LO3 Energy is moving ahead with a 12-month regulatory sandbox pilot program for its Brooklyn Microgrid project.
The pilot program will allow participants in the microgrid project to trade energy attributes on LO3 Energy’s software platform.
LO3 has run Brooklyn Microgrid as a test project since 2016. The project began in the Park Slope neighborhood in New York City’s borough of Brooklyn as a way for tenants in a handful of apartment buildings with solar power panels to track the output of their solar and eventually to swap energy among participants.
New York State regulations, however, have been a barrier to a wider or fuller expansion of the program because only utilities and retail service providers are allowed to buy and sell energy under New York State’s regulatory regime.
In October, Brooklyn Microgrid launched a campaign to create a regulatory sandbox to test the concept of energy trading among consumers using a version of blockchain technology.
Blockchain is a secure, online ledger that is an underlying technology for crypto currencies such as Bitcoin. Blockchain is being tested in a variety of industries for its ability to eliminate intermediaries and bring down costs even for very small transactions that otherwise would not be economically viable because of transaction costs.
Despite the technical ability of blockchain to facilitate energy sales, even in small increments, LO3 and the Brooklyn Microgrid still faced New York’s regulatory hurdles. LO3 launched its sandbox campaign to address those impediments.
The sandbox campaign petitioned the state’s Department of Public Service to authorize Brooklyn Microgrid to operate as a commercial entity. LO3 envisions a network of connected distributed energy resources in which participants are able to buy and sell locally generated, renewable energy among themselves.
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The sandbox pilot program is expected to begin early in the new year and involve about 200 participants.
Several players in the energy industry are exploring the use of blockchain technology. In March, LO3 announced a partnership with Kyocera of Japan to test the feasibility of a virtual power plant managed by blockchain technology. And in 2018, Schneider Electric and software company Arensis said they intend to develop smart microgrids that would use blockchain to facilitate energy transactions in remote areas of the world.
In November blog, Navigant Research argued that the creation of regulatory sandboxes could accelerate the transformation in the energy sector. Sandbox status can lead to insights on how policy and technology innovations can affect customers, markets and infrastructure without risking a permanent policy change. In addition to New York, Arizona and Utah also allow regulators to create a regulatory sandbox to test new ideas, Navigant said.
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