California could be a blockchain testing ground under its new rooftop solar mandate for new homes, energy analysts say, and PG&E Co., the state’s largest utility, is already looking into it.

The California Energy Commission on May 9 approved new building and energy efficiency standards requiring rooftop solar panels to be installed on new homes or for new homes to be connected to a community solar array. The commission estimates that as many as 90,000 new homes would be fitted with solar panels each year beginning in 2020.

Blockchain, a secure digital transaction ledger seen as a possible threat to major electric utilities’ business models, may become the technology that underlies the ways California could accommodate the rapid adoption of rooftop solar under the mandate.

That technology may include electric power trading among homeowners—known in the industry as “transactive energy” or peer-to-peer trading—and trading of renewable energy credits that verify the electricity a home’s solar panels generate.

Tiny Transactions

One of the best potential uses of blockchain is to verify and track thousands of tiny transactions between homeowners as they trade a few kilowatt hours of solar power among themselves for pennies each, something that is not yet possible on a broad scale in the U.S, Stuart Ravens, an analyst at Navigant Consulting Inc. in London, told Bloomberg Environment.

“These aren’t big figures,” he said. “Everything has to be automated.”

Karin Corfee, managing director for energy at Navigant in San Francisco, told Bloomberg Environment that transactive energy is many years away from materializing in California, but “it is down the road” with the solar mandate on the horizon.

“They key challenge is, you want to try to create these market mechanisms that help facilitate increased adoption of clean energy, and this is certainly something that everyone is talking about that could help facilitate transactive energy,” Corfee said.

The California solar mandate will guarantee that new homes will eventually need both solar panels and batteries to store the power they generate, making conditions ripe for homeowners to trade energy among themselves on a microgrid using blockchain technology, said Srinivasan Keshav, a computer scientist and professor at the University of Waterloo in Ontario, Canada, who advocates for blockchain to be used to “democratize” green power.

“To my mind, it makes it much easier to find the right set of conditions—pre-conditions—for peer-to-peer trading,” Keshav told Bloomberg Environment.

Blockchain’s use to accommodate a flood of rooftop and community solar installations in California may depend in part on whether a third party instead of the homeowner owns the solar panels, and how that electricity is purchased from the homeowner, if any at all, Morten Lund, an energy attorney at Stoel Rives LLP in San Diego, told Bloomberg Environment.

No transactions occur if a homeowner owns the rooftop solar panels, he said. But if a utility, a homeowners association or another company owns a centralized solar array for a single neighborhood, blockchain could be used to divvy up the power, he said.

“As far as we’ve been able to determine, the distributed energy sector doesn’t really need blockchain, but blockchain could help make it more efficient and cheaper and easier,” Lund said.

Proving Solar’s Electric Production

Peer-to-peer energy trading remains far from reality in the U.S., but blockchain may be used in other ways sooner in California.

Verification of solar panel electricity generation may be a better use of blockchain technology in California than peer-to-peer trading, Vikram Singh, director of advanced planning for the Canadian company Alectra Utilities in Ontario, told Bloomberg Environment.

Blockchain is best used to track and verify how much electricity each home is feeding onto the electric power grid, helping a utility manage the power streaming onto the grid from rooftop solar panels, Singh said.

“Everyone’s minds jump to peer-to-peer trading,” he said, but “measurement and verification is powerful in and of itself.”

Blockchain is an ideal technology for renewable energy credit trading, which could take hold more quickly in California than transactive energy, which is years away from reality, Ravens at Navigant added.

PG&E is studying how it can use blockchain to enable “smart contracts,” which are secure automatic electronic transactions between energy users. The company considers the solar mandate—known as Title 24 for the building standards’ designation in state energy code—an opportunity, spokesman Jason King told Bloomberg Environment.

“We are considering testing the use of blockchain technology to communicate hourly solar production from a small test facility to a smart contract to generate clean energy credits as one of our demonstration projects,” King said. “Based upon the outcome of our pilot this year, we will look for future opportunities to utilize blockchain technology, and Title 24 would be one such opportunity.”

Sorting Out Mandate Effects

Though some analysts are bullish on the use of blockchain in California as rooftop solar adoption skyrockets, Lund at Stoel Rives LLP said the effect of the mandate isn’t fully clear.

“The new solar mandate raises many interesting questions, and we are still trying to sort out all the potential impacts,” he said. “Some of the possible futures certainly could lead to a greater need for blockchain or similar technology, while others might do the opposite.”

Varun Sivaram, a science and technology fellow at the Council on Foreign Relations and author, told Bloomberg Environment that there is no connection between the solar mandate and blockchain technology.

“Rooftop solar is already substantially popular in California, so if companies want to work on blockchain peer-to-peer systems to transact energy among rooftop solar systems, they have plenty of systems to play with,” Sivaram said. “The new systems are not mandated to have anything special that makes them particularly apt for blockchain-based systems.”