Block-chain technology provides intriguing possibilities on both sides of the dual innovation imperative: overall it provides faster processes, real-time transaction visibility, and reduced costs for digital transactions, which support the optimization of efficiency across the core value chain; and it also offers distinct opportunities for innovating around new processes and services for the future, such as a transactional energy market
February 24, 2020. By News Bureau
When it comes to technology, blockchain reigned supreme as one of the most talked about hotspots in 2019. In fact, Deep Analysis recently forecasted that the “total market for Enterprise Blockchain technology sales will grow from $2.9 billion in 2019 to $13.2 billion in 2024.”
The report went on to add that “Industries’ interest in blockchain is not about marginal improvements or a slim go-to-market advantage over their nearest competitor; the interest in blockchain is driven by the potential for revolutionary new approaches that can deliver huge returns on investment.”
This certainly appears to be the case in India. A recent Nasscom report, noted the rapid growth of the blockchain ecosystem, adding that the “Indian public sector has driven blockchain-based projects with nearly half the Indian states involved.”
When applied in the appropriate places, blockchain holds the promise of transforming the ways in which many industries currently do business. It brings reliability, transparency, and security to a vast range of data exchanges, including financial transactions and peer-to-peer networks, to keep an unalterable record of every exchange, removing the need for trusted, third-party intermediaries in digital transactions. But what does it mean for the complex utility industry?
Blockchain in principle and practice
Let’s start by setting a little context on the state of the industry. Most utilities are in the midst of a perfect societal, regulatory and technological storm. They are facing increasing environmental pressures, rapidly evolving customer relationships, a growing use of big data technologies in grid operations, changing utility regulations, and intensifying enterprise cyber security concerns – all with an aging infrastructure. And amongst all of this change, utilities are also experiencing restricted revenue growth and increased pressure to grow margins.
At the same time, the industry is being disrupted in a dramatic way by digital transformation, new technologies, outside competitors entering the market, distributed energy resources and more. All of this is culminating in the need for utilities to incorporate innovation into their core business processes (to optimize efficiency across the core value chain and drive down costs) while also innovating around new processes and services for the future: a dual innovation challenge. And it’s no longer an either/or option—both types of innovation are essential to sustaining healthy business growth.
Blockchain technology provides intriguing possibilities on both sides of the dual innovation imperative: overall it provides faster processes, real-time transaction visibility, and reduced costs for digital transactions, which support the optimization of efficiency across the core value chain; and it also offers distinct opportunities for innovating around new processes and services for the future, such as a transactional energy market.
From complex contracting to transactive energy markets, the potential use cases for blockchain reach far and wide. In the near term, here are three areas that are already starting to show promise:
Peer-to-peer (P2P) energy trading and dispatch: P2P trading is by all counts currently the most popular energy blockchain pilot out of the gate, according World Energy Council research. As P2P pilot projects proliferate, there are some important nuances to consider. There are private P2P trading systems, in which microgrid-connected owners of small-scale renewable generation sell their excess generation directly to microgrid-connected consumers using pre-programmed “smart contracts” (stored on a blockchain) that automatically trigger transactions between sellers and buyers based on previously agreed-upon terms. But some utilities are also pursuing use cases that could eventually create a larger, grid-wide transactive market for electricity. This requires a decentralized transaction and supply system in which the valuation and settlement of electricity over time and location is fully automated via blockchain-enabled smart contracts, managing all of the electricity load over that grid.
Distributed Energy Resource (DER) management: There are a number of potential use cases being evaluated by utilities in this area. Within a community microgrid, blockchain has the potential ability to automate the control of distributed energy resources using smart contracts to agree upon the optimal response to a peak load event and ensure financial settlement conditions are met.
Network security: Much has been written in recent years about the proliferation of IoT sensors and devices on the grid, and the potential cybersecurity risks they might pose. Blockchain’s distributed ledger technology and encryption capabilities could provide authentication records of IoT devices connected to the grid, making it much more difficult to counterfeit transactions or inputs into the system.
Automate complex contracting
Utilities engage with third-party providers in numerous ways, from construction and field work to asset lifecycle management and more. Because the blockchain stores an unalterable record of every transaction across the network, it adds transparency and real-time trackability to multi-party, supply-chain processes. For example, in utility construction work, the use of blockchain technology could provide full traceability of the status of all parts ordered and services provided, all within the same system. This transparency also provides auditable proof of both regulation compliance and the ways in which goods were sourced.
While blockchain technology is not a solution for every utility business challenge it certainly is showing some very promising possibilities. Ultimately, it’s not a matter of looking for a problem to which blockchain technology can be applied; rather, it’s a matter of understanding the areas within the utility’s business where blockchain can provide clear value.
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