Block chain technology, which is central to the peer-to-peer payment network Bitcoin, could be a game changer for a future distributed power grid, speakers said on June 22 at a Greentech Media conference in San Jose, Calif.
Scott Clavenna, CEO & co-founder of Greentech Media, moderated a panel at the "Grid Edge World Forum 2016" entitled "blockchain and the transactive grid." Panelists were Dave Bartlett, chief technology officer at GE's Current, Paul Brody, Americas strategy leader, technology sector, at EY, and Lawrence Orsini, founder and principal at LO3 Energy.
Clavenna said that block chain technology has been decoupled from Bitcoin, with a variety of other industries looking at it for a number of different purposes as a way of authenticating transactions and contracts "and a variety of other ways to use something as secure and distributed as the block chain is."
He said that block chain technology "has now touched upon the electricity industry, which it turns out is looking for something that underpins a distributed transactive grid." Clavenna said that "for me, it is one of these sea change possibilities in the industry."
On its website, Bitcoin notes that the Bitcoin network shares a public ledger called the "block chain." The ledger contains every transaction ever processed, allowing a user's computer to verify the validity of each transaction. The authenticity of each transaction is protected by digital signatures corresponding to the sending addresses, allowing all users to have full control over sending bitcoins from their own Bitcoin addresses, according to Bitcoin.
At the Greentech Media conference, EY's Brody said that block chains "are fundamentally a distributed technology and the grid is being distributed." EY is a tax, transaction and advisory services firm.
The grid "is becoming a very, very smart network," he said. "The question is, how do you make that effective? And this is really where block chains come in."
Brody argued that there are three things that are "really amazing" about block chains. First, "unlike every other system that's ever been made from an IT perspective, block chains work without having a single central authority decide what is OK and not OK."
Instead, block chains work through what is called a consensus algorithm. "People do a majority vote to check each other's work and assess transactions and this actually makes block chains very, very secure," Brody said.
Second, "because it's distributed, it means that decision making automation and process can take place everywhere on the network even when pieces of the network are disconnected from other parts of the network," the EY executive said.
Brody said that this is "very useful because you can set up rules that say, hey, when the price of electricity goes above X, switch off. When the solar panel output falls, don't switch on the water heater. You can actually set up smart rules without the need for centralized demand response and all of these devices can actually follow it out."
The third characteristic of block chains that Brody sees as a positive is that they "create the single most unimpeachable transactional record of everything that goes on."
Block chains "create really perfect records. They're actually really, really amazing record keeping systems because everybody in the network gets a copy eventually of every single transaction," Brody said.
What does that history and the distributed nature of block chains mean for the grid? "If the grid is distributed and decision making is distributed, but we can still have a complete record of all the stuff that goes on, we can build a network, a grid that is smart and able to think for itself," he said. At the same time, "we could still understand through the transactional record all the stuff that's happening in it."
Brody said that "this is a technology that will have a transformational impact because as the grid becomes distributed we need a distributed technology that goes with it."
Brooklyn microgrid includes block chain element
Orsini noted that LO3 Energy has been focused on microgrids. The first microgrid demonstration project the company has worked on is in Brooklyn in two communities, Gowanus and Park Slope.
The purpose of the effort is two-fold, he noted. "The first one is an actual physical microgrid that at some point will separate from the utility grid in a time of need and provide for the resilient power for a section of the utility grid there," Orsini said.
"The broader part of it is a virtual microgrid," he said. A virtual microgrid "is really a community and so what we're focused on is building community microgrids."
In Brooklyn, "we have more than 100 community buildings that are engaged in this" that want to participate in the physical and virtual microgrid as it develops over time, Orsini noted.
He said that residents in this community have "never really had the potential to buy energy from each other and this is a place where the block chain actually makes this a significant possibility."
But one of the big problems behind this "is that the cost of transacting that energy is pretty high, actually." He said that there is "sort of a glass floor, glass ceiling -- depends on how you want to look at it -- to who gets to participate in these wholesale energy markets based on how much the cost of this transaction is."
When one utilizes block chain technology "and you can efficiently transact micro payments then that sort of takes the floor out and gives you a whole lot of different options," the LO3 Energy official said.
Proof of concept in microgrid includes block chain
LO3 Energy has set up a proof of concept in one small segment of the Brooklyn microgrid on President Street.
On one side of the street are five solar energy "prosumers," Orsini said. "These are people who are consumers of energy but they also have their own PV systems, so they're also producing energy," he said.
During the day, "they're actually producing more than they consume, so physics tells us these electrons go actually go out on the grid and they look for the next load, so they're probably going across the street to the neighbor's refrigerator, toaster, whatever it might be, but those electrons are going somewhere useful in the community."
Using block chain technology and "some bits that we have developed, we have given these folks the potential to actually set up a market for those free electrons," he said.
An open energy platform called the TransActive Grid and developed by a joint venture of LO3 Energy and Consensys is being utilized as part of the proof of concept. (Click here for a video that provides an overview on how the platform works in the context of the President Street proof of concept).
Among other things, the technology "nets the energy that goes back onto the grid. It takes all of this information and it puts it onto a block chain. So there's a great deal of transparency there. Everybody can see where the energy goes to, where the energy's being consumed and you can make an efficient market there," Orsini said.
What this does "is it gives us a significant number of new options for people to recognize the energy spend that they're already spending today, so they get to choose interesting new things."
Among other things, people can "buy a whole host of new forms of energy," he noted, listing community solar, local solar and "hyper local solar — the solar across the street from you -- all made more efficient and easier to transact across the block chain," the LO3 Energy executive said.
"We don't expect people to be day trading energy," Orsini said. "We're really not concerned about the six cents it's going to save you by shifting the time that your washer runs."
It is "more of a representation of how much I care. How much do I care about the local community? How much do I care about the economy? How much do I care about the environment? So you make those choices and in the back end, the fuel mix is lined up to represent those choices," he said.
GE, EY formed alliance in May
In May, EY and GE Digital unveiled a new strategic alliance to develop and provide Industrial Internet of Things services to help industrial companies achieve increased productivity from capital assets and processes linked in the cloud. The companies said they will develop and deliver industry-specific services based on GE's Predix cloud-based operating system.
GE unveiled the creation of Current in October 2015, noting at the time that the company would bring together GE's solar, LED, energy storage and electric vehicle businesses under one roof and start with more than $1 billion of revenue.
