The Electricity Industry is going through a rapid transformation. The stability and reliability of current Energy Market and the Electric Grid is under threat with decentralization, decarbonization and democratization of the electric industry. The transformation also provides an opportunity to improve our electric infrastructure, improve security, improve renewable portfolios, and reduce cost.
The rise of distributed generation (solar, wind, biomass, cogeneration etc.) combined with affordable storage is starting to reduce dependency on central generators that are often fossil-based. Central generators – including those from renewable sources – have traditionally been a reliable source of electricity supply in the energy market and a provider of predictable capacity to the grid. With the rise of distributed generators and storage and other technologies collectively referred to as Distributed Energy Resources (DER), business models are starting to evolve from a handful of reliable, well known, high capacity and centralized generation sources to a myriad of distributed generation sources that are distributed, intermittent and with varying asset capacities. It’s axiomatic that decentralization is good, but decentralization of energy assets will initially lower stability and reliability, resulting in increased grid complexity.
This transformation also provides opportunities. The proximity of the distributed generation and storage to the consumer load will reduce infrastructure cost. The potential to accelerate the reduction of carbon footprint could generate a wave of opportunities for renewable energy that is driven by consumer demand. To realize these opportunities, legacy retail and wholesale markets will need to adapt and distributed generation owners and aggregators can choose to become active participants in these markets. The traditional transmission and distribution models will also change. Trends such as consumers becoming producers (prosumers), peer-to-peer trading, affordability of electric vehicles and storage batteries will create new opportunities in the retail market that will impact the wholesale market.
Over time, efficient operation or evolution of the retail and wholesale markets will foster alignment of energy prices with the supply and demand of electricity with real-time grid controls, grid balancing and real-time transactions. Eventually in the long term, a true Transactive energy grid and market will evolve.
Power Equipment Manufacturers and their customers have a lot to gain with Blockchain. At the very least, Blockchain, like the Internet is about to become ubiquitous. Like the internet your solutions will need to support Blockchain or at a minimum your solutions will need to operate on a Blockchain. Either way, Blockchain will be an enabler that will enable equipment manufacturers to deliver more capabilities and more functionality, at a reduced cost and optimized cost. Here are 18 use cases where Blockchain can be applied by Power equipment manufacturers:
Improve Internal Operations – Use Blockchain to improve supply chain, track parts and assets, and streamlining industrial processes.
Improve Quality Control and Independent Measurement & Verification – Provide a verifiable and auditable log of test data related to quality and to provide transparency to customers and regulators about quality of equipment and test results.
End to end Parts Traceability – For guaranteeing customers that you are using authentic parts by creating a digital ID that authenticates and document the origin of parts.
Reduce Liability issues – Issues related to moving parts and components from one place to another can be reduced. Any tampering, damage and lost parts can be avoided.
Deliver chain of Custody – Provide tamper proof chain of custody.
Ensure Compliance — Provide complete records for auditing and regulatory compliance purposes.
Manage 360 degrees Asset Life-cycle management – Enable your customers (Utilities etc), to manage, track and govern the overall lifecycle of assets.
Improved Customer Service with Condition based asset management.
Perform proactive asset management – with reduced downtime by ordering replacement parts prior to failure.
Smart Grid and Power Digitization – Leverage data produced by AMI/AMR Smart Metering to deliver next generation of customer services including improved Outage Management and reduce aggregated technical and commercial (AT&C) losses.
Transactive Energy – Integrate Wholesale market with Distribution Utilities to deliver customers with calibrated price signals so customers can optimize their energy consumption and get more choices.
Energy Conservation – Improve Energy conservation measures that improve energy efficiency in buildings and commercial customers including ensuring that there is traceability and verification of adherence to energy conservation building codes.
Harness the data – Unlock the data produced by millions and billions of IoT devices.
Solve Tech Challenges – With the emergence of IoT devices, Analytics, AI, Robotics, and upcoming 5G, there is an opportunity to leverage Blockchain in integrating these technologies across a single platform that becomes the basis for next generation of services and solutions.
Prosumers and DER Integration – Enable the next generation of prosumers who are both producers and consumers of electricity. Facilitate the integration of DERs on demand.
Provide behind the meter visibility to Utilities who are traditionally ‘blind’ to behind the meter equipment.
Connected Home – Blockchain can be used to integrate the connected home with the main grid. This integration will complete the loop with an otherwise disconnected consumer and their home.
Energy Management – Blockchain can be used to manage energy data, for benchmarking and for compliance reporting.
