High levels of supplier switching by consumers are regarded as a sign of a well functioning competitive energy market. But for consumers to switch the process must be straightforward, painless and quick.
In the UK switching levels have declined in recent years from the high levels of the early 2000s. This has led Ofgem to take steps aimed to reverse the trend, broadly on the one hand through obliging suppliers to provide more and clearer information on costs and on the other by reducing the switching time.
While switching numbers have started to show an upturn in the last year, still almost three quarters of households remain on the most costly ‘default’ tariffs and could achieve savings from switching. Further, while the previous five week switching time is now down to 17 days, there is still a way to go to meet Ofgem’s proposed 24-hour target by 2019.
Blockchain meter registration
This switching opportunity is behind the UK startup Electron’s emergence into the market, with the development of a blockchain based registration platform for electricity and gas meters. Backed by a UK government Innovate UK grant, the platform has been built on the Ethereum blockchain, which has emerged as the currently most widely used in the industry.
Besides the particular application, what distinguishes Electron’s concept from other energy blockchain applications is that the transactions are operational and no financial transactions are involved, enabling it to be simplified.
“Our approach is what we call ‘top down’ in that we build platforms that work alongside existing systems, whereas most of the other energy blockchain projects are focused on microgrids and require a change in the way the market is structured to scale up,” Joanna Hubbard, COO and co-founder of Electron, told Engerati in an exclusive interview
As a proof of concept, the platform has been populated with simulated data from 53 million metering points and 60 energy suppliers, to represent the UK market. Scale out tests have shown it to be capable of executing switches over 30x faster than could be required by the current switching rate, i.e. close to real time.
Value added services
Hubbard says that for Electron, the switching application is the first of what could be any number of value added services, either from Electron or from the industry itself, on the blockchain.
“The blockchain concept allows innovation directly onto the platform,” she says, citing the analogy of a Google doc, which may be accessed and changed by anyone with the appropriate permissions. “For example, it would be straightforward to incorporate the priority services register [which details elderly and vulnerable individuals with for example dialysis machines, who shouldn’t have their electricity service cut]. Currently this is maintained in a semi-distributed form but requires utility intervention in the case of a switch.”
Another example she cites is the addition of all meter points nationally, including those attached to assets such as storage batteries and solar PV. A further one would be to link to an energy trading platform, which is Electron’s second blockchain platform under development. Initially this is intended to trade flexibility products such as demand response but with potential for expansion for applications such as peer-to-peer trading and smart grid actions.
Energy industry view
Hubbard acknowledges that for Electron’s platform to be adopted, blockchain will require industry acceptance. She says that so far the response has been very mixed with interest and support from some, particularly the smaller, non-incumbent suppliers, and pushback or total unwillingness to engage from others.
“The pushback seems to be rooted in a lack of understanding and the feeling they would need to learn a new technology and set up a whole new department for it,” she says. “We have been in close contact with Ofgem’s Innovation Link [which supports innovation by startups] and as a result of their feedback, they have encouraged us to play an educational role on blockchain in the industry, what it is, how it can be integrated with the current systems, its benefits, etc.”
As part of this activity, Electron is exploring opportunities to develop a front-end interface to better demonstrate its viability.
“We believe blockchain has great potential in the energy industry. Big pros are that platforms are interoperable and they offer cost efficient ways of adding functionality that standard databases might not. We know that suppliers are plagued with bad data on meters and so we think it is an important infrastructure to exist in general. It could be implemented very quickly, well ahead of Ofgem’s 2018/2019 schedule. Also, there is no other infrastructure existing in a form that could transition to a trading platform.”
Blockchain and energy industry
The blockchain scenario emerging is of multiple blockchains running different applications and services and interacting.
Engerati identifies three key emerging impact areas. The most advanced is transactive energy, which includes Electron’s application and the various peer-to-peer trading platforms under development. The others are network resilience, with an example project the Siemens, LO3 Energy partnership on the Brooklyn microgrid, and maximising Internet of Things investments, with an example pilot being the proposal by Fortum Oyj in Finland to enable consumers in connected homes to manage appliances over the internet.
A blockchain enabled transactive and dynamic system (Indigo Advisory Group)
Examples of the potential of blockchain in the energy industry are shown in the graphic, based on a possible scenario for how over time a series of blockchains may interact with distributed resource penetration and enhanced utility automation to facilitate a transactive energy system.
Developments in utility analytics, the proliferation of distributed energy resources and distributed intelligence may provide “the perfect platform for multiple blockchain adoptions across the value chain,” suggests David Groarke, managing director at Indigo Advisory Group.