Executive Insight, Smart Grid

Big Data, Bitcoin and Blockchain: How will Energy Cash In?

“Bitcoin is just one example of something that uses a blockchain . . . And now that the Internet is big enough and diverse enough, I think we will see different flavors of decentralized technologies and blockchains.”
Melanie Swan, author of “Blockchain: Blueprint for a New Economy”

The media has reached a frenzy reporting on big data, Bitcoin and blockchain. Already in the process of tackling big data, financial institutions are filing patents to build cryptocurrency exchanges and teaming to develop blockchain transaction platforms to handle payment authorization and processing.  The benefits of these technologies extend beyond the financial sector and have been touted as the next big technological disruption that will change the world.  So how will the power sector be affected?

Big Data, Bigger Value

The power sector had big data before “big data” was a term. Data from power plant meters, interties, high-voltage transmission lines, transformers, distribution SCADA systems, end-use meters and mandatory filings populated many large centralized databases managed by regulated utilities, traders, independent system operators and regulatory agencies.  Digitizing electrons, however, will exponentially expand the data and associated value that can be obtained.  As load becomes more sophisticated, flexible and dispatchable, electronic signals and automation protocols will manage and record.  Smart meters, behind-the-meter management systems and electric vehicles will digitize electrons on a real-time basis. The value is not in the data alone; analytics is the key that will transform business models, delivery processes, and energy consumption patterns. 

In the meantime, data servers that once could be housed within an office closet are transforming into mega data center campuses that require significant amounts of electricity to run, offering a beleaguered industry 24-7 load lifts.  Were it not for offsetting efficiency gains, energy demand would be skyrocketing.  It is only a matter of time before the tipping point is reached.   

As  Pat Gelsinger, CEO of VMware, Inc. noted, “Data is the new science.  Big Data holds the answers.”

Mining a Little Bit Coin at a Time

Bitcoin established that value can be digitized, exchanged and recorded with sufficient trust among the participants to challenge government-issued currencies.  Originally concerned with illegal activities, those same governments are finally starting to wake-up to the impact that cryptocurrencies can have on exchange rates and monetary policies.  Japan and Australia have taken the lead in regulating cryptocurrencies; consider South Korea’s announced ban of anonymous cryptocurrency trading as a precursor of more regulation to come.

The impact of cryptocurrencies on the power sector lies in the creation of new load. Unlike traditional currencies which are managed through a centralized process, cryptocurrency supply is controlled by miners who require electricity to process algorithms in order to generate new “coins”.  Increasingly more complicated processing tasks make each incremental bitcoin harder and more expensive to produce, acting as a break on supply. While supply slows down, an acceleration in demand can drive cryptocurrency values up dramatically, which in turn fuels the demand for more mining, processing power and energy. The exponentially increasing demand for processing speeds and electricity inspired a Malthusian prediction that Bitcoin will consume as much electricity as Denmark by 2020. Growing efficiencies in mining and physical limitations will prevail. Hydro Québec just announced that it was unable to meet electricity demand from cryptocurrency miners following the invitation to miners to establish operations in the province to make use of its 5,000 MW in excess capacity.

As South African activist and Nobel Peace Prize nominee  Leon Luow proclaimed, “Every informed person needs to know about Bitcoin because it might be one of the world’s most important developments.”

Blockchain Gang

Most technologists would concede that the true disruptive technology in cryptocurrency is the blockchain platform.  This decentralized database is a software platform that allows for anonymous transactions to be recorded and verified, thereby creating trust in the process versus a centralized manager. The power of such a system allows for peer-to-peer transactions to be effectuated anonymously and effectively.  Imagine a BnB-style electric vehicle charging station system, direct purchases of green energy from renewable developers, aggregated requests for energy storage tied to distributed generation, or capacity exchanges that operate outside of a local distribution company’s regulated rates.  Once blockchain goes behind the meter, the traditional utility business model established by Thomas Edison may finally receive an upgrade.

What is a utility to do?  Monitor load pockets, with focus on data centers and large load opportunities.  Develop grid modernization plans that incorporate big data analytics and blockchain transaction platforms.  Follow Hydro-Québec’s example and encourage load growth targeting cryptocurrency miners, but in a controlled, strategic manner.  Follow the lead of financial institutions and team up with other industry leaders to develop a collaborative technological solution that incorporates these new technologies into regulated offerings.  The pace of the next wave of innovation is gathering speed.  Start harnessing these disruptive technologies now or you will be left behind.

 

About the author: Tanya Bodell is the Executive Director of Energyzt, a global collaboration of energy experts who create value for investors in energy through actionable insights. Visit www.energyzt.com. She can be reached at: [email protected] or 617-416-0651.