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The potential of blockchain in the energy industry could be transformative.
Over the past two years, we have seen a host of energy companies engage with the technology and launch pilots. Some common trends are emerging, but a lot still needs to be defined from both a technical and business perspective.
Our view is that experimentation at this stage is worthwhile as it will enable utilities to explore the technology and see its use, limitations and scaling potential.
As a result, four New York utilities — Avangrid, Con Edison, New York Power Authority and National Grid — are excited to be working together to understand how shared blockchain infrastructure may benefit our customers.
It makes sense to explore the technology collaboratively. Many blockchain solutions inherently involve multiple parties sharing information to enable new services, and we are looking to provide value and stimulate innovation across our networks in the state. We are constantly evaluating new technologies that can provide value, defer investments, and improve the customer experience; we’ve come together to explore blockchain technology in order to increase our impact and focus on use cases applicable across New York state.
How could blockchain benefit utility customers?
Simply put, blockchain is a way of structuring data by forming and linking blocks of cryptographically signed and time-stamped transaction data. The blocks record who transacted “what” with “whom.” Once stored on the blockchain, these blocks form an immutable and shared database of records.
Another important element are smart contracts, in which the rules for completing transactions are carried out by executable programs. As a result, transactions occur automatically when the system detects that the conditions in the contract are met.
To reach agreement among all parties, there are several processes for the “nodes” (participants) in the blockchain network to approve transactions — this process is called “consensus.” By using the combination of these components, blockchain technology enables participants to keep track of transactions without centralized oversight, thereby creating trust among a group of participants in a network. The idea is that participants can be assured that there is one version of the truth. As a result, blockchain may not only be suitable for transactions among parties that know and trust each other, but also those that don’t yet know and trust each other.
We as utilities have many existing processes with partners that involve forms of automated transactions: our customers, the wholesale market, third-party energy suppliers, community solar companies, regulators, and many more. In the changing energy landscape, we are deploying smarter infrastructure and devices across the grid that are creating large volumes of data, while also seeing the rise of a whole host of customer activities as they engage with energy more.
All of this means that there will be many more transactions that require transparent processing, data privacy, and automation. As these technologies mature, we are looking at these blockchain technologies and how they fit our needs.
Selecting use cases
Working alongside New York-based Indigo Advisory Group, we began to evaluate potential applications across both blockchain and utility industry specific criteria. This year, we identified applications that may be suitable for blockchain from several sources.
In total, a pool of over 50 use cases emerged. These use cases were then evaluated against criteria that flow from two core questions: 1) Does the use case actually need a blockchain solution or will another solution perform better? and 2) What are the benefits to participants at this stage?
High scores across the first set of criteria were a prerequisite for exploring blockchain for a particular solution. Below we highlight our findings on use cases that warrant further exploration. They include: customer management, clearing and settlement, decentralized energy markets, cybersecurity, DER management, and electric vehicles.
Customer management
Trust portal: A portal that offers customers a place to transparently manage consent of energy sharing across the participating New York utilities and registered third parties. The distributed ledger administers shared registration of third parties (e.g., DER providers) for participating New York utilities, and keeps track of data sharing transactions from utilities to third parties and vice versa. An immutable distributed ledger would provide operational and compliance efficiency by allowing customers, utilities, third parties and regulators to trace back transactions in a reliable and shared record.
Clearing and settlement
Manage C&S confirmation process: An auction platform for wholesale commodity procurement that provides end-to-end control of the process. The same system could later be expanded to include peer-to-peer energy trading.
Managing carbon (RECs) positions and P&L: In New York state, load-serving entities are required to buy Tier-1 renewable energy credits every year. Blockchain could provide automated purchases via smart contracts, a lighter certificate of origin reporting system, reduce administrative costs, and eliminate costs associated with aggregation of small certificates coming from distributed resources.
Decentralized energy markets
Transactive energy: A decentralized peer-to-peer transaction and supply system where the valuation and settlement of electricity over time and location can be fully automated through smart contracts and recorded on a distributed ledger — enabling process efficiencies and improving audibility and transparency.
Cybersecurity
Device authentication: Deployment and provisioning of IOT devices such as smart thermostats at the grid edge. Blockchain’s one-way encryption and distributed ledger could help prevent intrusions and tampering with authentication records.
DER management
Advanced EE and demand response M&V: A distributed ledger could store references to meter data collected from smart metering devices and validate results of standardized measurement and verification (M&V) cost avoidance analysis. A blockchain solution could provide enhanced data privacy and security, near-real-time automated demand response events, and financial settlement and events validation.
DER quick connect: The distributed generation interconnection process comprises many steps that require accurate, consistent and confirmed information from the customer, consulting engineer or contractor, and the utility. Blockchain could further improve this process through automated data verification, using smart contracts that execute notifications when conditions are met.
Electric vehicles
EV charging platform for New York: This blockchain solution would allow customers to plug into any EV charging station, regardless of the utility region. Blockchain could facilitate a seamless mode between multiple parties: utilities, charging stations and third parties.
Looking to the future
We are looking forward to consistently monitoring the advancements in blockchain technology. Over the next two years, we believe we will see continued market developments.
For example, we expect that blockchain developers will continue to focus on core infrastructure, such as protocol development and network development, in order to address some of the existing technical limitations. In tandem with this progress, we are expecting to see further sophistication in architecture, interoperability and standards across the industry. These developments may help our efforts to standardize technologies and processes — as currently many different blockchain solutions exist.
We also expect that the debate between open (public permissionless, public permissioned) and closed (consortium, private permissioned/enterprise) blockchains will continue. We will follow closely and participate in these discussions. Lessons learned from other industries — such as financial services sector — will serve our industry well. In addition, we may see the idea of convergence solutions start to take hold where blockchain and artificial intelligence solutions will combine with OEMs and DER manufacturers.
By mapping how blockchain technology can potentially benefit our customers, regulatory objectives and state goals, we have begun to assess the relative potential of solutions. As a result, over the coming months we plan to work on this technology within our companies and collaboratively in order to share lessons learned across the state.
As we continue our research, we aim to work on a joint virtual proof-of-concept implementation of a shared use case to test our findings and explore further potential. We are looking forward to building off our work so far by collaborating with partners to better understand the opportunities that exist and that can bring value to our customers.
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This article was written by Avangrid, Con Edison, National Grid, the New York Power Authority and Indigo Advisory Group.