Power to the people – how blockchain will democratise the energy market
Will blockchain help to democratise power generation and power consumption? It is a tangential, and tech-minded, question, which came out of the central narrative at European Utility Week 2018 in Vienna this week about the decentralisation, decarbonisation, and digitisation of the energy market.
The theory is blockchain, as an immutable exchange system, will enable new business models to flourish in the energy sector, as power generation is decentralised and consumers become more active, to the extent they make deliberate choices about the types of energy they use, and how they use it.
This shift will be enabled by the digitisation of the market, as sensors and controls are applied throughout the network, from the generation plant to homes and businesses, yielding data and insights that inform usage. It will go further, as well, as consumers turn prosumers, and deploy green energy generators on their properties, and sell back into the network.
Blockchain affords a way for this new ecosystem to trade energy, and make informed choices. It will bring new order to the market, debated one lively panel in a session entitled ‘democratising energy’.
Joanna Hubbard, co-founder and chief operating officer at Electron, a blockchain collective working in the energy sector, said the model is broken. What goes into the system, in terms of power, does not come out, in terms of choices. Energy is a commodity; consumers are undiscriminating, generally, because they are unaware of the choices they might make.
“When we put energy into grid, it’s not just electricity, but a bundle of services. For the person taking the power out, it just a commodity, selected because it is nearest and closest,” she said.
As consumers increasingly choose green services, like electric vehicles, and become prosumers, with the means to monetise their own power generation, their choices will be apparent, and personal. Blockchain is a “coordinated platform” for them to make choices, she said.
But this is futuristic, right? It was a question from Ana Trbovic, co-founder and chief operating officer at Grid Singularity and the Energy Web Foundation, and chair for the panel session.
Yes, but for a few trial locations, came the answer. “But I welcome this experimentation,” said Hubbard. It takes time, she implied. “Day one of the energy transition, we talk about green [power]’; day two, the revolution is around data, which means multiple markets and agents.”
Kaspar Kaarlep, chief technology officer at Lithuania-based WePower, a blockchain platform for developers to sell renewable energy production as trade-able ‘smart energy contracts’, noted there is work to be done before blockchain systems are approachable to general consumers.
“If we want to talk about [blockchain enabling consumer choice], we need to think about the user experience. Because, until now, crypto-space has not been user friendly,” he said.
Estonia has earned a reputation for the digitisation of its public services. Its government has issued each of its citizens a unique digital identity, enabling them to interact with public services.
The country’s national transmission system operator (TSO), Erling, has developed trading portal that allows customers to present their energy data for energy retailers to bid on. It has achieved this without a blockchain, noted Trbovic. “What is additional value of blockchain?” she asked.
“It depends,” responded Kaarlep. “The TSO is a trusted and transparent party, in the way it has built its data governance up. In Estonia, the whole idea is citizens own the data. That’s is the underpinning of the government. So the idea is the TSO can access that data, but the citizen retains control, and can call-it-out and even sue if it is misused. This works.”
But the model has had issues scaling to other countries, he noted, where often more than one operator exists. “You get to questions of data access, and data storage,” he said, making again the case for a blockchain framework.
The conversation retreated, to seek clarity again. “What is purpose of putting all data in a blockchain? Is it just the security aspect – not to hold data in a single central database, but in a distributed fashion. Or is there more with it?”
It creates order in an increasingly complex market, in which power has been multiplied outwards. “There are often many parties interacting, which don’t know each other,” commented Karelp. “We use it to have a record of how all these contracts are performing. What we did in Estonia is to look at that on large scale, and see if the technology available today is usable for that.”
The same plotlines are playing out in every industry. Digital technologies are disrupting markets, and the traditional powerhouses are vulnerable. It is the same in the energy market, of course.
Trbovic asked about the power plays, and how they will unfold. “We don’t always have to know where we are going; sometimes the business model is not clear.” Is it better to be a pioneer or a follower, she asked, and what are the implications for the old guard in the energy market?
Lorena Skiljan, partner at Vienna based developer outfit The Blue Minds Company, and a lively presence in several sessions at European Utilities Week, responded. Their conservatism will cost them, she said, even raising Nokia as an example.
“They are used to dealing with the heavy technical stuff. This is their approach with blockchain, too. It is always very complicated, the question of how to put infrastructure in place. And it is difficult for them to understand you can have lightness with these topics, too,” she said.
The major utilities will talk themselves out of pursuing innovation, she suggested, leaving the floor open to nimbler entrants in the market. “They end up sitting around big tables, saying, ‘this is not compatible with this,’ and, ‘this is too fragmented’, and, ‘oh, let’s just stick with what we are doing, and see how it develops, because we are making money anyway’,” she said.
“But you can apply that to the internet, and, actually, the big companies didn’t make it. Amazon and Google and Apple came in, because they shifted these questions aside, and just put forward the best solutions for customers and for society, until they became $300 billion companies on New York Stock Exchange.”
But is blockchain a feature customers will base their decision on? Not likely, the panel agreed. “No. But if this layer of choice develops, based on open data, and allowing new applications, then what will happen is that when people see this IPCC climate report, they will vote with their wallet, instead of just yelling at the government on the TV,” said Karlep.
“They will be able to make choices like that. Today, if you don’t have a smart meter, and you’re not an active participant in the energy market, you can yell at the government or the energy sector. That is all you can do.”
At present, consumer energy choices are not being made. “Consumers just don’t care. You turn a switch, and the light comes on,” commented Skiljan.
“But is an awareness to support green initiatives,” observed Trbovic. The late plastics revolution is a case in point.
Still, Skiljan is cynical. “Yes, but it’s a small percentage. Just saying blockchain will get customers interested? I don’t think so. It’s like sugar and bananas. Okay, I buy Fair Trade, but people generally don’t care.”
Also on the panel, Henrik Göthberg, director of group financial systems at Swedish energy company Vattenfal, brought some perspective to the debate.
“It starts with who owns the data. And the process in Estonia, leading to the e-government initiative, was clear – that citizens have custodianship of their data in all aspects. That sets the playing field,” he explained.
Beyond these principles, there are certain fundamental aspects to the energy market, as with most infrastructure based service markets.
“In telecoms, you have the network, the SIM card, and the plan. Someone is making money from that. But then you have choice on top – that I have purchased this app, because I like my Google calendar better than my Apple calendar.”
His point was that the energy market is split between infrastructure and applications, and the former is regulated, and will essentially follow tradition. On top, the consumer energy market will develop, and create choice.
“We have quite dumb metering still,” he said. When it becomes really smart, and Amazon enters the fray, and offers to solve the “convenience problem” for consumers by connecting their fridge and smart meter, and producing algorithms to organise the two, then battle commences.
There is sense in conservatism and tradition. “We need to understand which part of business is regulated and which part isn’t. We have to sort all this stuff out; if we put everything where it belongs, then the conversation is clearer, returning to usability and usefulness, and problem solving… and choices.”