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Smart Energy International spoke with Jo-Jo Hubbard, chief operating officer and co-founder of Electron, a startup that uses decentralized technology to advance the shared infrastructure of the energy markets.
The team aims to create innovative and collaborative solutions, based on the blockchain guarantees of a secure, solid and transparent platform.
This article was originally published in Smart Energy International 5-2018. You have access to ours digital magazine here.
In this interview, Hubbard talks about why blockchain is important in the utilities industry and why the hype focuses on the wrong things.
What is the true meaning of the blockchain?
Perhaps the most important thing to know about blockchain is that it has solved the problem of how to coordinate transactions without a single intermediary.
In an environment of market platforms, it is in the interest of all the parties that they coordinate, as it makes the market more liquid and brings together more buyers and sellers. However, until recently, they always needed an intermediary to facilitate this process – and this is what makes the blockchain important – removes the need for an intermediary.
But is it safe?
There are three technologies that underlie a blockchain platform. Public key cryptography exists private key that governs the way you control your accounts, values or rule sets. More intuitively, this is the same encryption that protects your right to access your online banking. Public-key cryptography private key, in addition to the use of
the elliptic curve1 is what protects online banking. I feel like people always lose it and it's actually quite important. It's how you prove you have the right to access your online bank account and propose your own transactions.
Then there is the peer-to-peer connection protocol that has been popularized by things like Bit Torrent. This basically establishes how multiple nodes in a network connect with neighboring nodes and how they all end up being connected in a network similar to a network.
The third technology is that of incentive or gaming mechanisms. If we examine in more detail the piece of game theory technology, in essence, we examine how all the different parts are incentivized to "be good and to bet on the right result".
It is safe thanks to the combination of the three technologies and because you are about to lose being a bad actor.
You are incentivized to be a good actor, which means that unless a bad actor is controlling the vast majority of the network, the right result is essentially determined by a group of parties, rather than by a single party.
The three technologies that make the blockchain work are combined to be highly fault-resistant; and this makes coordination between many different parties possible instead of putting a party as the ultimate arbiter.
What is the tolerance level within a blockchain network?
It depends on the blockchain – each individual blockchain is a combination of a set of rules that allow coordination but, for example, in the bitcoin network, people talk about an attack vector of 51%, which means that 51% of the network should being hired by a bad actor to make an impact. In the end, however, people think that 70-80% are more likely to be taken by a bad actor in order to continually win the right to add the next block in the chain.
Depending on the case of use, people choose different compromises between safety and speed.
Bitcoin has been designed for as many parts as possible to protect the network in a completely pseudo-anonymous way; while what is done in the energy space means that we are trying to solve the problem of multiparty coordination, but we do not require the same level of anonymity and, in fact, it probably would not be allowed by many regulators anyway.
How is this being used in the energy sector? What are the cases of use?
Blockchain is the latest coordination and cooperation technology because it allows many different parties to coordinate through the same system and the same data sets.
I would say that the electrical system is the last problem of coordination and I will explain why. Basically, 15 years ago, we had an entire electrical system from top to bottom. We had large power plants that exported power to consumers.
But the renewable revolution has put in place a lot of different wind turbines, solar panels, batteries and controllable devices such as electric vehicles.
We now have a two-way energy flow and consumers are becoming prosumer; they are exporting energy and importing it; their cars may be able to make independent decisions about when to import and when to export and all of this happens on an electrical system that needs to balance on an instant-by-instant basis.
Basically, a huge amount of coordination is needed through this shared and physical power grid. The grid has never been designed for this type of coordination.
Therefore, most energy blockchain projects are examining this coordination challenge, whether it is coordinating data, coordinating business interests or coordinating green energy provision.
The main use of blockchain in energy is coordination.
Where does the electron fit in this ecosystem?
We have taken a fundamental vision in this regard.
What we are trying to build is the digital backbone of this new interactive energy system where you have to coordinate three specific sets of information to create new markets and services.
