Blockchain Is Key to Local Clean Energy Future

In this era of Big Data and break-neck innovation, Distributed Ledger Technology, popularly known as blockchain, will be key to creating smart local systems with renewables, storage, and electric vehicles.

What blockchain means for the energy industry as a whole, and local energy providers such as Community Choice Agencies, is addressed in The Energy Web Chain: Accelerating the Energy Transition with an Open-Source, Decentralized Blockchain Platform, published this month by the Energy Web Foundation.

Recognizing blockchain’s potential to become the central nervous system for the distributed grid, Rocky Mountain Institute and Grid Singularity founded the nonprofit Energy Web Foundation (Foundation) to develop the Energy Web Chain, “an open-source, scalable blockchain platform specifically designed for the energy sector’s regulatory, operational, and market needs.”

Originally created to support Bitcoin cryptocurrency, blockchain is a Distributed Ledger Technology that replicates a transaction ledger (i.e., database) in a series of blocks across a network of computers; when a new transaction is added to one computer, blockchain confirms the new information using multiple validators and distributes it to all peer computers ensuring their ledgers are the same.

A blockchain can contain financial and other data; validate transactions in near real time; use cryptography and digital signatures to prove identity, authenticity, and user access rights; enforce write and read-only permissions; and protect the transaction record from tampering.

These capabilities enable smart contracts that use computer code to automatically perform a function or data modification within the blockchain for a wide range of transactions (e.g., financial, ownership transfer, data storage, and marketplace creation) — each of which is confirmed by multiple blockchain validators. As a result, blockchain can process energy transactions faster, more securely, and at less cost.

Set to launch in summer 2019, the Energy Web Chain (EWC) will offer “a foundational, shared, digital infrastructure” for the energy and blockchain industries. The EWC is being developed in collaboration with stakeholders from the clean energy, utility, grid operator, blockchain, and start up sectors. The Foundation aims to deliver a scalable industry-grade EWC platform by 2025 to support new Distributed Energy Resource (DER) markets and business models.

The Foundation will increase the number of collaborators from 70 to 200 by the launch date and is accepting protocol and upgrade recommendations from the general public in addition to its collaborator group, which currently includes PG&E and Sempra Energy, utility manager for Southern California Gas and San Diego Gas & Electric companies.

In The Energy Web Chain, the Foundation cites several examples of how the EWC can support decarbonization, decentralization, and digitization in alignment with Community Choice Agency goals.

Community Solar. Community Solar projects allow renters and multi-family building owners to obtain the benefits of solar power; however, soft costs such as permitting, legal fees, and interconnection often increase project complexity and cost. Blockchain smart contracts enable a community to manage ownership, governance, and profit division at less cost and with greater security. On the revenue side, blockchain offers two additional advantages for Community Solar: access to global investors and the ability of project participants to easily and affordably liquidate kWhs or project shares.

Decentralized Grid. The centralized grid structure does not have the capacity to effectively value aggregated distributed resources and the competitive generation and load management services they deliver. In the EWC, each DER device (whether a new appliance or a microgrid) has its own digital identity linked to its capacity and customer information. As these DER join the grid, they can act “on behalf of their owners — to use or not use electricity at certain times via detailed, close-to-real-time price signals.” This makes it possible for local DER aggregations can function as single grid participant or “clean energy portfolio” replacing the need to purchase electricity from centralized thermal power plants.

Contract and Market Diversity. Bilateral and multi-lateral smart contracts can bring wholesale markets to the local distribution grid without a costly back-office process. According to the Foundation, “Forward-looking capacity, real-time energy, and ancillary services markets can be localized, aggregated in a nested hierarchy, and better reflect the value of energy and services over time and place.” The Foundation predicts new utility business models and market entrants will emerge in response to blockchain benefits such as lower market management operating costs, improved DER cost profiles, and continuing advances in blockchain and digital technology.

Electric Vehicle Framework. The ability of blockchain to enable a physical asset to participate directly in energy markets is particularly suited to electric vehicle adoption. According to a recent McKinsey&Company article entitled “What Every Utility CEO Should Know about Blockchain,” blockchain has the potential to facilitate EV charging by providing charging station maps that match the driver’s preferences and real-time pricing information and allow him/her to pay with a secure blockchain wallet and smart contract technology. Additionally, the Foundation notes, “In electricity markets, electric vehicles could use this functionality to enter into direct legal agreements with counterparties, removing the need for a vehicle to re-enter a legal flexibility service agreement with a grid operator even if the human ownership of the car had changed.”

The September 2018 GreenTech Media article “For Utilities Exploring Blockchain, There’s Beauty in the Mundane” reports that PG&E and BMW are using blockchain to pilot a carbon credit program for electric vehicles (EV) using an emissions profile based on when the driver charges his/her EV. BMW telematic data is being used to cross-reference user charging behavior with the real-time energy mix data to incentivize drivers to charge when solar energy is plentiful.

Renewable Energy Certificates (REC). The EWC provides a digitized automated platform for REC transactions using the device identity and smart contracts to make REC transactions affordable, effective, and transparent while providing ownership privacy where needed.

As the broader EWC platform is being developed, energy companies are using blockchain in internal proof-of-concept applications such as tracking chain-of-custody for building materials and equipment; for example, PG&E is using blockchain to trace steel reels that carry overhead cables to determine how blockchain can improve and automate the supply chain for all grid materials, according to GreenTech Media.

Community Choice Energy. The Energy Web Chain initiative provides an opportunity for Community Choice Agencies to represent the needs and goals of local communities as collaborators in the platform development. To join the Energy Web Chain collaborator group and provide feedback and recommendations as the project counts down to its summer 2019 launch, contact the Foundation at https://energyweb.org/contact-us/

Chris Cone is Principal of Chris Cone Consulting specializing in distributed clean energy systems that engage private sector innovation, accountability, and competition to meet greenhouse gas targets; drive solutions that create jobs and grow local economies; and foster a sustainable clean energy economy.

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