Power sector has witnessed proliferation of many digital technologies disrupting their status quo. Socio-economic drivers such as distributed energy resources, increasing customer expectations, big data analytics, decarbonisation of economies, cyber infiltrations, etc, have pushed the slow moving utilities industry to take relatively faster smart steps. One such technology is cryptocurrency-based blockchain. Put simply, it is a distributed ledger technology that has public database operating in a distributed environment with end-to-end traceability. While many understand the concept, it applies differently for different sectors and in specific markets. It empowers utilities to do the same business in different ways, which is more secure, traceable, cost-effective and transparent. Blockchain enables peer-to-peer transactions with full traceability and has a huge impact on cost optimisation. In electricity trading, blockchain can bring down energy supply costs by eliminating middleman, related fees and bureaucracy.
The foremost thing for utility executives is to identify, qualify and prioritise use-cases that can be supported by blockchain. The final selection of use-cases depends on aspects such as type of operating markets (regulated/deregulated), regulatory guidelines, business models and value on investment. Let’s have a look at some plausible blockchain use-cases globally. Innovative retail operations: In New York’s Reforming the Energy Vision (REV) strategy, there is a concept of Distributed Service Platform Provider, where grid is available as a platform where buyers and sellers can connect for electricity trade. Innovative companies can directly source electricity and sell to consumers without intermediaries. Drift, a retailer in New York, is offering new kinds of services to its customers by empowering them to make choices of energy selection, i.e. customers decide their own “energy mix” and accordingly they will be served. Prices to devices—automated demand response: Billions of smart home and smart grid devices talking to each other and responding to economic signals from the grid can be enabled by blockchain. These devices can make smart decisions without any human intervention. If there is stress on specific location of grid and LMP (locational marginal pricing) is rising, smart devices can execute “smart contracts” and control their consumption behaviour to bring back the grid to normal operating state.
Smart microgrids: It is another classic case of blockchain that can ensure locally-generated energy gets consumed locally by enabling peer-to-peer trading with neighbours. LO3 implementation by Brooklyn Microgrid in New York is the proof of distributed ledger technology that can enable consumers to take benefit of available electricity in vicinity. If a neighbour is out for certain time, the excess energy from his rooftop can be traded with fellow homes by writing smart contracts.
Smart electric vehicle charging: Utilities view EVs as an opportunity for lost revenues to solar rooftop. The challenge is setting up EV infrastructure and manage cross-border/service area billing when an entrant from different service provider’s geography travels to other states. Blockchain-enabled EV charging stations can address billing issues. Asset tracking: Blockchain can help in accurate tracking and tracing the assets as they move through financial systems when all relevant stakeholders participate in distributed ledger-based solutions. The mechanism of renewable credits can be seamlessly integrated and hence REC can be accurately tracked leveraging blockchain applications. Blockchain constraints: A major concern using blockchain is data privacy, since it is public database and everyone has access to it. This could be minimised to an extent by encryption of content. On business front, it can potentially wipe out FiT (feed in-tariff) and net-metering options for utilities since consumers are now empowered to sell electricity on blockchain platform. Blockchain enables energy trading subject to availability of physical interconnected grid present between two trading parties. Blockchain is a disruptive technology and utilities globally are embracing and investing in it by conducting pilots. It has immense potential to transform utilities into truly “energy services” companies. It is not too far to see the “energy banks” coming our way that will be based and run on blockchain platforms and consumers will have their own “energy deposits” against their account numbers which they can then withdraw and use.
Sudhanshu Gupta & Jasjeet Singh
Sudhanshu Gupta leads and Jasjeet Singh focuses on Digital Initiatives for Power Sector, Ernst & Young India