Ledger Ability

Energy Trading, Security at Core of Utility Blockchain Efforts

Bitcoin is a shiny new toy in the cyber world that inspires either salutation or skepticism, depending on your viewpoint and, often, your age. Cryptocurrency has the potential to make doing business more efficient by eliminating the middle man (banks)–or it’s the speculative bubble that will disperse and burst everything in its wake.

Blockchain, or the mechanism behind bitcoin, is all about transparency and yet one that mystifies many due to its relative invisibility and newness. Grid innovators clearly see it as important to the future.

Ledger Ability

Perhaps the most intriguing use of blockchain technologies will come in energy distribution and trading. Many companies who do business with utilities are already experimenting with ways to use blockchain’s distributed ledger tools to find nearly fail-proof ways of verifying energy transactions, balance out demand response programs, act on pricing signals and create the ultimate cybersecurity protection for ever increasing device connection to the grid.

The smart grid world is exploding with new ideas revolving around blockchain. The Rocky Mountain Institute (RMI) and Grid Singularity combined to create a startup called Energy Web Foundation (EWF), which has more than three dozen affiliates globally including Pacific Gas & Electric, Exelon, Duke Energy, E.ON, SB Energy Corp. and WiPro (see related story on page 6).

Utilities getting involved in EWF shows that they believe blockchain has the potential to put them out of the loop, but just as ikely make possible a new line of business. This all points to something called the transactive energy marketplace. It doesn’t really exist on any practical, everyday level currently, but it’s coming and fast. Pilot programs are showing how it could work…or not work.

“At a minimum, just the sheer amount of activity in this space makes it something worth learning about and getting involved in to gain experience and understanding,” said Stina Brock, a DistribuTECH 2018 presenter and senior director of utility and grid solutions at California energy storage and cloud startup Sunverge. “More and more companies like Grid+ and Drift are popping up as players in the retail energy space, using blockchain technologies to give customers new ways to participate in their energy usage and provide sophisticated energy options.”

Harmonizing the Orchestra

Blockchain is essentially a digital, distributed ledger that verifies every part of a transaction. These can be at the financial, energy or data level. It may provide a backbone for a future banking revolution, but utilities and their vendors see greater possibilities in bringing balance to the force of grid-edge technologies, renewable energy and Internet of Things (IoT) connections happening by millions of devices annually.

Jason Allen

Jason Allen

Accenture is one of many companies exploring options as the transactive energy market draws ever closer. Jason Allen, global utilities lead for Accenture Research, is extremely intrigued by the possibilities of blockchain in a transactive energy setting. He acknowledges that bitcoin’s “proof-of-work” activity–in which computers work feverishly to legitimize every level of a transaction–takes a ton of energy to complete. Projects like the Enterprise Ethereum and EWF are chipping away at the problem, finding the sleek statute in the slab of virtual rock called digital interaction.

And how is it done in a way that everyone from the utility to the end customer trusts?

“Ethereum is a blockchain-structured platform and provides apps for others to build their own marketplaces and their cryptocurrencies, so basically a private trading environment,” Allen said. “I could see utilities adopting an environment like Ethereum to build a private trading platform for existing customers in their service territory to allow prosumers to sell power to others.”



RMI’s Jesse Morris, who has the inside scoop on EWF because Colorado-based RMI is a lead partner with Austria’s Grid Singularity in the venture, admitted that he kind of stumbled into blockchain technology. Throughout its history, he said, RMI has been looking for ways to “harmonize and orchestrate” how two-way renewable energy flow is connected to communicating devices that cohabitate at the edge of the energy grid.

The organization looked at numerous transactive technologies but none of them would scale up to attract business capital and prove viable in the private venture sector–and then blockchain happened.

“This could be the technology that enables the transactive energy future to manifest,” said Morris, a principal for RMI’s electricity practice. “We think it’s a huge deal. We think it could be transformative.”

Buckets of Blockchain Possibilities

Bitcoin, with its draining energy demand, is not a consistent way to go for companies looking to be known as energy efficient within the smart grid. Those thousands of verified actions take a lot of juice. China employs huge server farms for validating coin values and a recent story out of Iceland notes that country uses more energy for bitcoin mining than powering homes.

Bitcoin uses an exacting process called “proof of work” to solve transactions. EWF is developing “proof of authority” mechanisms that it hopes will be equally provable but much more energy efficient. Proof of authority is in its early days, but Morris and colleagues see some promising grid buckets to pour their efforts into on the digitized, decentralized grid of the future.

The first bucket is not flashy by comparison, Morris said, and is focused on signaling, reconciliation and aggregation challenges of the demand response programs coming into flower on the grid.

Austin Whitman
FirstFuel Software

Austin Whitman
FirstFuel Software

“Most DR (demand response) programs or markets have a shocking number of analogue and non-automated steps to them,” he said. “What if we have a regulator, the utility, DR aggregator and say, CAISO (California Independent System Operator) or some other ISO. Those are the stakeholders in multi-party DR transactions. If you can put all the data into a shared distributed ledger, we can solve a lot of those analogue problems.”

