Earlier this month Shell, Statoil, Tepco, Centrica and a half-dozen other energy companies joined the Energy Web Foundation, an alliance devoted to bringing blockchain to the grid.
The companies donated $2.5 million to the organization.
The foundation was set up in February this year as a collaboration between Rocky Mountain Institute (RMI) and Austrian blockchain developer Grid Singularity to “accelerate the commercial deployment of blockchain technology in the energy sector.”
The companies and organizations involved think blockchain will be a game-changer for energy, and are working together to provide the frameworks and standards to help ensure that outcome.
Jesse Morris, principal for electricity and transportation practices at RMI and co-founder of the Energy Web Foundation (EWF), said the foundation's immediate aim is to garner more affiliates and funding, while developing an open-source blockchain application for use in the energy sector. Initially, partner organizations will evaluate the software, and potentially release it to the public in 2019 or 2020, if all goes well.
Blockchain is best known as the platform for Bitcoin. It is an encrypted, distributed database that allows all users to track every transaction -- thus eliminating the need for an intermediary.
Blockchain enthusiasts believe the technology can also be used to seamlessly transact electrons between consumers on the grid, while keeping an accurate, incorruptible tally of where they came from and where they went. It could encourage greater peer-to-peer sales on the grid and lay the foundation for microgrids and distributed renewables.
“We have a strong hypothesis that blockchain will solve a lot of long-running problems in the energy sector,” said Morris. “Overcoming these challenges could make small, incremental changes to energy infrastructure and markets in the near term, while others would be more far-reaching and disruptive."
Certificates (also known as guarantees) of origin would assure the user that a particular megawatt-hour of electricity was produced from renewables. According to Morris, the U.S. alone has 10 different tracking systems, Asia-Pacific has several more, and each European country has its own system of certification. Blockchain could be used to transparently guarantee the origin of the electrons.
Longer-term, and more radically, RMI sees the future of electricity networks being driven by the billions of energy storage and HVAC units, EVs, solar roof panels and other devices and appliances at the grid edge.
Blockchains can allow any of them to set their own level of participation on the grid, without the need for an intermediary. And crucially, they can be configured so that if a grid operator needs guaranteed capacity, the grid-edge unit can communicate back to the grid whether or not it’s up to the task.
This is an example of what Morris described as blockchain’s ability to “fuse the physical with the virtual” via machine-to-machine communication.
However, these are still early days. Foundation members have a lot of work to do in order to ensure its credibility, prove the technology works for energy applications, and lay down the foundation for widespread adoption.
“Think of it like the App Store,” remarked David Peters, director of strategy and innovation at grid owner-operator Stedin B.V. “We at the EWF are building a shared infrastructure where we can build on top the developed code.”
Stedin joined EWF because it believes in blockchain’s potential. “It gives us access to the best blockchain people in the world,” Peters said.
He hopes the widespread adoption of the technology will “lower the barriers of participation” for the grid.
Engie, the French multinational electric utility, had already conducted its own blockchain research projects before joining EWF. Among them was a program to track smart meters in Burgundy, keeping detailed tabs on solar panel electricity production, and facilitating transactions of a small peer-to-peer community energy trading project in Belgium.
Engie's Director of Research and Technologies Raphael Schoentgen explained that blockchain is a promising technology to track smart meter data. “It contributes to better management of electrons over the grid,” he remarked.
The technology’s ability to automate transactions for peer-to-peer trading is of key interest to Dr. Hans-Heinrich Kleuker, the CEO of Technische Werke Ludwigshafen, whose company is now also part of EWF.
“We’ll see many more consumers with either an energy deficit or a surplus in the near future, and the desire to trade that energy,” he said. “Machine-to-machine communication, such as that offered via blockchain, will be essential to manage the vast number of transactions needed.”
Such trades would certainly be beyond the capabilities of a small, local utility such as TWL, said Kleuker.
“We are looking at the convergence of different electricity markets, which are very different right now, but longer-term will be facing similar challenges,” Kleuker concluded, convinced that the application of blockchain can meet those challenges.
EWF will meet at the end of May to decide which use-case scenarios from around the world it will employ to take the project forward.
In the coming years, the foundation will decide on norms and standards that may allow blockchain to be used in a truly universal way and “move beyond the hype.”