Last week Electron announced that it had facilitated the first secondary capacity market trade in the UK – between EDF and UK Power Reserve. What other use cases for blockchain are being developed in the energy space – and why do they need blockchain?
On one level blockchain can simply be viewed as a distributed database with smart contracts embedded. It should therefore be seen as an “enabler” of a new way to distribute, share and process data.
Despite the hype surrounding bitcoin and crypto currencies, the most likely widespread applications of blockchain will be in private chains adopted by other industries, most notably finance, to cut back office costs.
In energy markets the following use cases have tended to dominate the market to date:
Peer to peer
Peer to peer has centred on the ability of a consumer to buy or sell their power to another consumer (a “peer”) rather than to a traditional utility. Someone with solar and storage sells energy to someone else, arbitraging the utility tariff. About two-thirds of energy use cases have centred on this model, and many believe it could result in the end of the utility. However, blockchain specialists at the recent IRENA conference in Bonn questioned this enthusiasm because the economics seem less attractive than previously thought. Questions about the number of available non-synchronised loads, the potential effects of moving to fixed connection grid charges and the lack of clarity about the scope of peer-to-peer trading were all raised. It seems the jury is still out on this.
Renewable certificate registration
In Europe there is an active market for renewable certificates that can be attributed to green energy sources and trades. Blockchain, with its ability to track provenance and have one version of the truth, is highly suited to certificate tracking, and companies such as Tennet are actively testing proofs of concept.
Microgrids have again gained significant attention as companies such as LO3 have trialled optimising and netting off assets at a specific location, the most famous example being its Brooklyn microgrid, where blockchain records transactions between participants in the grid.
The use case for microgrids is particularly relevant for some parts of the world where centralised electricity networks are not yet fully formed. However, in most developed grids, a single asset is most valuable if it can play in multiple markets rather than being artificially constrained in a microgrid. So microgrids may have a larger role to play in less developed grids.
Total grid balancing
At Electron we have focused on the existing £1.2 billion flexibility market in the UK and are seeking to find ways to allow hundreds of thousands of distributed assets – such as EVs, batteries, storage heaters – to play their full economic role in balancing the grid. We have received interest from around the globe, suggesting that many grids are facing the same issues, and we will shortly be announcing entry into two more geographical markets.
Smart electric vehicle charging
Another growing use case that is gaining traction is the ability to use blockchain to track smart charging in EVs, where one EV may charge at multiple locations and use multiple charging companies. The ability to track use and to control both smart charging and vehicle-to-grid actions is something that can be done well using blockchain given its distributed ledger technology and ability to ensure one version of the truth.
Finally, I should mention the use of blockchain to replace functions in well-established markets such as oil trading. The extent of the savings delivered remains to be proven in what are already well-functioning markets.
Blockchain is here to stay, as an underlying enabler of the macro changes in the energy markets. It is likely that many will fall by the wayside, as people test this new technology without first asking: “Why Blockchain?” In the long run, however, I do expect to see a number of successful applications that gain traction and help to shape the energy market in the next 10 years.