Another bucket is cybersecurity, which sounds like a natural for blockchain. Making multi-level, multi-party transactions instantaneously trustworthy works for both sides of a deal. In addition, hackers are getting smarter all the time and blockchain throws something at them beyond passwords and protocols.

A third goal, perhaps the ultimate destination, is peer-to-peer energy transaction. Say, for example, one family is connected to a neighbor with solar power and wants to buy some of that energy–or sell theirs. How do they do that, not just one-to-one but on multiple interactions grid-wise? Blockchain’s proof-heavy digitized ledger conceivably keeps track of all of that and keeps it straight. Balance is achieved. That’s the hope, anyway.

Several peer-to-peer type experiments are already going on, including something called the Brooklyn Microgrid, led by L03 Energy. Brock noted that London-based Electron is working on using blockchain technology to advanced shared infrastructure and energy markets in the U.K.

“Peer-to-peer transaction–that’s the long game,” RMI’s Morris said. “That’s the future, what we’re looking for.”

Jesse Morris
Rocky Mountain Institute

Jesse Morris
Rocky Mountain Institute

A Peer-to-Peer Tree Grows in Brooklyn

Accenture’s Allen sees the Brooklyn Microgrid project as more of a model for utilities to adopt if they opt to act as a sort of broker on interpersonal energy transactions involving distributed generators such as owners of solar-powered homes. Yet there are financial kinks to work out.

“Previously, prosumers could only provide power back to the utility for a bill credit, but now they can make money by reducing their load and selling excess to others,” Allen said. “As this is an experiment, it appears there is not a grid access charge or other fee for transmitting the power. For non-regulated companies that are looking to operate in deregulated markets to do something different, there will have to be a fee involved for the utility to transmit the power.”

Sunverge’s Brock pointed out the Brooklyn Microgrid is more of a demonstration project than proof of concept since utility ConEdison was not involved. She does believe that blockchain can be useful within microgrids, using the technology to incentivize and control transactions among the distributed energy resources used by the microgrid. A demonstration project in northern California headed by Omega Grid tested this idea, too. More is on the way, she predicted.

“There are many entrepreneurs and companies exploring applications in energy and I think we’ll see some very interesting projects this year,” Brock said.

Two-way and peer-to-peer energy transaction feel like the next big thing on the grid, many experts say. It’s highly complicated getting to that place, but the true goal is clarity. Blockchain proponents believe it can bring transactional harmony to the otherwise chaotic hither and yon of distributed energy movement.

Austin Whitman, vice president of energy markets for FirstFuel Software, used an example about a principal or building superintendent at a school district. Right now, the poor man or woman already has hundreds or maybe thousands of students to worry about, but energy-wise only the heating-cooling system and lighting.

Add to that the future potential of battery storage, fuel cells, rooftop solar and other connected energy devices. No way could he or she keep track of it all or make it work together. Enter blockchain to balance all that and let superintendents do their most important jobs, that of helping to educate and protect children.

“It’s plug and play for the superintendent, making it easy,” Whitman said. “Now there’s 10 systems coordinating. There’s a settlement for you and you didn’t have to make any decisions.”

Any new innovation created in the energy industry, Sunverge’s Brock noted, must be highly secured and nimble in these digital, decentralized and interconnected times. Even if the energy sector lags behind in blockchain development, advances in other industries such as health care and financial, could prove worthwhile for the grid, she added.

SimplyVital Health is one startup building a product called ConnectingCare that lets all of a patient’s providers share and view data on the same platform, using blockchain technology. In finance, many companies are weighing how to use blockchain technology to reduce settlement times and possibly tens of billions of dollars per year, Brock pointed out.

“Both of these projects are good examples of applications that require high security and high performance,” she said. “We should all keep an eye on what’s happening with blockchain in other industries so we can benefit from the progress made.”

As efforts such as Ethereum, EWF and the Brooklyn Microgrid show, energy focus on blockchain possibilities is already active, but is likely to become more transactive as the work progresses.

Timeline of Blockchain and Energy Sector

1991: An abstract in the Journal of Cryptology proposes digitally time-stamping documents to validate records.

2008: A mysterious entity or man known as Satoshi Nakamoto invents bitcoin as a “peer-to-peer electronic cash system.”

2015: Linux Foundation starts Hyperledger project to support development of blockchains and distributed ledgers.

2016: L03 Energy teams with Siemens and others on Brooklyn microgrid project using blockchain technology to enact peer-to-peer energy trading.

February 2017: 30 companies announce formation of Enterprise Ethereum Alliance, standardizing software to track data and contracts globally.

May 2017: Rocky Mountain Institute and Grid Singularity form joint venture Energy Web Foundation working on blockchain deployment within energy sector.

January 2018: Blockchain’s energy uses are discussed during DistribuTECH mega-session on building the transactive energy marketplace.

February 2018: Energy Web Foundation adds new affiliates, including utilities Duke Energy, Exelon, Pacific Gas & Electric and E.ON.

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The Clarion Energy Content Team is made up of editors from various publications, including POWERGRID International, Power Engineering, Renewable Energy World, Hydro Review, Smart Energy International, and Power Engineering International. Contact the content lead for this publication at Jennifer.Runyon@ClarionEvents.com.

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