One of these is the coordination of information on what resources are present in the system, where they are and who owns them and manages them. This is essentially the identification form of what we are doing. This is very important because given the very fast launch of electric and renewable electric vehicles and other devices, the operators of the central network do not have this kind of vision. Many of these devices are invisible to them and are therefore completely unassailable by them.
Secondly, we are creating a shared market infrastructure that allows utilities and network operators to interact with such small assets. What happens without that shared market is whenever they need to balance the system, they continue to rely on the existing coal, gas or diesel generation.
In the world in which they are able to identify all the functionalities at the edge of the grid, they start to produce cleaner, cheaper and more resilient energy systems, also talking about those goods and making them fit into the whole value idea. of the system.
The third module is essentially a data repository module whereby we are coordinating a set of access permissions that allow the parties to grant or cancel access to the data behind those resources.
Let's say I have an electric vehicle, a battery and a controllable refrigerator in my house, but I have a job, so I may not want to be the manager of those goods. I will be able to cede control of that trading to a third party or service provider and are basically able to act as my aggregator and act on my behalf. A bit like a stock portfolio manager, right? Only the existence of that fundamental data infrastructure allows the concept of "energy as a service" that we are already listening to a lot and facilitates the participation of your assets to the broader system, according to the rules and governance instructions that you have set up for your own good. For example, "You can exchange energy with my car battery but make sure it never falls below 50%."
We are building a broader network coordination market for local network operators, national grid operators and all asset operators in that structure.
In a recent Council for Foreign Relations report, there was a pie chart that illustrates what is happening in the industry and at the heart of the work. It's very interesting.
Most players are enabling peer-to-peer transactions, based fundamentally on how they coordinate between different assets and trading requirements at the family level. The next most common is the management of the network, which is where we are, and this examines how the broader energy industry coordinates all those goods and commercial interests.
Further down, for example, there are those companies that are simulating the right to property of a property, such as a solar panel or a battery. This represents the right to any cash flow generated by these assets.
The opportunity for peer exchange is truly extraordinary. A lot of people are wondering if they want to exchange their electricity. The really important thing about the promise of that market is that you do not have to do it alone, but you can have a very precise control over the bits that interest you, while essentially allowing someone else to manage your resources. Take advantage of cheaper electricity or earned value. An entire space of new value proposals opens up. Personally I think that many consumers would like the opportunity to pass operational control over to someone else, while continuing to gain value.
The most important thing to remember is that with blockchain you never get someone running it. It is always cooperated!
This is a very important distinction to make. If you have someone running it, you end up centralizing again and this is in contrast to the idea behind the blockchain.
The control for the utility is strictly monitored by the set of rules applicable to all those operating on this blockchain network, but then there are specific rules, or smart contracts, that are applicable to people.
Blockchain provides the utilities with a coordination structure that allows them to better interact with resources on their network and there are many different ways they can interact with resources. Sometimes they may actually want to have direct control of that asset, but sometimes they can be comfortable with the dealership or a distributor, because they simply want to access the different parts in the same coordinated market.
I believe that asset owners should not be aware that they are escaping from a blockchain platform: all you need is to know if you can monetize your resources more efficiently. Blockchain is not a consumer product. I see the new ways you can interact with business operators or service providers as a consumer product, but the blockchain itself is completely in the background, coordinating everything.
It has been made too sexy by the press because people think of it as a coordination mechanism. In essence, however, it is what it is. An activator for a utility or a group of people to coordinate information. It's a good thing for utilities because it allows them to interact with a completely new market of distributed assets more efficiently. offers many different options for managing the grid if you are a network operator. If you are a service provider, there is a more in-depth and more personalized service proposal that you can offer to consumers.
That's why we're engaging with utilities, but there's an entire level of different service providers who sit on top of that platform and offer specific services, such as trading for refrigerators or optimizing production of energy for homes with specific attributes in certain areas. These are much more personalized value propositions and energy ceases to be a commodity in which you as a consumer think of this as a kilowatt hour for a fixed price, and start thinking about it as an interactive system in which you decide what kind of value you want to get from the goods; and this is achieved through a set of rules or by the service providers that you decide to trust or with whom you have a relationship.
