makes transition more efficient for producers and fairer for consumers
by Arasan Aruliah
January 15, 2019
Scientists from Heriot-Watt University in Scotland have done an in-depth study of blockchain solutions in the energy sector that can “further facilitate smart grid applications and decarbonisation”. Blockchain’s distributed monitoring of services and transactions could be a good match for a renewable energy world of multiple energy sources and customers who can sell their surplus energy back to the grid.
Blockchain is better known for being used to underpin cryptocurrencies like Bitcoin and Ethereum. In its simplest form, blockchain is a ledger that can securely store digital transactions without the need for a central point of authority and can be shared across a network of computers. Once a block is added to the chain, it is difficult to change, making the ledger secure without a central authority.
The scientists conclude that blockchain offers significant potential for developing the way electricity is traded and dispatched. They reviewed results from over 140 projects, start-ups and initiatives, covering all areas of blockchains in energy, from transactive community energy models to balancing and trading emission certificates.
The era of the centralised grid is coming to an end
For most of the grid’s existence, all energy companies needed to do was generate electricity at a central power station and pump it out to customers with as few interruptions as possible. But now the grid is under pressure to become more intelligent, because the situation is more complex.
It has to incorporate intermittent energy sources such as wind turbines, plus an increasing number of consumer-owned power generation and storage devices. It has to manage significant extra demand from electric cars. And it has to meet customer desires for real-time energy-use data. In short, the system is decentralising, and the number of transactions it will have to process quickly, cheaply and securely is increasing.
Dr Valentin Robu, associate professor at Heriot-Watt University, said: “Blockchains are often described as holding the promise of enabling a more decentralised, transactive energy system. If we can enable energy generation and use them at a local level, this could allow system operators to reduce expensive network reinforcements, as well as make local communities more energy self-sufficient and resilient to outside shocks in power supply.”
Detailed producer and customer data, available to all
In energy applications, blockchains are often deployed in combination with artificial intelligence techniques such as multi-agent systems and machine learning, which enable smart micro-contracts and local energy exchanges. This can potentially enable building systems and energy service providers to identify consumer energy patterns and develop energy products tailored to the needs of individual consumers. The paper cites a report by Deloitte which states that blockchain-enabled transactional digital platforms could offer operational cost reductions, increased efficiency, fast and automated processes, transparency and the possibility of reducing capital requirements for energy firms.
Governments can also benefit, and help win over the public during the energy transition. The paper states that potential gains in transparency and competition could benefit key policy targets related to energy affordability and fuel poverty.
The cost saving potential is not restricted to government and the utilities: it is “relevant to energy consumers and prosumers (someone who both consumes and produces a product) who are facing increasing energy prices and removal of renewables incentives, respectively. Solutions promised by blockchains, such as peer-to-peer trading in local or consumer-centric marketplaces could potentially lead to cost savings for energy consumers“.
Learn from Bitcoin’s growing pains
However, the paper cautions that blockchain technologies need to address several issues before achieving widespread adoption. These include legal and regulatory challenges, security and scalability of computation, as well as privacy concerns.
But as these hurdles are overcome, “Blockchain could potentially be used for automated and secure communication of such smart devices that would further facilitate smart grid applications and decarbonisation of the energy sector,” said Heriot-Watt research associate Merlinda Andoni.
The EU has set a target of replacing 80% of traditional electricity meters with smart meters by 2020 wherever it is cost effective to do so. As more and more homes install smart meters and smart devices, and system operators increasingly adopt information and communication technologies, the volume and quality data needed for blockchain to work is getting closer.