As EV adoption picks up speed and utilities learn to incorporate them as grid management resources, the sheer volume of data moving around will grow exponentially. A home charging station might participate in demand response programs, provide services to the grid, and purchase energy from a nearby solar generator. Each of those tiny transactions has a cost, and it takes time to settle the ledger.
Regardless of the size of the grid — whether a microgrid with a few hundred users or a regional grid with millions of users — grid complexity is about to rise.
Enter, Blockchain, which has been widely touted for its ability to revolutionize everything from currency and financial transactions to balancing the grid and energy trading. Blockchain is essentially a distributed ledger technology that allows for validation of transactions rapidly, cheaply and publicly, helping reduce data risks and speeding the authentication process. It can eliminate the need for a centralized approach to market clearing and trusted third parties, opening the way for a transactive energy environment where balancing is constant and security inherent.
Transactive energy platforms may be the future, but they won’t have a centralized market function, according to Stuart Ravens, principal research analyst at Navigant Research. “It would just be too expensive. The transaction costs would far outweigh the potential profits. So it all has to be automated,” he said.
Energy trading today is typically done in large blocks — megawatts. But if energy trading occurs between consumers and “prosumers” — those who both produce and consume energy — it could include rooftop solar arrays of just a few kilowatts. That means transaction costs would make up a much larger portion of the entire deal.
“If you have high transaction costs, it puts constraints on the size of the deal you can make,” said Johnathon de Villier, a Navigant research analyst. “So when you start talking about potentially giving prosumers — at residential scale — access to markets, the transaction costs just makes that totally impossible. … The transaction costs could potentially be more than the value of the thing you’re actually trading.”
Ravens notes that “energy trading requires a fair amount of mediation and it needs that centralized market control.” And settlement — ensuring the energy was delivered and everyone got paid — can take weeks for some products. “Blockchain can do away with all of that … I hesitate to use the term ‘real-time,’ because it definitely won’t be, but you can settle the market far quicker, and open the market up to much smaller participants,” Ravens said.
If blockchain is a technology, how do parties actually connect and trade?
A blockchain is a series of logic statements that make up self-executing contracts. They are commonly known as “smart contracts.” But according to LO3 Energy CEO Lawrence Orsini, that’s a misnomer.
“The real ‘smart’ is in building and layering those so they can provide function at the grid edge,” Orsini said. “If you can layer these contracts and build out relatively complex logic processes that provide services, there is some real interesting value there.”
LO3 Energy is developing about 50 transactive energy projects worldwide, but the one generating the most buzz is Brooklyn Microgrid.
About 60 people in the Park Slope neighborhood are involved in a peer-to-peer trading network that allows for very specific energy transactions. A customer could specify, for instance, they wanted to purchase solar energy from a neighbor across the street.
LO3 has also developed the platform that enables all of this to happen. Formally launched in November, “Exergy” is a blockchain software and transactive energy system that, as the company puts it, generates and utilizes “the data required to enable price as a proxy for control and optimal operation of electric power systems.”
LO3 is not an energy company, Orsini said. “We are a tech company focused on transforming a market.” And with significant changes looming over the energy industry, he said those markets will be forced to change.
Another group building a platform is the Energy Web Foundation, a global non-profit focused on accelerating blockchain technology across the energy sector. Created by Rocky Mountain Institute and Grid Singularity, the group is working to develop market standards that will help align blockchain efforts.
The group has developed a testing environment, called Tobalaba, where companies and organizations can develop blockchain applications. Several affiliates accepted roles as network validators, settling on standards by whitelisting certain smart contracts. Validators include Shell, Statoil, Engie and Tokyo Electric Power, among others.
Energy Web Foundation’s Oriol Pujoldevall said Tobalaba is “gaining a lot of momentum.”
“There’s a growing community around the platform of both innovative startups and affiliates, and there are currently more than 25 companies building their tech on our platform,” Pujoldevall told Utility Dive.
As improvements are made to the environment, the Energy Web Foundation expects it will be capable of processing more than 1 million transactions per second.