Blockchain: two reasons to believe that the hype

If someone asks you what is the most exciting thing about blockchain in energy, what would you say?

Most would like to focus primarily on the immutability of data and the associated benefits obtained by a "One source of truth" to be shared among many market participants (eg Transparency, traceability). Others may say that the biggest selling point is automation, process efficiency and reduced transaction costs resulting from smart contracts. Some would say that it is computer security for distributed devices or perhaps data privacy controls and data source.

While these blockchain features have created a lot of hype, the best thing about the blockchain right now is probably the same hype. Blockchain has been a catalyst that brings together a wide range of stakeholders, almost out of necessity. As energy generation becomes more distributed, storage becomes cheaper and transportation begins to get excited, we not only have many more devices that produce and consume energy that need to be orchestrated; we also have many other models of composition, aggregation and properties to consider. This, of course, is all in the context of a complex network of global regulatory and market structures – always struggling to keep up with technology.

The problem is not insurmountable. The data needed to orchestrate the network, design efficient markets and inform effective policies are now being streamed from every new device sold. But since these data are all owned and / or controlled by a huge number of players, all with different factors and motivations, it has so far been difficult for stakeholders (eg, utilities, distribution system operators, system operators independent, regulators, third-party energy service providers) to gain access to data relevant to them.

Blockchain has been an extremely useful tool for involving many of these subjects in the same room to actively discuss which parts need what data and at what level of aggregation, anonymisation, permissions and timing.

This brings us to the second best thing about the blockchain . Because many people consider blockchain to be a fundamental technology, people are more likely to think of complex problems from the point of view of basic principles – where is the existing unnecessarily complex system? How would it look if we started from scratch? A diverse group of stakeholders discussing the solution of major industry issues with the latest technologies can be a powerful tool, regardless of whether the blockchain is the technology of choice at the end of the day.

In contrast, one of the challenges in expanding the use of blockchain in regulated energy markets is the harsh truth that change in economic regulation and utility business models has been glacial compared to the rapid pace of Technological innovation. While blockchain is effective in convening stakeholders and encouraging them to think innovatively, we are quickly rooted in the reality of how to get from here to there, given the current state of the regulation.

As pilots start to increase, there will be conflict over which actors create or maintain a place in the value chain and these conversations will take place differently in different regulatory jurisdictions. Those who have succeeded will have made the regulators strong test points in terms of cost efficiency, customer satisfaction, reliability and safety.

Further addition to complexity (and further on), what happens when an energy blockchain needs to interoperate with blockchains from adjacent industries such as transport, insurance and carbon markets? These sectors will experiment with their versions of the scenario described above and their decisions will be influenced by a completely different set of actors and priorities. The chances of all these industries adopting the same platform and an interoperable solution in parallel with the energy industry are quite small.

In the coming years, it is likely that we will see blockchain developing along different paths, influenced by the unique needs of each market and the interaction between regional economies, governments and regulatory bodies. The big winners will be the organizations that will be able to bridge the gap between the various implementations, as the standardization between individual sectors and between sectors will be long in coming, if it arrives at all.

While we are on the subject of interoperability, it is worth highlighting a further problem with blockchain that is often not addressed. Immutable databases only apply if they contain accurate and usable data. All underline the need for better data sharing and better interoperability – better visibility of network dynamics. However, many energy analysts will tell you that they spend more than 80% of their time spent cleaning and transforming data. While blockchain could reduce these efforts to a certain extent by eliminating database reconciliation type errors, the use of blockchain to store data does not automatically make data clean or of a common format.

This problem highlights the need for robust detection of distributed resources with automated validation before entering the ledger. It also suggests the need for greater dependence on open data standards. In the absence of stringent requirements governing interoperability, new companies may emerge that offer translation and data transfer services to address this problem. However, this could also be problematic because if these services require to extract data from the blockchain, it is no longer immutable, exposing numerous vulnerabilities in interoperability.

The grid design principle of the past was to create enough capacity in distributing networks to provide energy on demand for any foreseeable circumstance. It worked well in the last century, but today's grid is much more dynamic and is becoming too expensive to continue using obsolete design principles. The emerging design philosophy is more about understanding the status and conditions of the network at the level of a single node and component, with a granular visibility of the production and use of energy and the dynamic understanding of what will happen in certain circumstances of customer demand.

We can not blind him. The next fundamental objective is to be able to influence the demand for energy (when and how energy is used) and the local supply through efficient market signals and effective service models. Blockchain is one of several new technologies (such as IoT, machine learning and other order words) that can help make this new approach workable.

Even the latest generation of smart meters and networks can play an important role. They are no longer just measuring devices, but a full-blown IoT technology stack, complete with distributed computing functionality at each endpoint. These systems extend from the edge of the grid, through the distribution system, to the back office and to the cloud, increasing capacity along the way. They also host a low-cost sensor network and a partner ecosystem enabled by open standards.

The new reality of the electricity system is a more efficient balancing of supply, demand and capacity, which derives from the visibility of resources and the control of resources. These new intelligent measurement networks have been designed to provide a complete data layer that describes the performance of the network. From there, grid edge analysis allows for autonomous action, back-office analysis supports long-term actionable insights, and economic tools can create effective incentives for market participants.

The integration of blockchain as a transaction framework into a distributed computing platform has the potential to enable the utility to do three things: 1) process data from many devices at the edge of the grid and validate the & # 39; authenticity and accuracy before allowing such data in a block on the edge; 2) create a system for critical data transactions for the distribution system and the optimization of energy resources distributed among the relevant actors in a secure manner (a set of books); and 3) eventually create a system for transmitting energy between a heterogeneous group of actors.

With our OpenWay Riva IoT solution, Itron is exploring this unique interaction of distributed computing and distributed logs with our utility customers to provide tools that redesign selected business processes, enabling them to achieve renewable energy targets, better engage with their partners and customers, meet the goals of climate change and unlock incremental value through their organization. This is exciting for us.

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Luke Scheidler is a senior product manager for the new business innovation at Itron Idea Labs. Work with the innovation centers of the user, the startup community and Itron business unit leaders to develop next-generation solutions for the energy, water and smart cities industries. Deepening on the first Itron exploration of the blockchain through the lens of the Itron entrepreneur Idea Labs in residence and of the guru blockchain Tim Patterson can be found here .

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