Power to the people

The power industry has undergone a transformation in recent years, with utilities embracing new technologies and new sources of generation, and relying on data to make operations more efficient. It is now recognising the transformative impact of blockchain technology.  

What is blockchain technology?

Originally devised for digital currency, blockchain technology is, at its core, a giant ledger – an accountant’s dream of thousands of accurately noted transactions, digitally recorded, time stamped and encrypted. Each transaction forms one block, which is linked to other blocks to form a chain. If someone wishes to tamper with one block, they must change every block – making blockchains secure sequences of transactions. There can be multiple parties and transactions, requiring no central controller. They can be completely open-source, so anyone with a computer can add to the chain, or they can be private networks, similar to the intranets used in offices worldwide.

Blockchain developer Pylon Network is offering its blockchain services to Spanish energy companies to ‘inspire cooperation among all stakeholders, based on trust and transparency,’ Markos Romanos, Pylon Network COO, tells Energy Focus. ‘As an energy geek, this is a very exciting period for the energy sector.’

Benefits

Blockchain can provide utilities with traceable, permanent records, making it easier to identify trends or spot future supply gaps. For end users, customers can see where and how their energy is generated. They can switch tariffs or purchase renewably generated energy with ease, as blockchain platforms allow customers with solar panels, electric vehicles or wind turbines to quickly sell excess generation or storage to the grid – or just to a neighbour.

Individuals and communities ‘can obtain and trade energy peer-to-peer and machine-to-machine without complex intermediaries, and with an unprecedented control of their own data and energy usage, additionally empowered by the ability to source energy from smaller assets, including their own renewables,’ explains Mr Romanos. A study 
by Energy Cities in 2018 found that using blockchain networks reduced bills for vulnerable energy consumers.

It is not just utilities and end users that can benefit: due to the open nature of blockchain technologies, startups can gain vital market data, opening up the energy trading industry and allowing new competition to flourish.

Challenges

Pilot projects across Europe and the US have revealed that blockchain’s biggest issue is balancing data transparency with user privacy. ‘The data that will fly around the ether is immense, as is the scope for fraud,’ says Thierry Mortier, EY’s Global Innovation Lead for Power and Utilities.

How can we check whether an energy unit that claims to be renewably generated is not fraudulent, and actually fossil fuel-generated? There is also the issue of pricing – will there be limitations or standard pricing, or will it be a Wild West of bidding?

A 2019 study published in Applied Science identified the additional difficulty of matching. At decentralised, local levels, matches between buyers and sellers have to be precise and accurate in order for them to work. The study concluded that there must be more regulation on blockchain technologies to prevent fraud and exploitation before larger companies can adopt it.

Future outlook

Despite the challenges facing blockchain, many improvements have been made since it was first developed. Different techniques can be used to protect the annonymity of consumers: combining blockchains, changing addresses with pseudonyms, and using algorithms and encryption to ensure security.

The 2019 study concluded: blockchain technology is effective for smart grids and micro grids, renewables and decentralisation. It can increase the flexibility of the energy market and enable intelligent energy management by turning consumers into suppliers.

However, many more pilots, simulations and tests are required to perfect the technology before it can be widely adopted throughout the power and energy industries.

As Mr Romanos tells Energy Focus, blockchain is a tool for the digitalisation of energy trading – ‘not a silver bullet’. 

Picture Credit | iStock