Patrick Schnell is standing in his rooftop garden in the industrial Gowanus neighborhood of Brooklyn, surveying the skyline. “See that thing they’re putting up there?” he says, pointing at nearby construction. “That’s going to be some new building.”

He’s imagining the unobstructed roof, perfect for solar panels.

Schnell, a doctor who works for Pfizer, has 36 solar panels on his own roof, which produce about 90 percent of the electricity his family uses, he says. During the summer, the energy-generating panels have the added benefit of shading his plants, reducing how frequently he has to water them.

In the ten minutes or so I’ve spent at his airy three-story home, he’s already told me about the status of several other rooftops in his neighborhood—including that of a bike-riding friend (who came over to see Schnell’s setup, and eventually installed panels of his own), the building across the street (whose owner Schnell wants to talk to), the one next door (poorly situated for panels), and that of a nearby art space (whose owner keeps talking about solar, but hasn’t taken the leap).

“People are just so pathetically sluggish,” he says. “Everyone needs to work harder to make renewable energy a reality.” So when someone from a project known as the Brooklyn Microgrid knocked on his door a few years back and spoke to him about creating a network of solar energy producers, he couldn’t see any reason not to join.

The centralized energy grid is hardly an efficient enterprise. For starters, there’s the electricity that’s inevitably lost when it’s transmitted long distances. Then there’s the fact that consumers have little information about the grid’s overall supply and demand at any given time—information that could be used to make more intelligent decisions about when to use energy, thereby reducing costs and stress to the grid.

Green energy production—whether solar, wind, or geothermal—helps address grid stress, and New Yorkers have long been able to receive credits against their energy bill based on the power they produce. But Brooklyn Microgrid aims to take things further, by allowing residents with solar to sell local energy to neighbors. Those transactions are recorded on a blockchain, creating a continuously up-to-date and secure ledger.

Brooklyn Microgrid is being developed by LO3 Energy in a Gowanus office blocks away from Schnell’s home. Part cheerful startup, part mad scientist-like laboratory, complete with blinking meters, the office is home base for an undertaking that so far includes approximately 60 “prosumers”—that is, people who both produce and consume energy. In total, they represent about 1.25 megawatts of capacity, and were enrolled through a combination of door knocking, educational outreach, and community workshops.

Since the project uses the infrastructure of the traditional grid, it’s a relatively easy system to set up, in terms of hardware, at least. Getting members to sign up takes time, but the goal is to have transactions happening more widely by early next year, says Brooklyn Microgrid community outreach manager Elena Adcock.

“Blockchain has the potential to be the right solution for creating this energy marketplace of the future.”

A transactive grid element (or TAG-e meter) now sits in Schnell’s basement. The hybrid device—part electric meter, part computer—measures production and consumption of energy and shares that data with other nearby meters. A battery could be set to charge during a sunny afternoon when renewable energy was plentiful and demand was low. And the smart meter can connect to a home’s other internet-controlled devices, so energy usage can be better controlled across the entire network.

Those interested in purchasing energy will be able to use an app to decide what proportion of local renewable energy, regional renewable energy, and conventional electricity they’re interested in, and how much they’re willing to pay—effectively “bidding” on energy.

We see it very much as a sort of a ‘set it and forget it’ approach, where your bids would be automated and occuring in the background,” says LO3’s director of business development Scott Kessler. “We don’t expect people to be day-trading energy, but if you want to change it at any time, you can.” The app also allows users to vote on where they think energy assets might get placed in their neighborhood. Imagine, say, voting to put panels on a nearby community center or school.

Kessler says that decentralized technology lends itself well to this sort of electric grid application. “Blockchain has the potential to be the right solution for creating this energy marketplace of the future,” says Kessler. “We want to continue to test it, but really the only flaws that have ever been shown within these blockchain systems are within the wallet, at the end of it, not the blockchains themselves. So from a security standpoint, I think we can say that the early signs seem to indicate that it’s better [than a centralized system].”

There’s no shortage of headlines decrying the amount of energy bitcoin mining requires. And, despite the flaws in some of those calculations, it undeniable that the process of verifying groups of bitcoin and Ethereum transactions (called proof of work) is incredibly electricity-intensive. Though LO3’s initial transactions in April 2016 were run with an Ethereum-based platform, the company is currently running a private distributed ledger system called Exergy, because it thinks Exergy can scale more effectively. “I still don’t think that proof-of-work blockchains are going to be the end solution for all of this,” says Kessler. “The fullest vision of this really includes power quality and frequency regulation, which happen at the millisecond level. Our own proprietary blockchain has a block speed of one second and I still say that’s not fast enough.”

Last year, LO3 developed an exergy (XRG) token that acts as a medium of exchange within or among microgrids. Like with many blockchain ventures, the project is still at a relatively early stage of development. Kessler says LO3 plans to share more information later this year about its “two-tiered” blockchain design, which, he says, includes both “localized clustering” of nodes and “higher-order blockchains that are transmitting information across those clusters” for greater scalability.

A microgrid, Adcock says, “can be islanded off from the main grid so that it can continue to operate without the centralized grid.” Creating a model that can provide power even when the standard utility goes down was especially compelling for Park Slope and Gowanus residents, many of whom experienced flooding and outages during Hurricane Sandy, says Kessler. The idea of locally-sourced energy could be equally powerful in other places where natural disasters all too frequently affect electricity access.

