Blockchain technology—the technology underpinning the Bitcoin virtual currency—is being discussed as one of the most potentially disruptive technologies since the Internet. Blockchains are a combination of information technology, cryptography, and governance principles that enables transactions to occur without the need for a third party to establish trust between transacting parties.
To put it another way, in today’s transactions a number of human processes and institutions—such as banks, lawyers, regulators, brokers, and utilities—are paid to establish trust. Blockchain technology replaces these institutions, making it possible to conduct transactions without a third-party intermediary.
At Rocky Mountain Institute, we believe that blockchain technology has the potential to play a significant, potentially game-changing role in the global electricity system’s transition to a more secure, resilient, cost-effective, and low-carbon grid.
Blockchain Technology and the Electric Grid
In the face of aggressive growth in distributed energy resources (DERs)—such as rooftop solar, demand response, and electric vehicles—governments, utilities, and other stakeholders from across the globe are experimenting with new ways to better regulate and manage the electricity grid. These experiments currently face four main issues regardless of their geography:
- Controlling demand is difficult: Customers are concerned about privacy and sometimes loathe to share data—let alone allow third parties to control DERs that they own.
- Tracking flows of energy is imperfect: Energy markets and markets for the attributes of energy (e.g., renewable energy credits) can be expensive to run, can be subject to double spending, and can usually be accessed only via intermediaries.
- Not everyone can participate in the grid’s evolution: In developed economies, only large, sophisticated businesses are able to enter into off-site power purchase agreements for renewables. In emerging economies, access to capital is a major barrier to accessing DERs and renewable energy, even if these technologies are capable of generating cost savings.
- Putting customers and DERs first is challenging: The entire grid was originally designed from the top down, making it challenging to put customers and DERs first.
Although it is not yet 100 percent clear how, blockchain technology may be capable of solving these challenges:
- Blockchains provide privacy, enhance cybersecurity, and are a low-cost way of managing DER-focused transactions at the edge of the distribution grid.
- Blockchains provide a more transparent and, at the same time, a more secure way of tracking energy flows than the status quo.
- Blockchains enable small-scale and low-credit customers to participate in business models focused on DERs and renewable energy.
- Blockchains are a key enabler of balancing and managing the grid from the bottom up versus today’s top-down approach.
To unlock this value and help accelerate blockchain technology development in the electricity sector, RMI and Grid Singularity—an Austria-based blockchain technology developer—formed the Energy Web Foundation (EWF).
EWF is a nonprofit foundation with one high-level goal: to unleash the potential of blockchain technology in the energy sector. To achieve this goal, EWF focuses on defining blockchain use cases, building a blockchain platform for the energy sector, incubating an ecosystem of stakeholders, and educating the public.
Discovering Blockchains’ Many Applications
When technologists connected individual computers via phone lines to exchange packets of information in the late 1960s, no one knew exactly what that technology—which would eventually become the Internet—was capable of. Sending digitally signed messages, or “e-mail,” was immediately seen as a clear and interesting application, but not much else. In other words, the beginnings of the Internet looked intriguing, but nobody quite knew the extent of what it could do.
Blockchain technology in the energy sector is at a very similar early stage. We understand, at pilot scale, how to connect electricity loads, generators, and everything in between (e.g., distribution lines and batteries) to a blockchain ecosystem in order to track flows of energy and value while allowing multiple parties to transact. The most discussed blockchain pilots demonstrate this basic functionality, with small-scale rooftop solar customers exchanging green attributes of power in places like New York City and Australia.
But small-scale peer-to-peer use cases like these are just the tip of the iceberg. Even to blockchain experts, it’s still unclear exactly where the technology’s value lies and what the roadmap to commercial implementation looks like in the energy sector. Research organizations have identified more than 200 applications of blockchain technology. EWF will conduct detailed research and analysis on these use cases to identify exactly what blockchain technology can be used for in today’s electricity sector, how much economic value the technology can unlock, and what it will take for applications to be deployed at scale. Thus, EWF can help key stakeholder groups—electricity regulators, ratepayer advocate groups, and the public—better understand the benefits of blockchain technology and ease the technology’s path to market.
Open Sourcing and Unifying the Blockchain Movement
Imagine for a moment you are the chief executive of Snapchat (or any other popular mobile phone application) five years before its application becomes one of the most-used in history. Now, imagine that you have built your application, but platforms like Apple’s iOS operating system or Google’s Android simply don’t exist. In this alternate history, Snapchat would not only need to build its application, but it would also need to build an entire operating system capable of running the application on mobile devices everywhere—a massive undertaking.
This is exactly where blockchain technology is in the energy sector today. Currently, a select few utilities are experimenting with blockchain pilots. These pilots typically consist of defining a use case (e.g., peer-to-peer exchange of excess rooftop solar energy), writing software to turn the use case into an application, and then running the applications on a platform. To date, each utility has either built its own platform or used an existing public platform (like Ethereum or Bitcoin) to run its application.
Instead of developing proprietary platforms, EWF sees an opportunity for energy market participants to jointly fund and develop a single blockchain platform for the global energy sector. EWF will capture this opportunity by bringing together dozens of stakeholders and building an open-source blockchain platform. Organizations representing distribution utilities, traders, customers, and financiers will be able to build energy-focused applications on top of this shared, open-source blockchain. Likewise, instead of utilities, regulators, and grid operators conducting individual pilots, we aim to position EWF as the central convening platform to bring together energy-focused blockchain efforts everywhere and accelerate the pace of blockchain development through a combination of hackathons, boot camps, and other gatherings.
Last week in Vienna, Grid Singularity hosted the first large-scale conference focused on blockchain technology and energy: Event Horizon. The conference is an opportunity for energy-focused organizations to learn about blockchain technology, connect with startups across the globe, and understand how they can benefit from the technology. Moving forward, EWF plans on holding Event Horizon conferences annually, with ambitions to become the conference for blockchain technology and energy.
RMI and Grid Singularity look forward to sharing EWF’s progress and detailing exactly how blockchains can help us achieve our vision of a cleaner, more resilient, customer-focused electricity future.
© 2017 Rocky Mountain Institute. Published with permission. Originally posted on RMI Outlet.
Image courtesy of iStock.