As the power sector undergoes the next phase of its transformation from grid modernization to a “flexible grid,” the requirements of a flexible grid align at least in some measure with the capabilities of blockchain technology, said Scott Clavena, Chairman of Greentech Media.
Clavena made his remarks at Greentech Media’s recent Blockchain in Energy Forum 2019, which was held in New York City in late September.
Blockchain is a form of encrypted digital ledger more commonly identified as the technology behind cryptocurrencies such as Bitcoin.
In his presentation, Clavena said the power sector is entering a new phase of grid evolution, which he referred to as a flexible grid. The flexible grid includes the rise of distribution-level markets, distributed market operations, wholly new models for the utility and decentralized grid balancing responsibilities.
“My feeling is blockchain is best suited to ride the waves already in the ocean,” Clavena said. “Don’t force a new one,” but rather “look at what’s going on in the electricity system and see the trend that we’re in and find where it works within that trend because the trend is gigantic – it is the energy transition.”
Clavena said that the trend that is critical for the future of the grid and for the blockchain opportunity is the flexible grid, “that high penetration renewables really ask for a new model for the grid.”
He said that the “piece parts are all in place now. All the market forces are lined up. Solar and wind costs have declined significantly and continue to. Annual energy production continues to grow for wind turbines. There’s just a tremendous amount of renewable energy going into the grid across the world.”
Clavena noted that there is renewable energy that is going on to grids, “all the way from the transmission network down to the customer and that, at its low penetration rates, just requires a modest amount of accommodation and it hasn’t necessarily created a whole new opportunity for ways to operate the grid and technologies deployed to support that.”
However, “as we get to higher and higher penetrations, there’s definitely a point where things start to invert, where the more variable renewable energy you have on a grid, the greater the requirement is that you manage that grid in a new way around flexibility because of that variability.”
As the global push for 100 renewables gets closer to becoming a reality, “you can’t just throw it on the grid and expect the grid to operate, given the existing systems it has,” Clavena said.
“Blockchain doesn’t need to catalyze anything,” he pointed out. “This is already happening. There’s a tremendous amount of renewable energy and distributed generation coming on the grid, along with customer-side flexibility resources,” Clavena said.
“What we’ve been calling grid modernization for years around adding intelligence and resiliency to the grid and the ability to integrate renewables” has now transitioned to the next phase in the power sector “that’s much more than that. It’s not just accommodating DG and renewables. It really is rethinking how the grid operates,” Clavena said.
“Once you start thinking of new models – and those models include lots of distributed intelligence and transaction and data sharing and all that – you create lots of opportunities for the values of blockchain,” he said.
He said that “you’re seeing the beginning of grid services move out toward the customer. As time goes on then, there’s more and more evidence” of the piece parts where utilities can start to think about managing the grid in a new way.
“Really looking more at controlling demand, rather than having complete control over generation and when you look at that, you end up with what I would call the flexible grid,” the Greentech Media Chairman said.
The only way a flexible grid works is “you need a tremendous amount of distributed intelligence and you probably need markets, you need some way to reward all the participants that are attached to that grid for providing grid services to it, so you’re not just a consumer of electricity on that grid anymore, you’re actually a participant in it,” Clavena said.
If a flexible grid needs markets to succeed, “well, then you have the need for a platform that very securely transfers value, transfers data, and is scalable and extensible,” he said.
“If you look at all the requirements for the flexible grid, they match up with the capabilities of blockchain to some degree,” Clavena said.
“If you look what a distribution level market can potentially look like, there is just a lot of intersections and I think blockchain in a way succeeds where there is a lot of intersections – a lot of places where value needs to be transferred, ideally in a sort of programmable, autonomous way.”
A slide from his presentation, “Where does blockchain come in?,” said a flexible grid will ultimately necessitate new markets, and those new markets will require:
- Cost efficiency
- Data privacy
- Regulation and governance; and
- Reliability and affordability for all ratepayers
“I wouldn’t say blockchain gets like a positive star on all those, and in fact there’s some elements of this that are much more challenging than others, particularly scalability and data privacy, for different reasons,” Clavena noted.
“The quantity of transactions, the speed necessary for transactions, that can be a challenge for blockchain and so there’s a lot of work around rethinking” the architectures of blockchains so that they can achieve that kind of scalability, “but that’s still early days, it’s still a work in progress.”
That in turn is why when one looks at most of the blockchain pilots and proof of concepts, “we’re really talking about small scalability. It’s small trials to just watch how it works and everything. But when you get to the point in sort of this future distribution-level market, where all these things are happening in five-minute increments and lots of energy trading going on or data sharing going on, scalability is a real challenge and I think it’s one of the big ones to crack.”
SMUD official details electric vehicle blockchain project
At the Greentech Media conference, Denver Hinds, R&D project manager for smart energy technologies at California public power utility Sacramento Municipal Utility District provided an overview of a SMUD blockchain project.
The project is being funded in part through an award from the American Public Power Association’s Demonstration of Energy & Efficiency Development program and will utilize blockchain-enabled tokens as part of an effort to encourage electric vehicle owners to charge their vehicles at workplaces when local renewables peak during the day.
Atlantic Council report
A recent report from the Atlantic Council, “Assessing blockchain’s future in transactive energy,” says that the power sector stands to be transformed by a pair of the intersection of two disruptive forces: the spread of distributed energy resources, which is upended the traditional one-way flow of energy from central stations to consumers, and the use of blockchain to replace the traditional role of intermediaries, such as banks, in recording and executing transactions.
In the early flush of enthusiasm, however, blockchain’s suitability to energy sector transactions has not been sufficiently analyzed, according to the report. “Blockchain, though offering a number of significant benefits, is not a panacea,” the authors write in the report.
The report’s analysis found six trade-offs when blockchain is used to disintermediate a central platform authority: efficiency, scalability, certainty, reversibility, privacy, and governance.
Those trade-offs are difficult to justify for some, though not all, blockchain applications, such as in the retail electric sector, but also for microtransactions, smart contracts, and support for third-party application development, which are often touted as ideal uses for blockchain but, in fact, may be better supported by traditional platform architectures, the authors say.
When it comes to the core challenges of transactive energy, the report argues that blockchain is not yet ready to handle those problems and, though it may play a role, blockchain is not yet prepared to play a leading role, the authors say.