Realizing a More Flexible, Smarter Infrastructure
By Thomas Weisshaupt, Gemalto
The way customers consume energy is changing. The electricity industry is transforming, and the “Uberization” of energy, where utility customers buy energy assets such as solar panels and car batteries to use at their convenience, is occurring. The Internet of Things (IoT) enables owners and service providers to leverage devices, data and remote access to create new commercial opportunities for a variety of stakeholders. The supporting infrastructure is stuck in the past, however. To capitalize on the new energy landscape, the management and governance of the physical grid must evolve. Only then can the Internet of Energy be optimized. Without this, society will never realize the full potential of smart energy and the benefits it can bring.
Evolving the Infrastructure
From a commercial perspective, many current processes and settlement rules are too lengthy for the new data-driven, decentralized energy landscape. Energy plans and agreements are defined in a rigid, process-led environment where all actors and regulators must agree and market roles are tightly defined, as they have been for decades. The existing system does not incentivize evolving business models.
Currently, grid operator monopolies manage the transaction environment by collecting money from millions of households and then distributing funds to the power generators. This business model doesn’t make use of regional, intensively distributed intelligence, which is provided by the IoT. There is a clear need to decouple the natural monopoly of digging copper from that of gathering information. In other words, the industry might be forced to divorce the way it finances physical infrastructure from the management of IoT deployments that provide intelligence in the field.
A more flexible infrastructure can bring in added revenues for operators and asset owners. Energy consumers are buying energy assets for their own buildings and becoming more independent from the energy infrastructure while patterns of grid connection use are changing. Grid operators might become big data users without being obliged to gather all data originating on the consumer side of proper IoT systems.
Realizing the Internet of Energy
Through the IoT, these assets will be connected to the internet in one way or another. Millions of individuals using their own energy assets can become part of the revenue streams, bringing clear benefits for energy providers, enabling operators to manage over- and under-capacity in a more intelligent way, and thus avoiding extensive investment in grid capacity. It’s crucial, however, for grid operators to trust the data they receive from these assets. The information from these distributed, user-owned assets must be as reliable as information produced by a grid asset that operates under full control and ownership of a grid operator.
The Internet of Energy also creates more opportunities for a greener world. If data is trusted and connected devices are properly protected against fraud, green energy consumption can be better incentivized. It will be easier for operators to identify those taking care to adapt their usage to the availability of local energy generation and reward them appropriately.
Security, Privacy and “Asset Identity” are Paramount to Success
For a flexible system to be successful, strong cybersecurity is required. This is the only way to ensure a sustainable, trusted transaction environment. Blockchain technology is a viable way to create that secure environment.
What is Blockchain?
Blockchain is an example of a distributed public ledger-a shared record system for transactions. It’s been described as “a technology that allows people who don’t know each other to trust shared record of events.”
The idea is that every authorized party involved in a particular type of transaction holds a copy of the entire ledger; there are no centralized databases. Anyone can enter a transaction onto the system, and at regular intervals these transactions are batched together into “blocks.” The blocks are then formed into “chains” (hence the name) using cryptographic technology that provides high levels of security. The chronological chain of transactional information is created in such a way that each block that is added protects the information in the previous one.
Distribution and decentralization are fundamental to blockchain; they ensure that no party in the system can modify or tamper with the data. This guards against fraud, theft, hacking and other malfeasance. In addition, as previously mentioned, the blocks in the chain are protected by advanced cryptography that has so far proved immune to hacking.
Paradoxically, for such a complex technology blockchain actually increases transparency, because any party in the system can verify the information it contains. In addition, it eliminates the need for an intermediary to authenticate and process transactions, saving both time and money.
Flexible Transactions Secured by Blockchain
In situations where energy assets are operated in a decentralized manner and use of them can be “Uberized” (meaning at times, use of the asset will be offered to people who ask for it vs. for the owner’s sole benefit), blockchain offers a cost-effective way for smart contract-based transactions with the flexibility and scalability needed for energy management. For instance, in a shared property like an apartment building, individual tenants might wish to be charged separately for their energy consumption. With blockchain technology as a central part of the system, transactions no longer need to be based on predefined data exchange and settlement processes. Blockchain also can support micro-transactions between individuals.
The Importance of Authenticating Data
Another requirement of a successful shared energy economy is that data is secure and protected across the entire ecosystem-from smart meter sensors to transactions to backend systems. Operators currently calculate revenues based on data from closed meters in millions of households. They must know that the data they receive from millions of customers using connected assets is accurate and reliable. Blockchain technology cannot prevent the original data from being manipulated or compromised. Strong authentication solutions are needed on sensing and metering devices, as well as networks to prevent fraud in the system. A trusted transaction environment, secured by strong authentication hardware and software must replace the current process-led landscape.
The IoT revolution provides exciting opportunities for a greener world and greater revenue for energy providers. Collaboration, cooperation and innovation are needed to update the energy infrastructure to better support micro-transactions and to provide system flexibility. To achieve success, blockchain and trusted transactions must be a central part of the new system.
Thomas Weisshaupt has more than 15 years’ experience in developing, initiating and implementing digital driven business models, most of them in the utility/energy and industrial sectors and dedicated to technologies considered as IoT. For the last six years he has been acting as director for smart energy and IoT markets in the industrial segment for Gemalto, a world leader in digital security. Prior to that, Weisshaupt held various business development positions in global companies like Deutsche Bahn and Tieto Oy. He also has experience building businesses from scratch as an entrepreneur. He was the manager of Germany’s first utility-driven energy savings services platform (at the time), which served more than 4 million citizens. Thomas is founder and chairman of the privacy and security working group in ESMIG (European Smart Metering Industry Group), as well as a contributor to the EU Task Force Smart Grids Expert Group 3 on Market Design where he was driving the development of the DAM (data access point management) concept. He advocates collaboration and trust building between a variety of sectors. He’s also an expert reviewer of FP7 projects.