DePIN Can Rebuild the Grid From the Bottom Up

The American power grid is currently as outdated as it has ever been, with approximately 70% of its power lines being over a quarter-century old. Consequently, the United States experiences more power outages than any other nation, leading to enormous financial losses totaling billions of dollars. For instance, the power surges that occurred in Texas during 2021 resulted in damages ranging between $80 billion and $130 billion.

Despite prioritizing insourcing trillions of dollars for chip production in response to China’s rise, the US government has yet to focus on reinvesting in electrical hardware.

The government is focusing more on investing in computational infrastructure than electrical infrastructure. As a result, companies have arisen that enhance the current energy capacity through initiatives like demand-response programs and the distribution of credits linked to actions (similar to carbon credits). These demand-response programs are activated promptly when the power grid becomes overloaded. They motivate consumers to adjust their electricity consumption to periods when electricity demand is lighter, thereby preventing strain on the grid. Historically, these programs have relied on manual processes for communication, often using mailers and automated phone calls to encourage participation.

Despite the significant potential of demand-response programs, their current implementation has yielded minimal results. The Energy Information Administration (EIA) in the United States estimates that these programs save approximately 29 gigawatt-hours (GwH) annually, equivalent to around $150 million in energy costs – a tiny fraction of the total US energy consumption. Historically, the US government has attempted to address this issue by providing subsidies for demand-response solutions.

Opower, which had the government as its sole client, was acquired by Oracle for approximately $600 million in 2016. By using mail slips, Opower motivated homeowners to reduce their energy consumption, saving over $3 billion in energy costs. However, Opower’s approach was manual and focused on educating people about their energy usage habits and encouraging changes. The underlying challenges with grid management made demand-response a complex endeavor. These issues stemmed from two primary causes: limited access to data and the absence of the ability to remotely modify energy usage.

The ability to instigate demand-response actions is limited by the quantity and real-time accessibility of data, as well as the speed at which individuals react to tangible incentives. Energy information is fragmented across the approximately 3000 energy providers in the U.S., with most companies relying on Excel spreadsheets for data management. This makes it hard to measure real-time energy consumption and promptly respond, leading to a delay in optimization efforts. Moreover, for demand-response actions to take effect, homeowners must actively participate by adjusting their energy use accordingly. If no one is present at the residence, no action can be initiated.

To the problem of data availability, blockchains present a perfect solution. Distributed ledgers can unify energy data across utilities to create a baseline health map for the U.S. energy grid. This would allow utilities to securely store their own data, but also share that data with other utilities and the government without revealing private information. However, it’s unlikely these sleepy monoliths will drive this improvement themselves: utilities earn an annual fixed 10% return on equity from the government annually and aren’t well incentivized to innovate.

I’m thrilled to see a major shift taking place in the hardware sector, with the expansion of Distributed Energy Resources (DERs) such as solar panels and charging stations paving the way for an overhaul of the U.S. energy infrastructure. This transformation presents an exciting opportunity to integrate advanced technology into our power grid.

Companies such as Srcful and Daylight bring programmability to the data layer in home automation systems, enabling not only the reporting of energy usage but also its regulation. Users can now manage their home energy consumption remotely, for instance controlling lights from the office. This advanced infrastructure paves the way for novel products that generate distinct economic benefits. With real-time data access and virtual control over appliances, companies like Srcful can develop automated demand-response systems that instantly respond to requests, compensating users with stablecoins or cryptocurrency for their cooperation in energy management. The real-time verification of energy savings makes the data layer an attractive proposition for municipal governments, who can monetize it through various means, such as grants awarded to pioneering companies like Srcful, which has received funding from the Swedish Energy Authority.

As a data analyst specializing in smart home technology and blockchain applications, I’m excited about the potential for large-scale demand response programs. With an increasing number of smart homes connected to a decentralized, blockchain-managed data layer, we have all the necessary components to create dynamic energy networks, which I refer to as Decentralized Generative Energy Networks (DeGEN).

As a researcher studying the energy sector, I’ve noticed a pattern where utilities and energy have been subjected to excessive regulation due to the socialized nature of grid costs. However, the financial gains are primarily reaped by a select group of companies and traders. The lack of accessible data hinders our ability to address recurring issues and creates opportunities for arbitrage in energy markets. Consequently, these market distortions lead to increased energy costs and an disproportionate concentration of profits among the motivated few.

In contrast to DeGens, who work together to generate economic worth and distribute it among their members, could pave the way for a new form of business model – collaborative capitalism – where the focus lies on inclusivity instead of supplier exploitation, leading to substantial profits.

As a data analyst, I’d like to emphasize that the perspectives shared in this article are mine alone, and they may not align with those held by CoinDesk, its management, or its associated entities.