Utilities and blockchain - between a rock and hard regulation

Will blockchain enable mass energy transactions in the next ten years? Not likely, says OSIsoft’s Bill McEvoy.
Published: Wed 05 Jul 2017

Regulators and technology developers have an appetite for promoting blockchain as the core technology infrastructure to allow the market for prosumers to be fully interactive with a decentralised energy market, says Bill McEvoy, Global Industry Principal at OSIsoft. 

In the US, regulators from federal and state level believe that decentralising the energy market is good from an economical standpoint, and also good for their constituents.

These authorities think they have to be advocates to move the needle and throw out very aggressive pressure telling the utility sector: 'You need to start thinking about blockchain. You can’t keep controlling the money, you can’t be a monopoly.'

Regulators know that developing new technology such as smart grid, smart cities or blockchain, stimulates the economy with job creation through pilots and new technology businesses.

McEvoy believes there are a few core strategic forward-looking utilities - probably 10 or 20 across in the world - that are basically playing the political game. They are successful in being schizophrenic and playing along with the politicians to help the technology move along.

These energy companies - in California, New York, Germany, Netherlands - truly believe blockchain technology is going to get there, but not in the time frame in which regulators or technology startup companies want it to.

If you've got regulators and technology developers saying blockchain will be enabling energy transactions in ten years, you’ve got to look at 20 years before it might even start to make a big move, and in 25 years before it's mature.

Challenges to energy blockchains - who owns what?

Before blockchain is a solution for mass energy transactions, there are many questions still to answer, says McEvoy.

There is the issue of regulation. Who's going to regulate the energy blockchain, who's going to own it, and what is the play between the federal area versus the state area as far as who is responsible for making sure that the oversight is being done properly?

Who should manage the market and the blockchain trading platforms? Are transmission system operators or distribution system operators ever going to be able to completely manage it? So do you come up with balancing groups that do it, such as a large federal, certified provider?

One possible model is the Nasdaq Stock Exchange, where Nasdaq is pretty much an independent model, but they’re an operator of the stock exchange and they’re running a private blockchain.

Energy blockchain data and security

McEvoy also believes that another big issue is around data. Who controls, governs and owns energy data?

There lies the largest and greatest impact that is going to slow down blockchain transactions from moving as quickly as people might like it.

If a customer is assigned to an energy company, there are privacy laws that will restrict what information the supplier can give out on them from a customer billing system. They can't give personal details to a third-level provider.

Cybersecurity is another barrier around security that is going to stall and stop blockchain development. Currently the distribution sector isn’t even embracing cyber security standards and trying to do adhere to them in order to protect their own company’s reliability.

And then there’s the customer - does the consumer-prosumer really understand who owns their information? Who's going to be able to have access to the information? Who's going to have oversight of these transactions? And what are the check and balances?

"To me, educating the consumer to understand that they can be a prosumer is going to be a challenge itself," McEvoy says.

"I can't see blockchain transactions at scale happening within the next 20 years," he concludes.

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