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TEPCO and the Democratization of Energy Markets

SNA (Tokyo) — Peer-to-peer (P2P) energy trading is set to disrupt and transform the energy industry in Japan and around the world. The rise of individual renewable energy producers globally has caused a decentralization of energy production. Traditional utilities like the Tokyo Electric Power Company (TEPCO) are looking for solutions.

Blockchain technology offers both a problem and solution to the status quo.

To better understand what peer-to-peer is, look to familiar companies like Airbnb, Craigslist, eBay, and Kickstarter. P2P platforms like these allow users to buy or sell with anyone else on that platform. But the power of blockchain is even greater.

Blockchain technology offers a radically different solution to traditional central server databases. In the case of residential solar power, it allows a household to sell their excess energy directly to neighbors. Further, it ensures that when a digitized unit of electricity is bought or sold, it cannot be sold again. All transactions are stored in detail in the blockchain’s ledger which is publicly available to all users.

Traditional utility companies see an opportunity to manage transactions on the electric grid with the help of this new technology.

TEPCO was founded in 1951, but its age isn’t stopping innovation as it takes steps to research such a system. As one of the nine power companies to emerge after break-up of the wartime state-run electricity regime, TEPCO is in need of an upgrade.

The company’s history can be divided by decades and fuel sources. The 1950s and 1960s were powered by fossil fuels. By the 1970s, concerns about pollution and a volatile oil market prompted a shift toward increased reliance upon liquefied natural gas and nuclear power.

In the post-Fukushima world, nuclear power production has been minimized and reliance on fossil fuels has increased. From a climate standpoint, as well as a fiscal one, the current mix is unsustainable.

A series of misreported inspections of nuclear plants in the early 2000s eroded public trust in the company, and the Fukushima disaster—widely criticized for mismanagement and lack of transparency—dealt a severe blow to the company and the country as a whole.

But TEPCO’s interest in exploring P2P energy trading platforms could help to improve the company’s performance and catapult them onto the forefront of a new era.

According to a July press release, TEPCO has put 3 million Euros (about US$3.7 million) into funding Conjoule, a Germany-based P2P energy trading company. TEPCO’s investment will support ongoing technical development and Conjoule’s commercial launch.

Whether TEPCO brings Conjoule’s solution to Japan remains to be seen, but the investment is significant, and there is reason for optimism.

Globally, the P2P energy marketplace is full of startups with similar offerings. But at this point, the application of these systems is largely taking place in test studies and has not been deployed on a large scale.

The upside for utilities is that blockchain is a secure and cost-effective solution to the distributed generation problem. TEPCO and electric companies worldwide hope for reduced costs and increased efficiency. They are also looking for a solution to a world where power is no longer produced at power plants alone.

For individual owners of renewable energy systems and small businesses investing in solar for profits, P2P energy trading is a game-changing opportunity.

Australia has one of the highest concentrations of renewable energy producers worldwide. They are buzzing on the topic of P2P energy trading, and companies like Power Ledger are taking off, supported by government agencies. Europe is full of blockchain energy trading startups such as Sonnen, Conjoule, and Piclo. In New York, Brooklyn Microgrid is a pilot project that is giving consumers and producers the ability to build micro-economies and community at the same time.

In the current system, small-scale solar photovoltaics operators can only sell their excess energy at the rate the electric company is willing to pay, often under market value. But with P2P energy trading, a household could sell electricity to another house in their neighborhood, bypassing the middleman. With blockchain technology, the seller would only pay for the access to the grid that is required for the local sale of electricity.

The end users of locally-generated electricity would also see a reduced cost as redundancies and middlemen are eliminated.

The bigger picture is a triumphant one, where society may well be entering the age of a democratization of energy. After a half century of development and struggle, solar photovoltaics is now as cheap as coal, oil, and natural gas once were. Adoption rates are on the rise in every part of the globe, and seemingly overnight, massive energy companies like TEPCO are scrambling to adapt.

Thanks to bitcoin’s founder who created the technology, blockchain is democratizing information and transactional exchanges. Both solar photovoltaics and blockchain are technological forces with exponential development cycles. What this means is that both of these technologies united together seem to be an unstoppable force. So much so that behemoths of industry, the old guard, are forced to play nice.

TEPCO is positioned to show global leadership as an intrepid, early adopter of a full-scale P2P energy trading platform. Utilizing this technology on the scale and complexity of the Tokyo regional market would be an invaluable showcase of what is possible. For the old dinosaurs of energy, it is wise to get in front of the next wave of disruption.

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