The Rocky Mountain Institute, a 36-year-old nonprofit that champions reduced dependence on fossil fuels, was so inspired by the potential of blockchain technology that it decided to create an entirely new nonprofit organization to speed its adoption. “[The] typical RMI move is to say, ‘Hey, that’s a cool technology. Let’s write a paper,’” says Jesse Morris, who has been at RMI since 2010. “Instead, we said ‘No, we’re going to start a completely new organization to build this technology and bring it to the sector at scale.’”

That nonprofit is now known as the Energy Web Foundation, which RMI cofounded with German company Grid Singularity in 2017. It’s studying promising use cases of blockchain in the energy industry and has launched its own open-source blockchain platform. Last week, LO3 announced that Exergy would become an affiliate of the EWF.

“[Blockchain] is a technology that utilities, frankly speaking, don’t know how to use,” says Morris, EWF’s cofounder and chief commercial officer.And this is a technology that, again, frankly speaking, many of the startups in the space are just learning how to use. So that’s what most of our other activity is around: Finding the cool use cases, helping our affiliate partners think through them, and helping all the startups basically connect with the corporates to build solutions.”

One analogy that he’s partial to is that EWF is attempting to create an “Apple Store for energy blockchain apps.”

“The vision is, years from now, you have hundreds, if not thousands, of both completely open-source, and maybe some proprietary, applications sitting on top of the blockchain, on top of this app store, and different individuals—regulators, customers, utilities, whatever—are using the applications to get value,” says Morris. For instance, now electric car owners can only use certain charging stations depending on the type of vehicle and/or payment system they use. If the charging infrastructure were fully tokenized, a EV driver could charge at any station using one simple app to conduct a quick multi-party settlement.

Morris says EWF is trying to come up with other killer apps itself. Recently the foundation announced EW Origin, an open-source app that aims to increase the efficiency of buying and selling renewable energy globally. It uses smart contracts (self-executing agreements written into lines of code) to track the ownership of renewable energy generated at the kilowatt level, which, theoretically, makes it easier for smaller green energy generators to participate. It’s designed to work across different markets with differing regulations, and can even show the amount of carbon that’s being offset at that moment in time.

Those solutions can go beyond the idea of buying and selling surplus locally generated energy. Morris says that to maximize energy efficiency, the grid needs to change fundamentally. “Blockchains don’t solve the problem that most utilities are incented to put steel or copper in the ground, versus solar panels or batteries. That’s a regulatory problem that blockchains can help with—but don’t conflate the two things,” says Morris. “We’ve got to figure out a way to either completely disrupt the old way of doing business, which I guess could happen. Or deploy this technology with people who are really in positions of power, right now, mainly at the utilities.”

For LO3’s part, Kessler says that the company has not set out to become a utility, but instead is an energy company that happens to use blockchain. Their strategy involves striking up partnerships with large companies like Siemens and Direct Energy, which already have relationships with utilities. LO3 is also pursuing energy markets in countries like Germany, Australia, and the U.K., where regulation may be more supportive than in the U.S.

Brooklyn Microgrid prosumer Garry Golden emphasizes that it’s not about competing with the traditional grid, but about creating a more flexible overall system. “I want the utility model to evolve and change,” says Golden, a futurist who consults for many sectors, including energy. “I’m not looking for a free ride. I don’t want that burden or cost to be ignored. We’re trading energy among ourselves using infrastructure that someone else has to pay to maintain.”

From his storefront-like office, Golden talks about his Windsor Terrace row home which, he likes to tell people, tilts 14 inches from front to back. He lives with his family on the first two floors and rents out the third floor of the house. A few years back, Golden and some of his neighbors joined together and installed solar panels. His rooftop system now produces more than enough electricity for his family.

Golden has followed the rise of blockchain technology for years and first approached LO3 Energy co-founder and CEO Lawrence Orsini after hearing him speak at an Ethereum meetup. “I said ‘Hey, we live on this street and we’re about to have all of these solar panels installed. Keep us on your radar,’” says Golden.

As a prosumer, Golden was one of the first to have a TAG-e meter installed, helped with data gathering for the meter, and was involved with testing the app. But much of the work, he says, was in convincing neighbors to take a more active role in their energy use and production.

“We have been pretty passive—‘we’re just energy consumers’—for 60 years,” says Golden. “But getting people to realize that you can produce energy; you can store energy; you can use a thermostat that helps you manage your costs; you can use an app.”

The potential for sharing energy production within a neighborhood is especially compelling for Golden. He’s excited about other more far-off projects made possible by a community grid. One idea LO3 is exploring is “negawatts”: basically that consumers might get paid to not use energy when the grid is being particularly taxed. The term was coined by Rocky Mountain Institute chief scientist Amory Lovins in the 1980s and is being tried out by a number of non blockchain-based companies like OhmConnect. “It’s not the money that motivates you,” says Golden. “It’s knowing that I’m not adding stress to this system and they’re not firing up a plant in Ohio to give us more energy. We can just hang out outside for a little bit longer.”

Last year, LO3 announced that it would be participating in a Department of Energy competition to create more community solar through crowdfunding. People will be able to invest in a portion of a panel, and then receive a monthly return via an app, which they can use against their energy bill or sell back to the community.

One of the current impediments to wider community solar adoption is the high price point; usually no one gets involved for less than $1,000, says Kessler. A crowdfunding project, however, could allow lower-income and middle-income residents to invest smaller amounts of money, like $50 or $100. “We are testing out ways in which Brooklyn Microgrid can provide benefit to the entire community,” says Kessler. (The company that wins the DOE competition will receive $1 million.)

Golden is enthusiastic about how jointly-owned solar panels might transform his neighborhood. “I think the scaling out of those systems will be the story that defines this in five years,” he says.

Photo courtesy of Flickr/10:10 Climate Action