Using Blockchain for Smart Metering and Billing in Developing Countries

In industrialized countries, blockchain applications compete with advanced technological solutions supported by solid infrastructure and embedded in the frameworks of trusted public institutions that enforce local regulations. In developing countries, this framework is not always available and often basic services (e.g., access to bank accounts) may be impossible. Alternatively, the market penetration of smartphones in many developing countries is as high as in industrialized countries.  This has led many  developing  countries to adopt  blockchain-based  mobile  money transfer applications. An example is M-Pesa, a mobile phone-based money transfer, financing and micro-financing service, launched in 2007 by Vodafone. According to Vodafone, after 10 years of operation M-Pesa is now available in 10 countries with more than 29.5 million active customers averaging 614 million monthly transactions. The M-Pesa case proves that the developing countries offer fertile markets to develop new financial platforms.

Using blockchain and cryptocurrencies for monetary transactions is an achievable application of blockchain technology in the energy sector. Blockchain eliminates the need for a third party in money transfer transactions and reduces transfer costs by eliminating administrative fees, bank fees and commissions. An example of such an application is the United Nations’ World Food Program (WFP). The WFP is expanding its Ethereum-based blockchain payments system to avoid the transfer fees incurred when using the conventional banking system. The WFP performed a pilot test in the Jordanian refugee camp of Azraq to successfully facilitate cash transfers for over 10,000 refugees on its blockchain payments platform. According to Munich WFP innovation lab chief Bernhard Kowatsch, the pilot project saved the agency $150,000 a month and eliminated 98% of the bank-related transfer fees. Blockchain decreases fundraising and operational costs, and improves transparency, accountability and control over how funds are used. Savings from using the blockchain’s platform can be re-invested.

An application of the blockchain in the energy sector is through the installation of smart prepaid electric meters that provide power to the end-user once money is transferred from the end- user’s account to the utility account. This application improves end-users payment discipline and reduces the cost of reading meters, billing and collections. In several countries, the utility company suffers from low billings and collections. Prepaid electric meters offer a solution which decreases utility company losses, leads to lower energy rates, and avoids increases in electricity prices.

As detailed in its whitepaper, Grid+s Energy, a blockchain based accounting layer for the energy ecosystem, works to save residential electricity consumers money with unique capabilities through smart software, hardware, and blockchain technologies. Grid+ operates as a commercial electricity retailer in deregulated markets. At its core, the Grid+ Smart Agent is a computer that pays for a customer’s electricity usage in real time. After the Smart Agent is registered, the customer purchases U.S. dollar stable tokens (called BOLT) from Grid+ with a credit card or bank transfer. Once the payment settles, these BOLT tokens are transferred to the user’s Smart Agent. As long as the Smart Agent holds BOLT, it may read from the household smart meter and pay for the electricity usage in real-time. This application reduces the administrative burden of processing transactions over legacy rails (traditional payment processors typically charge fees of 1.5 – 2.5% ). Additionally, by pushing market signals to customers, Grid+ enables customers to make smarter decisions about their energy usage. This lowers their own costs, while also increasing the efficiency, robustness, and reliability of the electrical grid as a whole.

Another application of blockchain for energy sector money transfers is demonstrated by the South African company Bankymoon who use Bitcoin to perform remote payment transactions with compatible smart meters. The application works as follows: assume a donor wants to support a school in a developing country; the donor can send cryptocurrency directly to the school’s smart meter, enabling electricity from the grid to be supplied to the school.

Today’s most energy billing systems are not designed for a bi-directional energy market in which customers produce and consume energy at the same time. For example, individual bills are still issued for every PoD (Point of Delivery), rather than one aggregate bill per customer, who might own several apartments, illustrating that these systems do not apply a user-centric system hierarchy. As a result, retailers do not have any information about customers who own multiple locations, and therefore are unable to offer personalized products. Moreover, billing constitutes between 5% to 15% of retailers’ total operating costs. This results from the fact that the industry still relies on expensive and outdated legacy softwares that have high setup and maintenance costs, without providing the necessary functionalities that are needed in order to compete in a more customer centric energy market. Moreover, the current data collection, processing and financial settlement processes are highly inefficient and error-prone, resulting in significant time delays in value settlement and the need for costly reconciliation processes. Thus, the need to develop an automatic decentralized energy trading system that can automatically collect energy consumption, offer a user-centric approach and ensures a simple settlement for energy transactions in a bidirectional way. This is where blockchain, IoT and AI can revolutionize the current energy trading models by providing energy companies with the possibility to incorporate thousands data points per day per smart meter, enabling them to offer customers a variety of innovative, dynamic tariffs, services and products, while running on an efficient, fully automated and process assured billing system.

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