Three key innovations of Blockchain – namely Consensus, Smart Contract and Distributed Ledger are the basis for the new computing paradigm that provides a game changing opportunity. First, a Distributed Ledger is a “distributed” database that is resident across all participating nodes. This distribution of databases or ledgers is unlike conventional replicated database systems, because in a Blockchain based application each node performs independent verification of each transaction prior to accepting the data. Hence each copy of this distributed ledger is independently verified and validated copy of data. This process provides autonomy to each node while operating within the controls established by all participants. This governance model ensure that each node even while working independently, must also produce the same results. This guarantees that each node, although independent, works within the rules established by the collective thereby guaranteeing that a single node cannot monopolize the data even while working independently. Second, a Smart Contract – which is the business logic for the application, is replicated across each node allowing each node to operate on the data – again independently. This means that operations on the data are decentralized as the control is no longer resident with a single node or with a single company. Third, Consensus, a key innovation of Blockchain is the process via which, an actor such as a Data mining company, validates the data based upon the business logic and creates valid and trustworthy blocks of data. Each block of data may have one or more transactions. Once a block is created, it is chained with a previous block. Over time, each block is part of a long chain of connected blocks and a Blockchain emerges. It is important to mention that the actor who is responsible for Consensus building i.e. one who creates a block, is nominated and selected based upon a decentralized control model as well. In traditional computing paradigm, the actor who controls the business logic and operates on the data, is the company that holds the data such as the airline, the retailer, or the insurance company etc. With Blockchain, the actor may be (though not necessarily) an external organization that is democratically selected via a Consensus driven processes known as Proof of Work, Proof of Stake, Proof of Authority and few other techniques. A Consensus driven process results in identification of a leader who is then nominated to act as the creator of a Block. The creator of the Block associates its private signature (private key) to the Block thereby eliminating the possibility for any one else to alter the data (intentionally or unintentionally). Once created, the Block is immutable. This immutability is a key attribute of Blockchain that establishes verifiable trust through traceability. It is important to note that a Blockchain can be a private blockchain or a public blockchain. A public blockchain is open to any qualified party and the consensus is typically offered with the consensus protocol commonly known as “Proof of Work”. In a private Blockchain, the consensus is established via a smaller subset of Consensus builders commonly known as “Proof of Stake” and “Proof of Authority”. The Private Blockchain is a good way for Power companies to embrace Blockchain as it provides more control to Utilities, consumes less electricity and does not allow open access to any party.
Today’s Information Technology is based upon a simple paradigm where a company or an organization controls operation of a computer application. As shown in Figure below, any organization such as a bank, an Insurance company, a retailer, an airline, a telecom company, a social media company or any company that uses computer systems, is responsible for running the application and managing its data. This company is solely responsible for operating this application as its control is centralized with the company, and the company has exclusive responsibility of the application and its data. With Blockchain, the paradigm changes. Rather than a single company being responsible for the control or functioning of the application and its data, the responsibility is split between two or more companies or nodes – this is by design. This “decentralization” when combined with a “democratize” approach to executing business logic on the data is the real game changer. Unlike traditional computing paradigms, Blockchain provides a new approach for computer applications where decentralization and democratization are at the core of its functioning. These fundamental changes can empower customers unlike ever before, facilitate new transactions economically, enable unprecedented cyber-security capability and deliver trust guarantee for all participants.
Blockchain Technology is akin to the “swiss army knife” that can be applied in many ways to many Energy problems and transactions. The Consortium will apply Blockchain technology responsibly, economically and effectively in a fair and equitable manner to protect the interest of Energy Companies, Consumers and Regulators while developing innovative business models for the future. The Consortium will identify and prioritize the right opportunities for members and provide a pragmatic path to piloting and commercialization. The key value propositions and benefits are as follows:
Reduce Business Risk and Accelerate Time to Market through Collaboration: A collaborative and pooled approach to Research and Development, combined with iterative learnings from pilots will provide the pathway to commercialization at lower risk, lower cost and faster time to market.
Pooled approach accelerates execution, lowers cost and delivers faster services;
Participate and learn from Pilots without risking too much capital and resources.
Reduce Technology Risk by driving Open Architecture and Standards: Drive an open and standard architecture to reduce technical risk, more competition & reduce prices.
