The United States passed The Inflation Reduction Act in early August, spending $369 billion to support energy transition and combat climate change. While vigorously supporting the development of green energy, it also helps the development of blockchain.
Current tax credit measures related to promoting the development of renewable energy include the "Production Tax Credit (PTC)" and "Enterprise Energy Investment Tax Credit (ITC)." The former was originally withdrawn in 2019 but has made a strong comeback under the IRA Act and will continue through the end of 2024.
Tax breaks are expected to accelerate U.S. solar development over the next decade, with U.S. solar installations increasing by 67 percent within 10 years, according to Wood Mackenzie data. Tax credits will also increase the visibility of solar power plant cash flow and the development of new technologies to develop more stable digital assets.
A White House Office of Science and Technology Policy (OSTP) report also examines the link between distributed ledger technology (DLT) and energy transition, finding that blockchain technology has the potential to transform the solar industry. By adding blockchain technology to smart microgrids, decentralized energy coordination can be made more efficient.
Decentralized ledger technology shares and records data in multiple decentralized blocks. Emerging uses in energy management include California's "Flex Alert" system, which allows grid operators to respond to emergencies. Customers can also participate in energy conservation anonymously, while operators can only see the participation rate.
Community microgrids can also be used, where resources are shared peer-to-peer (P2P) within a community, and DLT may help manage P2P relationships on microgrids, as electricity from virtual grids is basically traded through a network owned by the grid operator. In addition to meeting customer preferences for power generation and consumption within the community, localized power generation and consumption can also reduce grid congestion, benefiting both those within and outside the community.
Smart meters can record and track the whereabouts of electricity and P2P energy transactions also require some of the same supporting technologies as encrypted assets. Through cryptography-based authentication, Ethereum’s smart contracts can be used for transactions and payments in addition to a tamper-proof transaction ledger.
A report from the Cryptocurrency Carbon Rating Institute (CCRI) commissioned by blockchain firm ConsenSys states that Ethereum’s transition from proof-of-concept to PoS has reduced network power consumption and carbon footprint by more than 99.988% and 99.992%, respectively. It is expected to help the United States achieve its climate goals of reducing greenhouse gas emissions by 50% to 52% by 2030, establishing a non-carbon-polluting power system by 2035, and achieving net-zero emissions by 2050.
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