Energy Savior Blockchain Set To Shake Up Utilities

James McClelland

Some commentators refer to them as an oncoming superstorm for the utilities industry. Others say they represent an impending revolution in the business.

The combination of microgrid energy production and blockchain distribution is powerful. The two technologies can work together to decrease prices for consumers. They also can improve energy generation during crises.

But their partnership poses global disruption for longtime utility providers. Understanding these tools will help in preparing for challenges and potential benefits.

Understanding microgrids

Utility grids are centralized power systems. The largest ones create, store, and distribute electrical energy to millions of customers. Some serve multiple nations on different continents.

A microgrid is a much smaller system for generating and storing electrical power. Islands, rural communities, urban neighborhoods, and individual homes may run on microgrid power. Some use renewable resources such as solar, wind, and water power to generate electricity.

A microgrid may be self-sufficient. Or it may connect to a large utility grid to purchase electricity or sell excess that the microgrid produces. One situation when a microgrid may choose to disconnect is during a storm that causes outages for the big grid. Another is when the microgrid wants to cut energy costs by avoiding periods of peak demand on the big grid.

Another key feature of microgrids is that they make it possible to purchase and sell tiny amounts of electricity, such as a single kilowatt hour.

Unchaining blockchain from Bitcoin

Blockchain is a type of database that distributes and gathers transaction information from all participants. It has no central point of control. Each participant can record a block of data connected to blocks of information from other contributors in a read-only chain.

The anonymous inventors of blockchain created it to trade electronic currency called Bitcoin. The encrypted, read-only function secures the entries against change. Blockchain information is also protected by its transparency. Each participant can view all the blocks.

Many types of businesses are experimenting with blockchain ledgers. Recording and sharing data about purchases, sales, and trades of energy are among the main uses of blockchains for utilities and microgrid participants.

To encourage the use of solar energy, the SolarCoin Foundation of Connecticut created a virtual currency called SolarCoins. Network members who produce solar power earn one “coin” worth about 24 cents for every megawatt hour of solar energy they produce. In time, they will be able to use the coins to purchase goods as well as energy from other prosumers (producers and consumers of microgrid energy).

The foundation estimates it will have about 1 million participants by late 2019.

Modernizing the power grid together

In March 2017, Navigant Research published a post about microgrids and blockchain, in which principal research analyst Stuart Ravens and coauthor Richard Shandross explained trading energy peer-to-peer (P2P) via blockchain. The P2P movement is based on the idea that power generation will eventually decentralize with utility companies taking a smaller role in production.

Here is the scenario the Navigant authors predict: Prosumers sell power to and purchase it from each other. If you own enough land or buildings fitted with solar panels or windmills, you may become a mini-utility. The old utilities morph into distribution network operators. Blockchain operators become supply companies. And consumers, the authors say, “pay their current retail tariff” or less due to local sourcing of power.

The article noted that blockchains may: (1) maintain data logs about production and transactions, (2) handle payment by cryptocurrency, (3) store unchangeable performance data, (4) and serve as a ledger for trades and purchases.

Ravens also discussed prosumerism in an August 2017 SAP Game-Changers talk show about the impact of blockchain and utilities. Another guest was Henry Bailey, global vice president of the SAP utilities industry business unit.

Bailey said that the Internet of Things (IoT) allows objects, such as power poles, to connect and share information rapidly. The IoT is a network of digital objects – actual and virtual – connected and sharing information with each other through the Internet. During the talk, Ravens added that blockchain secures the energy information it carries.

The importance of this role in securing information became clear during the talk when Bailey noted that an Australian experiment in which power poles contain IoT taps allowing the poles to “talk to one another” and to managers at remote locations. This is helpful when a problem arises, such as an outback fire requiring power pole repair.

Also, Ravens reported that adoption of solar power is occurring rapidly in Australia and soon will “account for about 90% of residential energy consumption and meet about 50% of the country’s needs.” So, lots of other microgrid equipment will be sharing information through the IoT.

Learning lessons from disasters

Speaking of utility power poles, in October 2017 numerous stories about Northern California’s massive wildfires indicated that winds felled poles, and this may have been the leading cause of the fires. Perhaps IoT connection of the poles would have more rapidly alerted authorities to locations of downed lines.

Before the wildfires, other disasters attracting world attention included destruction on Caribbean islands by hurricanes Irma and Maria. Following the storms, Dr. Jemma Green wrote in Forbes about the technology’s potential for speeding emergency access to energy during outages.

Green specializes in studying how blockchain disrupts enterprise. She noted that one of the few pieces of “good news” concerning the storms is that they have shifted interest toward renewable microgrid systems and new uses of blockchain to support them. She noted the survival of Sir Richard Branson’s microgrid on Necker Island “showing how things could be” with investment. She concluded that blockchain’s transparency makes it “easier to sell microgrid to investors.”

So, blockchain will cause disruption, but it will ride to the rescue of energy delivery as well.

Learn how to innovate at scale by incorporating individual innovations back to the core business to drive tangible business value by reading Accelerating Digital Transformation in Utilities.

About James McClelland

James McClelland is the senior global director of SAP Utilities & Energy Industry Marketing, James has over 25 years of experience creating business strategy for the utilities industry. He is a graduate of the University of Toronto, Canada, holds a degree in Business & Commerce, and currently resides in Dallas, Texas.