Develop standards with a peer community and de-risk your investments for years;
launched after the financial crisis of 2007-08, broke into public consciousness in 2012-13 with its iconic application – Bitcoin, a cryptocurrency whose jaw-dropping rise both puzzled and intrigued the general population. Ardent support led to its fierce but volatile rise. Since its inception, this esoteric cryptocurrency continues to reshape the global financial markets. Blockchain, the less-understood albeit foundational technology powering Bitcoin, is the real technological game changer, an innovation in some ways as radical as the Internet itself. It provides an opportunity to reshape the Digital economy, empower consumers and secure the digital world. This paper addresses the importance of Blockchain technology and its application in the Energy industry – especially how ISOs can use Blockchain technology to solve some of the ISO challenges and opportunities.
Blockchain technology is more than just ‘Bitcoin’. While Bitcoin is an ‘application’ that is ‘visible’ to end consumers, the underlying and ‘invisible’ technology that drives this application is called Blockchain that is also known by another name – Distributed Ledger Technology or DLT. Simply put, it is the next generation of distributed computing technology that can serve as a new computing platform to implement ‘distributed’ solutions. Distributed computing technologies have been around since the eighties and have been well known to IT practitioners in the field. A few major distributed computing technologies more widely known with their acronyms in the IT field are: OSF DCE, CORBA, J2EE, .NET and SOA. In fact, a majority of computing application and clouds in existence today are based upon at least one of the distributed computing platforms identified above. This paper identifies use cases that do not require or depend on any crypto currency such as Bitcoin or Ethereum. This paper addresses non-crypto use cases that are more germane to the ISOs business models to provide wholesale market functions and grid reliability.
So why is Blockchain so different? Because, Blockchain offers the next generation of ‘built-in’ distributed computing features such as consensus, immutability, provenance/tracking, cryptography, smart contracts etc. that are well suited for today’s not just distributed systems but decentralized digital systems as well. Blockchain takes it one more step further by injecting the capability to design democratized systems. The distributed, decentralization and democratization attributes of the Blockchain architecture are coincidentally very well aligned with the transformation of the energy industry. Although public blockchains may be too slow for real-time transactions, private or consortium blockchains are apt for next generation of solutions for the energy industry.
The Energy Industry is going through a transformation for a decade and the Utilities and Oil & Gas companies have been following a predictable path to SmartGrid and Digital enablement. This steady pace has recently been rocked by a radically new technology whose potential and pace of adoption has surprised even the harshest of critiques. Every industry is gearing up to adopt it in one way or another. Blockchain technology launched after the financial crisis of 2007-08, broke into public consciousness in 2012-13 with its iconic application – Bitcoin, a cryptocurrency whose jaw-dropping rise both puzzled and intrigued the general population. Ardent support led to its fierce but volatile rise. Since its inception, this esoteric cryptocurrency continues to reshape the global financial markets. Blockchain, the less-understood albeit foundational technology powering Bitcoin, is the real technological game changer, an innovation in some ways as radical as the Internet itself. It provides an opportunity to reshape the Digital economy, empower consumers and secure the digital world.
Summary: Blockchain is not just a new technology, but a new way of doing business that is impacting all industries.
Implications to The Energy Industry
Early indicators from implementations in Europe and Australia suggest that Blockchain can radically simplify energy transactions, reduce overheads cost and improve efficiency. The technology fundamentally decentralizes and democratizes execution of any transactions in an environment that is pre-ordained for trust to eliminate dependency on intermediaries. The core innovations of Blockchain are coincidentally a perfect enabler for energy transactions because without Blockchain the solutions are uneconomical and unsustainable whereas with Blockchain, the transactions can be economized and expedited with near real-time controls. Blockchain technology’s core innovation isits distributed ledger, “trustless” protocol and consensus-driven capabilities that can track almost any asset, rewire any transaction and reduce dependency on traditional intermediaries. Energy companies will need to plan, prepare, and harness this new technology, so it reduces stress and serves their broader mission.
Introduction to Blockchain Webinar: The Energy Industry is going through a transformation for a decade and the Utilities and Oil & Gas companies have been following a predictable path to SmartGrid and Digital enablement. This steady pace has recently been rocked by a radically new technology whose potential and pace of adoption has surprised even the harshest of critiques. Every industry is gearing up to adopt it in one way or another. Blockchain technology broke into the market just a few years ago with its iconic application – Bitcoin, a cryptocurrency whose jaw-dropping rise both puzzled and intrigued the general population. Ardent support led to its fierce but volatile rise. Since its inception, this esoteric cryptocurrency continues to reshape the global financial markets. Blockchain, the less-understood albeit foundational technology powering Bitcoin, is the real technological game changer, an innovation in some ways as radical as the Internet itself. It provides an opportunity to reshape the Digital economy, empower consumers and secure the leaky digital world.