I do not think it is so disruptive for that world as it was conceived. I think it's much more than a facilitator.
What is your business model?
We provide a platform and could be paid management fees, for example, by users of the platform or we could take a small fee per transaction; but we could also be a service provider on that platform. We provide some of the applications that work on our platform. We know that people may want to be able to sell their aggregate data on energy consumption or assets at home; and on the other side, people may want to be able to buy it. We can build and implement that data sales portal that allows these parties to interact as part of the platform. We become one of the competitive service providers within this newest and largest digital energy ecosystem.
At what point are you?
In general, it is still relatively early. We have passed the phase of "What's the blockchain and it works, and can it add value to me?"
We have found many utilities that believe in added value. We have set up a marketing consortium with 12 key energy players: three network operators, three suppliers, three aggregators and three professional service providers. We conducted a monthly series of workshops on data architecture, how it could work and what the use cases were and what you could actually do with it.
We have defined four initial products that today these parties want to negotiate and that have neither a market nor the necessary infrastructure for trade, so we are going to try them out. On September 13 we facilitated the first exchange between EDF Energy and the British power reserve [see Current Affairs pg 8 – Ed]. Our model is working with a consortium of local stakeholders with the goal of creating a co-opted and co-opted platform. I spoke with 12 and 16 network operators all over the world. The outpouring of interest and interest in having these conversations about how these old traditional energy processes could be made was amazing!
Innovating in energy is like an open heart surgery: you want to move slowly and define what the final result will be, but you also want to add value from the "first day" and that is not always realistic.
Our approach is 'slow and incremental'. and the first exchange we will announce will be made on the basis of all our learning on the regulatory frameworks, on the informational barriers and on the links we have to include to confirm these exchanges – and then we will scale. We are at the dawn of trials, in the late days of industry acceptance, and over the next five years we will hear a lot more about this technology and what will happen.
Is the blockchain overhyped?
It is overwritten for the wrong reasons. I think the kind of advertising campaign on an exchange between one family and another is too much – we are still reading the same exchanges three years later.
What is not overwritten, because it is not understood, is like all this, huge sector could be transformed when you have access to the market to millions of resources and devices, instead of only 100.
Electricity will therefore become cheaper for everyone, because we will be more efficient users of all the assets that we have already included in the system or in the homes of people who are today invisible or completely unmanaged. We will therefore have a greater penetration of renewable energy since you have a reactive system and can therefore generate a more intermittent generation and not worry about a systemic collapse.
The energy system today has been built for multiple multiple redundancies, but if you offer people a price option at which to turn off the lights – and there's a price that people will accept – you can eliminate repetition and the waste of resources the people are paying into the system.
Short-term overhyped, long-term underestimated. We operate in a highly regulated industry and we understand the journey. In reality, the "first day" is not so exciting, even if it has already been completely overcome, but the end result will be really, really exciting.
All the fuss, while it could be potentially damaging, brought a bunch of parties to the table that would never get to the table before and this is allowing us to make all the real, fundamental changes with some of the really big players. SIX
About JO-JO Hubbard
Jo-Jo is the COO and co-founder of Electron. She is also a speaker at the European Utility Week this year.
He began his energetic career in the early days of the renewal of resources on the side of financing activities before the transition to cleantech VC. In 2015, she joined the international strategic consulting firm McKinsey & Co, where she focused on digital transformation. Here, he realized that decarbonisation and transformation of the energy sector do not happen without a new shared digital infrastructure and markets that encourage cooperation. This provided the foundations on which Electron was founded.
1 * According to Wikipedia: "The elliptic curve cryptography (ECC) is an approach to public-key cryptography based on the algebraic structure of elliptic curves on finite fields.ECC requires smaller keys than non-ECC cryptography (based on simple fields of Galois ) to provide equivalent security.
Elliptical curves are applicable for key agreements, digital signatures, pseudo-random generators and other tasks. Indirectly, they can be used for cryptography by combining the key agreement with a symmetric cryptographic scheme.
