Blockchain Tech Potential for Distributed Energy Resources, Energy Trading, Utilities, and Other Energy Apps

Blockchain Tech Potential for Distributed Energy Resources, Energy Trading, Utilities, and Other Energy Apps

Blockchain tech is also being explored in distributed energy systems (and this may be a future post) particularly with microgrids. It can be used in charging and sharing EVs as a recording ledger. It could also be used to throttle back smart IOT home appliance in response to the instantaneous energy needs of the local power grid.

“Samsung and IBM in January [2016] released a platform called ADEPT for controlling connected devices based on the blockchain concept. The platform uses software that Ethereum developed that authenticates smart contracts. The contracts could be microtransactions between appliances inside a home as they react autonomously and instantaneously to changing grid conditions.”

Navigant Research reports (in 3Q 2016) that:

“While many use cases have been proposed for the energy industry, the one gaining the most traction at present is peer-to-peer (P2P) power trading, where owners of small-scale generation can sell excess generation direct to other consumers. Today, centralized control of distributed energy resources (DER) restricts to whom and when DER owners can sell their energy back to the grid. A blockchain-enabled P2P model allows much greater flexibility and could be a powerful enabler for truly customer-centric transactive energy. The earliest adopters of blockchain will likely not be utilities, but other stakeholders. Currently, those leading the research into blockchain are the owners of DER and startups seeking to sell directly to them.”

Pre-programmed ‘smart contracts’ can automatically trigger transactions, cutting out any third party ‘middleman.’ Through pre-programming, meters can automatically communicate with one another, trade energy, and record those transactions directly to buyers’ and sellers’ balance sheets.

Unfortunately, we know that power grids have been frequent targets of hackers so it is unclear whether a vastly growing system of power trading DER generators would require an increasingly energy-consuming cryptography scheme in order to keep systems secure. There has been much talk of the vulnerability of IOT devices to hackers. However, as ‘permissioned blockchains’ only accessible to registered users they are less likely to be than say Bitcoin, as a public, anonymous, and permissionless blockchain.

Blockchain tech could eliminate the need for physical meter-reading and also lead to more accurate billing. According to the Bitcoin Magazine and Nasdaq.com article referenced below the implications of blockchain-based P-2-P trading:

“The broader implications of this would include increased industry competition leading to lower prices, streamlined energy distribution, reduced energy waste and better relationships between utility companies and their customers.”

According to the Harvard Business Review article referenced below:

“Finally, blockchain may make existing electric industry processes more efficient by serving as the backbone for utilities’ “smart grid” management systems that automatically diagnose network emergencies and problems and reconfigure in reaction to them. Austrian startup Grid Singularity is using blockchain technology to develop a decentralized energy exchange platform that can host applications ranging from validating electricity trades to monitoring grid equipment, in part because such a platform has the potential to prolong the life of equipment, improving both large and small power-generation system operators’ earnings.”

The overall potential of blockchain tech to make energy trading more efficient and to eliminate the need for over-redundancy and idling peaking supply resources likely will far outweigh the energy used up in cryptography so the potential is quite real here. Still it is unclear what level of energy use would be required to provide these energy grid functions, only that permissioned private networks not attached to a currency will require less energy. Size of the network and amount of data also matters in energy consumption. The blockchain-based DER pilot in Brooklyn, New York begun in 2016 utilizes the Ethereum platform so perhaps they too will migrate to the less energy-consumptive Proof-of-Stake consensus algorithm as Ethereum plans to do. 

“Like the Internet, blockchain is an open, global infrastructure upon which other technologies and applications can be built. And like the Internet, it allows people to bypass traditional intermediaries in their dealings with each other, thereby lowering or even eliminating transaction costs”

The following graphic from Indigo Advisory Group indicates how emerging blockchain applications are being targeted in the energy and utilities sector, currently mostly through pilot projects:

They also note that the impact of blockchain tech on evolving utility business models is likely to be significant. They predict impacts will be both supportive and disruptive.

Another graphic from Indigo Advisory Group shows how the core blockchain technology is evolving in the energy and utilities sector:

They also note that:

“… the technology still needs time to mature and the core developer network estimates that this may be 2-5 years away, as such, we are in the midst of an experiment and right now blockchain technology is too slow to handle real-time market needs.”

In addition, they note that energy apps require much faster transaction confirmation times than financial apps and that the blockchains here need to be private and permissioned blockchains without any digital currency attached as in Bitcoin. Does this reduce the need for energy-consuming cryptograpy? Yes, but by how much is still unclear. They also say that the emerging technologies of AI, distributed ledgers (blockchain), and robotics will mature in the next decade with increased proliferation of DERs, increased deployment of sensors and data collection tools across the grid, and increased demand-side energy management (DSM). They call this the 4^th Industrial Revolution (4IR). They also suggest that emerging carbon markets will employ blockchain technology. One issue that is emerging is ‘fragmentation’ which refers to the proliferation of competing protocol frameworks (often software platforms) along with small-scale ‘testing’ networks in the myriad of pilot projects. In order to make the processes more efficient across industries there would need to be standards adopted for seamless operation so more universal platforms and frameworks would need to be agreed upon. AI innovations in the energy and utilities sector include renewables management (forecasting, equipment maintenance, efficiency, and storage), demand management (efficiency, management systems, demand response management, demand response game theory), and infrastructure management (digital asset management, equipment operation and maintenance, and generation management).

Blockchain tech in combination with AI and robotics may have myriad applications across the energy sector including in oil and gas (from zdnet.com article referenced below):

"Blockchain technology can be deployed across the entire oil and gas supply chain, from the wellhead all the way to the consumer," said Daniel Nossa, an attorney with the law firm Steptoe and Johnson, who has closely followed the development of blockchain technology.”

"When combined with IoT [Internet of Things], the technology can be used to securely track and monitor the extraction and transportation of hydrocarbons," Nossa said. "Smart contracts embedded in the blockchain platform together with emerging AI [artificial intelligence] technology can automate many of the transactions that occur, such as the sale and physical transfer of the commodity from producers to marketers to refiners and on to consumers."

References:

How the Blockchain Will Create a Distributed Grid – in CCN.com, Feb. 29, 2016

Blockchain-Enabled Distributed Energy Trading – by Navigant Research, 3Q 2016

How Blockchain Tech Will Create a Distributed Future for the Energy Sector –by Michael Scott, in Bitcoin Magazine and Nasdaq.com, March 27, 2017

How Utilities are Using Blockchain to Modernize the Grid – by James Basden and Michael Cottrell, in Harvard Business Review, March 27, 2017

Blockchain in Energy and Utilities: Use Cases/Vendor Activity/Market Analysis – by Indigo Advisory Group, 2017

Benchmarking Blockchain in Energy and Utilities – A Bellwether for 2018 – by David Groarke, Indigo Advisory Group, Oct. 14, 2017

Artificial Intelligence in Energy and Utilities [Infographic] – by David Groarke, Indigo Advisory Group, April 11, 2017

Blockchain Shows Promise for Energy Companies: Potential Benefits Include Security, Transparency, Efficiency, and Speed – by Bob Violino, in zdnet.com, Dec. 20, 2017