DER) with clearly defined electrical boundaries that acts as a single controllable entity with respect to the grid [and can] connect and disconnect from the grid to enable it to operate in both grid-connected or island mode. 
A Microgrid comprises of one or more distributed generation sites.
Here’s why Microgrids are important – the part of lower Manhattan in this pic with the lights on had distributed energy assets in place when Hurricane Sandy hit. As a result when the ConEd grid went down they still had the lights on.
New York Prepares for Millions of Smart Meters Under REV
Regulators in New York recently released guidance for the state’s electric utilities’ distributed system implementation plans, which are due next June. One of the items that utilities will have to address is the need for advanced metering infrastructure to meet the goals of New York’s Reforming the Energy Vision.
As with other New York utilities, Con Edison will also have to find ways to monetize some of that data under REV by providing services to third parties and customers — all while ensuring customer privacy. Con Edison is confident that offering near-real-time data in 15-minute intervals (5-minute intervals for large C&I customers) will provide the sort of granular information that can create new earning mechanisms for utilities and third parties.
Ethereum to Enable the Community Energy Market Sharing Economy
Let’s review what we’ve got so far;
- The RECs system and its inefficiencies, principally in double counting environmental benefits
- Microgrids reshaping the utility of the future landscape whereby buildings become adaptive principally by producing and storing energy and adding resiliency to the grid
- Smart Meters providing near-real-time data and granular information
Let’s take a look at what is possible when we sprinkle a little Ethereum blockchain into the mix
In phase one of the Community Energy Market Sharing Economy we start with an Ethereum enabled platform allowing for peer-to-peer transaction of proxy electrons between participants of a microgrid. We achieve this by hooking into smart meter data and using a token issuance and management system to create cryptographically secure digital tokens representing electricity. Those tokens can then be traded across this the Ethereum network.
In this peer-to-peer system configuration we can choose to pay the premium that would otherwise go to a third party RECs retailer who, in most instances, doesn’t actually deliver renewable ‘green’ energy to the customer. Remember, when you buy a REC you are actually buying an environmental attribute of power produced by renewable energy projects which probably does not contribute benefit to your local environment. Just because you buy a REC that originated from a wind farm in Idaho does not mean you actually receive that clean energy in your local community in New York – physics tells us that because electrons go to the nearest load. Instead, the electricity in your Brooklyn apartment probably comes from the naval yard co-generation power plant which rains down particulates in your neighborhood – a far cry from those clean, green, modern marvels of technology windmills whom you’re paying a handsome 30% premium to.
As it turns out we can now instead pay that premium to our neighbor who is actually generating a local environmental benefit with their photo voltaic systems by converting electromagnetic radiation to electrical energy (commonly referred to as generating energy from solar). In this way we are rewarding our neighbor for providing our local community with clean energy we actually consume and in doing so we are recognizing the local environmental benefits and giving a price signal to the market for the real value of renewables at the community level.
In this model we can transact and price energy with Microgrid neighbors directly. Peer-to-peer local energy markets and point-to-point give us a community pricing structure and price signal. From here it becomes somehow possible to imagine an entirely new business model emerge for utilities wherein they earn transaction fees to support this market and infrastructure; Community Energy Market Sharing Economy
Ethereum, Energy Markets, Enterprise Solutions at ConsenSys. Non Profit Education at Code To Inspire.