One of the strongest use cases for smart devices and microtransactions is local sharing of utilities, especially electricity generation. For example, a roof top solar panel on a home generates more and less usable electricity as conditions change, and might well produce more than you need at various times. That excess could be stored for later, or it could be sold to others. Over a city, the total could be huge, but it happens in many small transactions, a bit of electricity and a few dollars now and again. Hence the need for efficient microtransactions.
One approach is to sell the excess to the utility, offsetting other consumption, or even making a profit. This concept has been around for quite a while, though it is under sustained legal attack from utility companies. Theoretically, this is a win-win, but large utilities generally don’t want to compete with or provide expensive infrastructure to a zillion rooftops, so they make it less than a great deal for the little guy.
Another alternative is a plethora of local grids, transferring power and payments within a small system. The technology is not necessarily difficult, and it might be organized in different ways, and that is the hard part. For instance, many large campuses have their own generators and distribution grid across the site.
This year The Brooklyn Microgrid is demonstrating a peer to peer version of this concept. Local residents with solar panels connect to a local grid and associated software platform that allows trading of generated electricity among the nodes. This is “peer-to-peer” in that the utility is not involved in the transmission or payments, though the network is operated by a company.
The project is based on LO3 Energy’s TransActive Grid, which connects the nodes via their proprietary system
“A TransActive Grid element is a hybrid device that contains both an electric meter and a computer. It is capable of (1) measuring energy production and consumption and (2) sharing and acting upon this information with other TAG-e in the network.”
Essentially, there is a gizmo that tracks electricity, and also talks to the other gizmo in the network (via your home wifi, which thye assume you already have).
It is not surprising that the sharing and transfers are done using a blockchain. This is a perfect example of this use case for blockchain.
We don’t know very much about the exact solution because the “platform” is proprietary. They say that it is “based on an open source” platform, but the source is not actually available or even explained in public documentation. (I’m guessing that the “open source” part is Bitcoin or whatever blockchain they are using.) They also say that the company is “a benefit corporation”, which is a company that is supposed to benefit the public, and that someday soon, they will transfer ownership “to local organizations and individuals living in the Brooklyn community”. I feel better already.
From the limited information we have, it looks like the blockchain is playing an important role, but scarcely an irreplacible one. For one thing, the “trustless” blockchain is rather offset by the fact that the system built on top of it is anything but “trustless” or open. You have to trust the company, its magic meters, and its software. In turn, they stand behind the hardware and software, which is a good thing.
Technologically, the blockchain stuff could easily be replaced by cloud servers operated by the company. The users would never know the difference, and the level of trust would be pretty much the same. It might even work better than the blockchain.
On the other hand, the cryptographic signatures and public key cryptography is essential to this network. But this is implemented on the nodes (i.e., your own trusted devices) and has nothing to do with blockchain, per se. Everything hinges on managing the cryptographic keys used to sign and route the transactions via the blockchain, and that would work the same with any other distributed storage technology.
Even more important, the technology is not the primary problem to solve here. In general, ”It is illegal for individuals to sell or buy electricity from each other without a utility’s involvement.” 
LO3 is working on solutions though they have not indicated exactly how they mean to work around this tiny little difficulty. Lawrence Orsini of LO3 Energy says they are “looking at three possible options.”
“”What I will tell you is that when we’re ready to actually do the transactions, they will be real transactions. They will be real dollars being traded for real energy, legally,” Orsini said“. (quoted in )
Well, good. It will be instructive to see what they work out.
Returning to my earlier point, I note that the blockchain technology is not necessarily relevant to this legal and political challenge. In fact, the use of “trustless” software is probably a red flag for regulators, who generally want someone to be responsible for the system.
Bottom line: microgrids are cool, and these developments are interesting. Using blockchain is probably convenient and cheap, but not really technologically necessary.
- LO3 Energy. Brooklyn MicroGrid. 2017, http://brooklynmicrogrid.com/.
- LO3 Energy. Transactive Grid. 2017, http://lo3energy.com/transactive-grid/.
- Sebastien Malo, In New York, neighbors trading solar energy electrify community. Reuters.March 30 2017, http://www.reuters.com/article/us-energy-usa-blockchain-idUSKBN171003