Taking Back Power: An Upstart Government Plans to Tokenize Energy
Catalonia is continuing to test the boundaries of centralized power in Spain, this time with the help of decentralizing blockchain technology.
Despite the police crackdown that followed last October's failed bid for independence, the Catalan Government plans to airdrop an energy trading token to people in the northeastern Spanish region. The plan is to incentivize solar power generation by circumventing rules inhibiting its adoption made by Madrid.
Peer-to-peer energy trading in Spain is limited by rules preventing consumers who produce solar energy (known as "prosumers") to sell their excess power back to the national grid or share it with other users.
However, this debate goes way beyond Spain's torrid political climate. Highly regulated energy markets around the world appear to be embracing a wave of disruption in the form of renewables and innovation, but the big players are also stymying the democratization of energy.
Restricting the sale of excess electricity back to any national power grid makes rooftop solar much less attractive – when it could be bringing down people's bills and making the planet greener.
Llu?sa Marsal, the technological innovation lead at the Catalan Institute of Energy of the government of Catalonia, is overseeing a creative project that dodges legal and economic limitations on sharing and trading self-produced energy.
The solution involves an "ION" crypto token to vitalize community-managed micro-grids (groups of distributed energy resources, such as rooftop solar generators which can connect to the main grid or operate in "island mode").
Llacuna stressed the token was not conceived as a challenge to Madrid's authority, but rather to ensure that energy trading is attractive to consumers.
"The token has nothing to do with independence," she said. "It's an energy token to manage micro-grids."
But in order for those micro-grids to be free from the legal and economic constraints which limit their appeal, they have to be isolated from Spain's national grid.
"This way, the trading is not with the utility company but between the peers of these solar communities. The ION token powers all the transactions within micro-grids," said Marsal.
Power to the people
The ION token and wallet will be completely open and public and based on the ethereum ERC-20 token standard, Marsal said.
Rather than being sold to raise funds like an ICO token, it will be given away, or "airdropped" to use the common parlance, when users sign up for the project and install their ION wallet. Quantities given out will vary between 100 to 5,000 IONs, depending on the user's engagement.
The wallet is still under development and no code has been released yet. The plan is to start in approximately two months from now with a pilot scheme covering five municipalities in Catalonia.
Ultimately, there will be 8.418 million ION distributed; this is to mirror the power in kilowatt-hours (kWh) per year produced by Catalonia's combined nuclear power plants, said Marsal.
"When these micro-grids are massively deployed and many solar communities are formed, we aim for a total solar production equalling one solar power plant. This may take years, but we want to establish the value of 1 ION to 1kWh."
In terms of how the token will work in the hands of users, the system will use an average measurement of kWh in solar power usage and when someone uses more than average they pay for the excess in crypto tokens; if they use less they are rewarded in crypto.
This approach to electricity metering is meant to offer more flexibility. For instance, small and discrete groups of users can agree on energy consumption schedules (such as using appliances at different times of the day or different days of the week). Smart contracts could help manage power allowances for each user in these "non-simultaneity" schedules.
In addition, ION tokens could be traded on secondary markets, "since the price of kWh is known and it is approximately ˆ0.10," said Marsal.
Winners and losers
Stepping back, the ION proposal aims to cut through a Gordian Knot of regulations, disincentives and subsidies that tie up any kind of free market for trading or sharing energy.
James Johnson, CEO of Open Utility, a peer-to-peer energy marketplace in the U.K., sees tokens as an interesting replacement for feed-in tariffs, subsidies designed to help accelerate renewable energy technologies.
"In the U.K. we have mandated subsidies paid through electricity bills that then gets awarded to the early adopters," he said. "A token could count in the same context if there are enough people willing to buy into it, because they saw the value in taking power into their own hands, figuratively speaking."
There will likely be some losers within the legacy system of suppliers, generators and wire infrastructure as we evolve towards smarter, greener grids, said Johnson.
"With the rollout of solar and batteries and electric cars, all the interesting stuff is on the edges of the network, rather than centralized," he said. "Some of the big generators could go out of business because they can be replaced with small-scale equivalents."
Returning to Catalonia, it's fitting timing for the ION airdrop as the region's new separatist president, Quim Torra, just got a green light to form a government provided it doesn't include any of the jailed and exiled former ministers involved in last October's rally for independence.
The drive for Catalan independence goes back centuries (the region gained broad autonomy in the early 1930s but that was revoked under General Francisco Franco). Catalonia is wealthier than the rest of Spain and recently has emerged as a flourishing technology hub.
Indeed, the decentralizing power of blockchains is being explored in other areas, such as managing a digital Catalan identity system. And identity, after all, is a thing many of these people are proud of.
"We Catalans usually are more creative and we tend to be more pioneering," said Marsal, who also allowed a little resentment to slip out regarding a "revolving door" between the central government and utilities, adding:
"The guy who leaves the government is always the one who goes to a utility. They have verbal agreements to keep the status quo."
Catalan independence protest image via Shutterstock