The role of blockchain technology in the energy transition

By JJB

This week, on Monday June 18th, the German Center for Research and Innovation (GCRI) and the Fresenius University of Applied Sciences organized a symposium on “The Role of Blockchain in the Energy Transition”, which took place at Grand Central Tech in Manhattan, New York.

Blockchain technology promises critical progress for the energy sector. Indeed, blockchains could improve system reliability and reduce operating costs, thanks to new types of interactions between the power system, its users, and distributed energy resources (DERs) such as photovoltaic rooftop installations, heat pumps, electric vehicles or electricity storage. This would also represent an opportunity to enhance overall system efficiency and to share the economic surpluses arising from better resource utilization.

However, blockchain technology continues to evolve and projects with different levels of maturity are being discussed on both sides of the Atlantic. Therefore, the symposium’s panel of experts discussed a range of key insights for a better understanding of blockchain and its potential for the energy sector.

First of all, what is a blockchain? Kicking off the main event, Jens Strüker from the Fresenius University of Applied Sciences described it this way: “A cryptonetwork is a decentralized network built on top of the internet that provides a wide variety of digital services. Tokens are the internal currency of cryptonetworks, and the incentive mechanism which enables them to function. Blockchain is the underlying technology [of those cryptonetworks and their tokens]”. Strüker highlighted specific features which blockchain technology aims to deliver, such as increased efficiency (higher speed, less layers) compared to intermediate platform exchanges, better control over data exchanges and other benefits that are specific to the token-based approach of blockchains (such as: immediate remuneration, better incentives for participation in the network and for investing in the network).

In a pre-recorded presentation, Ashley Pilipiszyn (from Stanford's SLAC) described some of her research on Crypto Control for Power Systems. By reducing the amount of verification necessary to proof that a certain service was indeed carried out (“Proof-of-Work”, used for example by BitCoin) or that it was monitored correctly (“Proof-of-Authority”), Pilipiszyn’s “Proof-of-Control” concept reduces the blockchain’s energy consumption. Indeed, this blockchain technology only needs to verify that sufficient controls were in place during a given interaction. According to Pilipiszyn, this could become an efficient solution for power system functionalities such as forecasting, scheduling, dispatch and frequency regulation.

Colleen Metelitsa (GTM Research) presented several existing use cases for blockchains in the energy sector, including electric vehicle charging (for instance, the ambitious “Oslo2Rome” project, using an Ethereum blockchain), wholesale power trading (for example: 39 companies have been taking part in a pilot project, using a Tendermint blockchain), distribution management, grid flexibility (e.g.: transmission system operator TenneT will be able to manage residential storage units through a Hyperledger blockchain) and cybersecurity. Metelitsa argued, more generally speaking, that blockchains could be used to optimize multiple market participation options for DERs and also to remunerate them immediately.

Andrew Reid (ConEdison), who recently won an award for his research on microgrids, presented ConEdison’s approach to redefining the utility business model, by integrating DERs and by designing and implementing new management processes that maximize the value of innovation for ConEdison. According to Reid, blockchain technologies will be an essential part of this strategy. He also announced an upcoming ConEdison report on blockchain implementation in the power sector, and on use cases that could prove to unlock substantial energy benefits.

Scott Kessler (LO3 Energy) presented his company’s blockchain technology Exergy, aiming to be a DSO-operated demand-response and grid services platform that understands the time- and place-dependent value of DER grid injections, and that moves towards a system based on grid efficiency. In addition, his company’s work on local community microgrids enabled the “first-ever energy transaction through a blockchain”, according to Kessler. He also emphasized the industry’s need to continue their research efforts for new, profitable business models. Kessler also argued that different layers of blockchain could very well go hand in hand: local ones could be used for specific or urgent local interventions, whereas larger blockchains could be used to ensure system optimization. In a similarly cooperative spirit, he highlighted that the aim of LO3 Energy was not to create a single turnkey-ready blockchain product for the worldwide market, but rather to accompany utilities in their deployment of blockchain-based solutions, harnessing their employees’ knowledge of local constraints and imperatives.