By Jesse Morris
Dozens of companies, from small startups to major utilities, have claimed that “peer-to-peer (P2P) energy trading”- enabled by blockchain technology - could transform the architecture of electric grids everywhere. Many of these claims are dramatically overstating the case for what their technology, and blockchain as a whole, is capable of today.
To date, most claims of local P2P energy trading typically involve selling and buying the equivalent of distribution level renewable energy credits (RECs), or guarantees of origin. The “trading” equates to the exchange of solar attributes, but not a fundamental shift in the way the grid is operated or balanced.
A fuller achievement of P2P energy trading would come much closer to grid-edge transactive energy, where local generation and consumption from distributed energy resources (DERs) are balancing the distribution grid in real time. That’s certainly on the roadmap, but as an industry, we have quite a way to go.
P2P hype about tomorrow’s potential distracts from real value blockchain can add today
Meanwhile, the heavy-on-marketing, light-on-substance claims surrounding P2P business models in the energy sector, are making it difficult for real applications of blockchain to break through the noise. Blockchain technology, although nascent, can accelerate the transition (already underway in grids around the world) towards energy efficiency and renewables. And, in the process, unlock significant value along the way.
Over the next several years, we believe blockchain technology can unlock value through:
Let’s consider a few examples.
1. Streamlining accounting in the electricity sector
Blockchains elegantly make mundane grid operations more efficient, transparent, and cyber-secure. Take the renewable energy certificates, or guarantees of origin mentioned above. These markets have noble intentions, but are highly manual, opaque, inaccessible for most smaller participants, and largely unable to support higher-level functionality (such as consumption-linked purchasing, or carbon-impact selective purchasing).
In a blockchain-based market, however, each generating asset can receive a digital identity that links to all production of that asset. This identity would also link to each owner of the corresponding credit. This record of identities and ownership would reside on the blockchain for all market participants to use. Smart contracts could then provide automated additional functionality, such as mapping kWh production to carbon offset, or automating credit purchasing based on a consumption profile.
Similar architectures can be applied to other utility operations, such as including customer billing and electric vehicle charging settlement. This isn’t some far-off reality; from RECs to EV charging, several Energy Web Foundation (EWF) Affiliates, from the UK to Southeast Asia, are experimenting with these use cases today.
2. Delivering new services and products using blockchain-based networks
As grid operations become increasingly digitized using blockchain technology, utilities and other market participants will find it easier to launch new products and services for customers. Most of these services create value by either: a) allowing customers to monetize their data, b) making it much simpler and easier to integrate and manage demand-side flexible resources, and/or c) creating new opportunities to finance and own energy infrastructure.
Delivering on the vision of P2P energy trading
Years from now, assuming market participants have digitized most electricity infrastructure (using decentralized technologies and architectures, and unlocking value along the way) there may be an opportunity to rethink the way electric grids are constructed from the customer up. This future could realize the vision described by companies focused on creating true P2P electricity markets.
As the underlying technology of such future grids, blockchains are capable of creating value in the world as we know it. We invite utilities and innovators to join us in learning what the technology is capable of over the coming months and years.
Jesse Morris is chief commercial officer of Energy Web Foundation, and a former principal in the electricity practice at Rocky Mountain Institute.
Energy Web Foundation | http://www.energyweb.org