At the pace with which blockchain offerings are developing there is little doubt that the technology will be a key feature of day-to-day life in the years ahead. The big question at this early stage of development with use cases as diverse as peer-to-peer trading and data aggregation, is where it can bring the most value?
For some insider insights, Engerati caught up with former CEO of RWE’s UK subsidiary npower Paul Massara, who after a spell with solar company Northstar Solar, is now CEO of the London-based blockchain startup Electron.
“I always start by saying that blockchain should be seen as a solution to energy sector challenges rather than as a technology looking for a problem,” says Massara. “The unique nature of blockchain with its distributed ledger and the ability of third parties to interact and create markets along with the ability of independent parties to undertake data management are all very applicable to the energy market and the challenges that it faces.”
As an example, he cites the problem of poor data quality and the potential of utilising blockchain to incentivise verified third parties to keep certain customer data up to date, rather than relying solely on the periodic cleansing by Ofgem or other data holding parties.
“This would be a real benefit to the system and consumers. Blockchain is a much more dynamic and flexible system.”
Blockchain energy solutions
Electron was one of the earliest blockchain entrants to the energy sector with a solution focused on solving the problem of how to integrate tens of thousands of devices into the flexibility market.
Subsequently the company has won support from the UK government's Innovate UK fund and along with National Grid and Siemens is establishing the first of what are envisaged as several project consortia to demonstrate the role of blockchain in balancing the electricity grid with the commercialisation of a flexibility trading platform.
Members include the network operators Northern Powergrid and UK Power Networks, suppliers EDF Energy and Open Energi, energy companies Shell and Statkraft, demand response providers Flexitricity and KiWi Power and consultants Baringa with legal support via Pinsent Masons.
“The overarching challenge is of course the decentralisation of the energy system with distributed assets and two-way power flows and the blockchain platform allows the full economic benefit of those assets to be gained by value maximising across all levels of the grid,” says Massara.
Referring to Electron’s near real-time switching solution, which will be entered into Ofgem’s forthcoming switching service procurement, he points out the potential with blockchain, not available in the current process, to a switch with the customer information such as their vulnerability status and assets such as solar PV, battery storage or an electric vehicle. Or at the next level with smart contracts, for a doctor to be able to flag a customer as vulnerable if for example, he or she requires an oxygen pump.
Advancing blockchain in energy
While the energy sector is very much at the forefront of blockchain development, Massara believes it will start to become mainstream following the lead of bank implementations in their back-office systems.
“This will give blockchain more use cases and more legitimacy and will move it away from the concept of bitcoin and cryptocurrencies to a focus on what the technology can do for the underlying business.”
Nevertheless, energy regulators need to play a part, in particular in ensuring “openness” of the market, he says.
“For example, in the UK it needs to be clear that the system operator and distribution network operators become distribution system operators, with neutral partners balancing across the grid based on market principles. This is essential for the market to develop.”
Massara also comments that considerations of solutions should focus on outcomes rather than the underlying technology. “If one gets improved outcomes with blockchain, that should be the test.”
Again referencing the faster switching use case, he says the questions being asked can be based in the analogue world rather than the digital world, “It is a bit like asking how near is your nearest Blockbuster? When you are there how fast do you get served? And do they have the video you want? Yet the answer is Netflix.”
Utility use cases
When it comes to use cases, Massara says that as a utility CEO now, he would be looking at issues such as demand-side response, customer reconciliation, metering and balancing and how new products such as storage and electric-vehicle aggregation could be based on blockchain.
Going forward, he comments that Electron’s goal is to further develop its platform.
“Flexibility is the main focus, then quicker switching and we are also doing some work on the peer-to-peer market. The other main project we are looking to start soon is with National Grid and some DNOs to build an asset register with all assets over 1MW on a central register for the first time.”
Massara adds that there has been a lot of interest in the platform from companies in other parts of the world and discussions are underway to form more consortia outside the UK towards commercialising the flexibility solution.
He does however note the need to be realistic about change in the energy markets. “Ultimately there are highly regulated markets where people cannot risk the lights going out, so we are not going to change everything overnight and there has to be a transition. While some of new business models may fall by the wayside, I am confident that working with others in a consortium is the right way forward.”