How Blockchain Is Solving the Energy Crisis in Developing Nations

Basic electricity access is taken for granted in the tech and cryptocurrency worlds, but many people across the globe lack this basic commodity. 1.1 billion people globally lack energy access; many more communities have inconsistent or prohibitively expensive electricity.

Electricity poverty has serious ramifications for quality of life in communities experiencing it. Without electricity, many modern medical procedures are impossible to do safely. Well water can’t be drawn with electric-powered pumps, lighting and climate control can’t provide basic comforts to students studying for exams or government workers carrying out important administrative tasks. Many communication tools, such as internet access or even computers themselves, are unreliable or totally out of reach. Indoor air pollution drives up mortality rates in communities that rely on biomass heating sources for cooking, light, and warmth, resulting in an estimated 4.3 million avoidable deaths per year.

Electricity poverty burdens are not distributed equally around the world. More than 95% of people experiencing energy poverty come from sub-Saharan Africa or developing portions of Asia. 84% live in rural areas. The predominance of rural energy poverty means that simply adding more capacity to centralized energy grids predominantly servicing urban areas is no real solution. Former Indian Minister of Power EAS Sarma has observed that the addition of 95 thousand megawatts of power to India’s power grid, mostly through coal-fired plants, made virtually no reduction in the number of Indian communities experiencing energy poverty between 2001 and 2015.

How can we address energy poverty? A startup called ImpactPPA is proposing a decentralized solution. This solution addresses the real root of the problem: energy transmission.

The Problem: Access to Energy

As Sarma’s observation on the Indian power grid shows, the problem in many countries who struggle with energy poverty isn’t necessarily that they lack fuel resources. Instead, they face the obstacle of expensive transmission architecture. Rural communities, of course, are less densely populated and more far-flung than urban ones. Building lengthy transmission lines out to each small community results in high costs for each electrified household. Many electricity companies find this situation too cost-inefficient to build.

Distributed energy generation projects (DEGs) provide a feasible solution to transmission costs. These projects are much smaller than centralized power plants, providing only as much electricity as the immediate community needs and transmitting it to local buildings through a microgrid of transmission lines. Coal and other fossil fuels are usually poor sources for DEGs, requiring expensive transportation costs for any communities who aren’t immediately located near a mine.

Renewable resources, however, are distributed by nature and thus ideal sources for DEGs. A study of unelectrified Indian villages found that when a settlement is more than five kilometers off the grid, local solar projects and other distributed energy sources are far cheaper than the costs of bringing in power made by coal or other conventional sources. This principle holds true in communities across the globe who have wrestled with energy access, in both developed and developing nations. The U.S. state of Hawaii has experienced a solar boom in part because shipping fuel to the tropical island was inexpensive, while solar power in such a climate is cheap.

DEGs aren’t springing up left and right in developing countries yet (though they are being built at a quickening pace) largely because of financing challenges. The Rural Electrification Act, which brought electricity to the vast majority of American farms between 1935 and 1950, was successful due to the number of subsidized loans provided by Roosevelt’s New Deal program during the unique economic and social conditions of the Great Depression. These conditions have yet to come about in many developing countries, which means communities who are interested in DEG’s often can’t find the initial capital to build them.

ImpactPPA’s Solution: Funding Decentralized Energy Infrastructure

Blockchain is uniquely well-suited to solving the financial problems posed by rural energy poverty. Communities seeking DEG financing often have to apply to national governments or NGOs for funding, a laborious and lengthy process. Many people in other parts of the globe are interested in financing DEGs, but forming connections between these potential financers and energy-poor communities is difficult. Even when financers and communities can contact each other, determining a secure long-distance financing solution can prove challenging.

ImpactPPA is launching a platform in which communities seeking DEG financing can create proposals for SmartPPAs (Power Purchase Agreements). Holders of ImpactPPA’s dedicated cryptocurrency, the MPQ Token, will vote on which SmartPPAs get funded by MPQ Token sales. MPQ Token purchases present a low-barrier entry point for socially aware individuals with limited finances but a strong interest in renewable energy.

When DEGs are built, electricity consumers will use GEN Credits to pay-as-they-go for electricity consumption. By handling both financial processes through blockchain, ImpactPPA ensures secure, efficient, and quick transactions that don’t need the bureaucratic oversight of third parties.

Clean energy DEGs make economic sense for the communities who build them. Increased productivity in newly electrified communities creates sustainable financial conditions for continuing to purchase electricity. ImpactPPA is aiming to eventually achieve what they call “Impact Equilibrium.” In this state, revenues from successful DEGs will be re-invested in funding of further SmartPPAs, which will continue to be chosen democratically by the token holder community. The result will be a blockchain-based funding “engine” that tackles energy poverty across the world, one community at a time.

Disclosure:

The author has had a working or personal relationship with one or more companies mentioned in this article in the past. Access to mentioned company’s management and information was made through the author’s personal network. All information was vetted prior to posting.

Disclaimer:

This essay is not intended to be a source of investment, financial, technical, tax, or legal advice. All of this content is for informational purposes only.

How Blockchain Is Solving the Energy Crisis in Developing Nations was originally published in Hacker Noon on Medium, where people are continuing the conversation by highlighting and responding to this story.