The following is a point of view by Benjamin L. Gerber, executive director of Midwest Renewable Energy Tracking System, a web platform that releases a unique and traceable digital certificate for every megawatt hour of renewable energy generated by generators registered in any state or province in North America.
Blockchain supporters at their best are enthusiastic, dedicated and often gifted entrepreneurs who want to make a difference. I am continually impressed by the talent level of many energy blockchain enthusiasts I meet and sometimes I also have the pleasure of discussing in conferences all over the world.
However, at worst, it is the modern snake oil sellers who commit fraud on securities and in the most striking cases they have unwittingly attracted investors out of millions by asking for donations to fund useless initial coin offerings (ICOs).
According to the Financial Industry Regulatory Authority, "blockchain, also known as distributed ledger technology (DLP), works through the participation of several individuals: each" block "of a chain consists of a series of cryptographic protected records that describe the previous ones and current transaction data.
DLT can use a public or private network. "All data stored on a public network is visible to all participants in the network, in an encrypted form" and the record is managed by the participants in the network and there is no central authority. A private chain requires a network administrator who grants permission to people who have access to the network.
Sighting the blockchain hype
The common blockchain promotion article is easy to spot and replicate on the Internet. The article begins by stating unequivocally that blockchain can solve the problems of energy industries in a more economical, transparent and democratic way than traditional technology (eg centralized databases). It usually takes 1-3 areas of the energy world that claims to be ripe for a blockchain revolution.
I must immediately admit that the democratic point, like a pure ledger distributed in its nucleus, should be as pure as possible of a possible democratic operation. Although in grandiose theory, in practice, it usually does not work as promised.
As can be seen with most institutions throughout history, human beings need rules, which is why our complicated society requires many third-party intermediaries who validate a given source of truth to avoid ourselves from our worst human inclinations. The same applies to distributed register systems. That's why organizations like L03 use an "authorized private blockchain" for their Exergy product.
Inside, a group of people decides which permissions and access they have, just like today's centralized databases. It's starting to look like a database maintained by third parties.
Note in the article Because blockchain will power the new energy network as the author states that a centralized database "adds millions in additional transaction costs and makes full transparency between market players almost impossible". However, the author continues to provide examples of authorized private blockchains. At this time, an authorized private blockchain is just a very expensive way to run a traditional database and sell it as a new technology.
A transactive future?
Transactive energy is often promoted as the future of blockchain in energy. The story begins with data showing that people want to buy local renewable energy, especially if they come from their neighbors. I do not doubt these polls, nor do I think this is particularly bad for people. However, in practice, it is much more complicated.
For example, a change to a local market facilitated by the blockchain would require a change in the net measurement, which regardless of your position on the matter is a political minefield. This change would also require substantial upgrades of the traditional utility model or restructured in much of the country. It would also involve customers of utilities or artificial intelligence – or a combination of both – to fix prices, geographical limits, plans and price caps, etc. To maximize the value on both sides of the transaction.
Assuming that market players are rational, in the end it is probably a big effort for little or no benefit for the producer and the consumer after deducting system management costs.
Finally, all the pro blockchain articles highlight the renewable energy credit markets (REC) as the number one objective for the interruption of the general accounting. First of all, it is important to note that the REC markets have been intentionally created through complicated legislative and regulatory processes. Some of the defects found during the execution of a REC tracking system are that the prices of bilateral transactions are not public, the import / export is not available among all the systems, the tariffs are not transparent or uniform Inside and between systems or are too expensive compared to the value of goods.
These are all problems created by man / organization and not created by a specific technological choice. If the desire is to really solve those problems identified by the many articles, the solution lies in a cultural change and not necessarily in a new technology. The organization I manage is actively trying to innovate and address many of the issues that affect the industry.
Among the many false statements I've read about how the blockchain can change the REC markets, promoting data integrity is more important to me.
As a technology, blockchain does not solve the GOBO (garbage-in-garbage-out) problem. Just because something is recorded on a blockchain does not make the data more reliable.
Fans often say that because blockchains are immutable, data is more reliable. However, as someone who administers a REC tracking system, I know that the data reported by the RTO can and sometimes change between the initial reporting date and a subsequent settlement date. This is a common knowledge among those who administer the REC systems.
However, once a block is created, it is much more difficult or impossible to change. It is not always a good thing in the REC sector and it does not produce better data. The immutability touted as a benefit can actually become a huge problem.
While a recent article correctly points out that paper certificates are still used in REC markets to verify information, this is a choice made by the parties to avoid the low cost of REC tracking systems.
I often hear that if a commodity is worth only 30 cents, because I should also pay 1 cent to follow it. I can not understand how to blockchain the system will check the information at a lower cost than a centralized database and will persuade people to give up paper certificates until they are legal and accepted.
Again, this is a human problem and not a technological problem. This is why organizations such as the International REC Standard work in countries around the world to promote a consistent approach to issuing and monitoring REC.
It is important that the blockchain industry begins to take seriously the way they communicate technology. Overcoming the uniqueness of technology and continuing to make claims for not substantial cost savings will only increase the confusion surrounding the industry.
A great example is found in Because blockchain will power the new energy network where the author states that Hyperledger Fabric will provide network operators with "the ability to act instantly on information and, perhaps in the future, automatically".
Databases, whether distributed or centralized, do not allow instant replies or automatic replies without the associated control software. The author makes a big point about how the grid of the future can be but inappropriately links it to the blockchain.
The same can be said for many other statements about smart contracts, which is just a computer code that executes agreed if / then statements that already exist in centralized databases like many of the existing REC tracking systems.
Predictably, the answer to this article will be "But this project will change this" or "The new technology will limit or eliminate that unwanted result". And this is probably true. I'm cheering for these companies to show me that I'm wrong.
The technological revolution has been slow in the energy world and I'm not saying that innovations or even discussions about how to innovate should be silenced. However, if we want to change a complicated industry, we must clearly define and recognize our problem before moving on to a specific technological solution.
In the end, I believe blockchain It can help the energy industry. A specific use case on which the blockchain can improve is to build a blockchain REC exchange that can connect to existing REC registers that will allow users to execute transactions electronically – eliminating the need for letters of credit and work back office settlement. Blockchain could also be useful in managing the network.
As technology develops, I think it will become clearer, however, we are still years away from a real understanding of how this technology will impact the industry.
I remain skeptical at this time of the way in which the proponents discuss the proposed technology and solutions. Self-pivotalization is a beginning; however, I remain worried when I continue to see false false statements that are not supported on what technology can do now and that blockchain is cheaper, more secure and anti-fraud continuously repeated in the media, in industry meetings and institutions.