Nov 2, 2017 - 5min read
At this year’s Wired Energy conference our MD, Chris Russell, put forward his vision for energy users taking control of their own power supply to rebalance the grid with renewable energy. Meanwhile, another speaker – Joanna Hubbard, co-founder and COO of Electron – outlined how blockchain could be the underlying infrastructure that makes this transformation possible.
Blockchain can be an intimidating concept to get your head around, but it is essentially a digital, decentralised record of who owns what in a network. It is most commonly associated with Bitcoin and other cryptocurrencies, but blockchain is merely the architecture that makes cryptocurrencies possible, and actually has a far wider range of applications.
“Blockchain technology is revolutionary,” says Joanna. “It allows a large group of people to coordinate with each other, for example to share a certain set of information.
“It’s like a shared Excel spreadsheet where you can see who owns what, and you can transfer value directly – without having to get permission from an intermediary. The blockchain protocol is a set of rules that govern the transactions on a network, and you can directly extend the functionality of the platform as long as it does not contravene them.”
Blockchain and the energy industry
But what does this have to do with the energy industry? When Joanna first came across blockchain while working as a digital energy associate at McKinsey, she felt the answer was obvious.
“I was like Cassandra, running up and down the halls, shouting ‘This changes everything!’” says Joanna. “I thought, ‘This is how you optimise the energy industry without centralisation.’”
She was introduced to Paul Ellis (now co-founder, CEO of Electron), a colleague who had been contemplating starting an energy supply-switching business but was confounded by being unable to complete a switch in less than 21 days. The pair found themselves asking what was so wrong with the energy infrastructure that switches couldn’t be performed instantly.
This is how Joanna and Paul hit on Electron’s first product: an asset registration platform. In this capacity, the blockchain would provide a decentralised record of who is signed up with which supplier and what assets they are using; solar panels, batteries, smart meters, EVs and so on.
Ofgem and the Data Communications Company (responsible for delivering the UK’s smart meter network) are in the process of creating a new asset register to facilitate faster switching. They are currently in the process of scoping the asset registration platform, and Electron is championing a decentralised (“blockchain”) platform instead of a central intermediary (“data silo”) solution.
“The estimated cost for delivery of a central registration service out to 2030 is just over £140m,” says Joanna, “but on blockchain it would cost a fraction of that and running costs would be very low indeed. Even more importantly, though, a centralised registration service would only enable faster switching.
“Meanwhile, a decentralised register of all meters in the UK, confirmed locations and billing relationships is a really important basis for building future peer to peer and flexibility trading markets.”
A virtual marketplace
Here is where it gets genuinely exciting, and the more extensive potential applications of blockchain become evident; “it could lay the groundwork for an energy network where consumers can buy and sell either kWh or capacity between themselves, help balance the grid and actively drive towards a system flexible enough to handle 100% renewable generation.
“In 2000 there were just 80 sites exporting electricity,” says Joanna, “and now, because of solar panels, we have just over a million. By 2030, it will be closer to 10 million – with devices including batteries and electric vehicles as well.
“All of these electricity producers currently have no option as to how they sell back to the grid. Blockchain is a very efficient coordination mechanism, capable of endowing all of those assets with digital identities, and then creating a ‘trading venue’ where they can all interact and express the price at which they want to buy or sell. The inherent protocol guarantees of a blockchain platform will provide those new market participants with the comfort that they are being fairly represented and compensated in an increasingly automated market.”
This is where another Electron product comes into play: the blockchain transaction platform. Overlaid onto the infrastructure of the asset registration system, it could create a virtual marketplace where energy can be traded between individual users at a price mutually agreed on by sellers and the buyers. This is the technology that makes energy cooperatives and community microgrids possible – groups who produce, share and sell their own electricity.
Energy suppliers of the future
What, then, is the purpose of energy suppliers in this vision of the future? It turns out the answer very much echoes our MD’s prediction that energy companies of the future will be ‘facilitators’ rather than simply ‘suppliers’.
“It drastically changes your relationship with your supplier,” says Joanna. “Your supplier becomes this enabler of all these new things you can do today, as opposed to just someone who sends you a bill every month.
“One of the very simple things you can imagine your supplier being for you is an asset manager. If you have a lot of stocks and shares and bonds, you might have an asset manager who optimises them, watches the market and sells at the right time for you.
“So imagine a home in which you have solar panels, a battery, an EV and maybe even an interactive fridge… you want your energy provider to be the expert who optimises your energy use, automates your energy transactions and offers actionable advice on which products and behaviours will best maximise your efficiency and savings.
“Meanwhile, the consumer gets a perfect record of exactly what’s happened – right down to the level of microtransactions. That’s democratisation. That’s a market that works for everyone that everyone is allowed to participate.”
A grid populated by prosumers generating their own renewable energy, with suppliers working together to execute trades for their customers and redistribute energy in a way that takes strain off the grid is very much the hope we have for the future, too – and blockchain technology, Joanna argues, is integral to this.
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