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Blockchain, a record-keeping system made up of digital “blocks” that are chained together, is appealing to utilities for its security potential, among other uses.
Utilities continue to test promising uses for the digital ledger software despite caution and lack of widespread knowledge.
Blockchain has been a rising concept in the energy space in recent years, as more utilities announce pilots and partnerships with tech companies. Several new projects were announced in 2019, and that number will likely grow in 2020.
Utilities throughout the country are trying to figure out how the software can help them secure their operations as new customer-owned generation resources come on the grid, and in the future, blockchain could play an important role in enabling energy exchanges between customers in “transactive energy” marketplaces.
But many in the industry still have questions about how the technology works, why they should use it and whether it has as much potential on the grid as some supporters say. A lot of this research is just ramping up, and the next few years will be important for finding a clear path forward.
Here are a few questions answered about the technology and how it might be used in the utility sector.
Blockchain 101
“Blockchain is almost more of an umbrella term or a category” than a specific item used across the board, said John de Villier, an analyst at Navigant Research who recently wrote a report on the topic. “There’s almost nothing you can say about one implementation of the technology that’s going to be true for all of them.”
Broadly, blockchain software is a digital record-keeping system that can be used for anything from tracking transactions, like trading renewable energy certificates, to data about equipment as it travels through the supply chain.
It’s also becoming popular as a potential way to track energy exchanges in transactive energy marketplaces: situations (mostly in the future at this point) where customers can buy and sell energy from each other — for example, a person might buy excess capacity from their neighbor’s battery.
The idea of blockchain is that digital “blocks” are chained together. If one link is missing, the chain breaks. In the renewable certificate scenario, transactions with the certificate are grouped into blocks. For transactive energy, each device or person in the system could be considered a block: If two neighbors were to exchange energy, they’d both need to approve the transaction to keep the chain together. If 50 people were involved, each of them would need to approve.
Why are utilities interested in blockchain?
Aside from its usefulness as a record-keeping tool, blockchain is appealing to utilities for its security potential. When it’s used to track renewable energy certificates, for example, the certificate’s progression, from creation to trading to retirement, is recorded in the ledger, which is replicated across many independent computers. If a hacker were to enter the system to change information about the certificate’s history, the attack would only affect one of those computers, leaving the overall system intact and alerting the entire network to the change.
As transactive energy becomes more common and energy exchanges happen more frequently throughout the grid, it will be difficult for utilities to monitor everything that’s happening at any given time. Blockchain could offer an added level of security.
But for the moment, the technology is still new and there aren’t many examples for utilities to follow. Interest is high, but so is uncertainty.
One resource utilities have to learn more is the Utility Blockchain Interest Group, a project by Hannah Davis, an engineer and scientist at the Electric Power Research Institute.
“We started hearing more and more about blockchain, and it was a really hyped up, buzzed up word,” Davis said, so she started the group in mid-2018 to help utility stakeholders discuss their experiences with the technology. The group currently has 60 utility participants who take part in the forum to learn how others have used the software, whether they’ve engaged with startups, and whether they’ve found advantages, Davis said.
“The goal is to continue to accelerate this learning around blockchain,” she said.
How are utilities using blockchain so far?
Blockchain has potential in several areas of utility operations, and those opportunities are likely to increase.
In Illinois, for example, utility ComEd is using blockchain to track simulated exchanges of energy between resources, like solar and storage, on two microgrids.
A Sacramento utility is using it to award “tokens” to drivers who charge their electric cars at times when there is excess solar generation. Those tokens, which customers can access through an online dashboard, can be used to make purchases at participating stores.
Both of these projects are steps toward transactive energy marketplaces. But while transactive energy may be a promising application for blockchain in the future, technology and regulations aren’t yet ready for true, full-scale marketplaces.
For now, some industry members view blockchain as a valuable way to monitor and secure existing grid operations, demonstrating its potential in preparation for more advanced capabilities.
One of the reasons the technology is ideal for tracking renewable energy certificates is that those certificates already have a market, said de Villier. Blockchain in this case isn’t creating something that doesn’t exist. Implementing it in these easier use cases can help build trust for the future, he said.
What’s holding back broader use?
Davis helped conduct a survey of 15 U.S. and European utilities and one regional grid operator to gather insight into utility experiences with blockchain so far. The main barriers to further adoption, she said, “were either skepticism or lack of demonstrable success with pilots.”
Those pilots will be important to demonstrate blockchain’s effectiveness, she said. Beyond that, education on the technology will be key at all levels of the utility, from engineers to executives. And as projects involve customers more, those customers will also need to learn about it.
Utility stakeholders expressed concerns over cost too, Davis said. This is another aspect that’s difficult to pinpoint, since there are so many different uses for blockchain and costs can vary. Navigant’s research shows that at least 228 blockchain pilots have been implemented around the world, with $700 million in investments from utilities and other stakeholders. De Villier predicts utilities will partner with software developers rather than build their own technology. Doing so could save utilities money.
Where do experts predict it will go?
While there’s no authoritative list of current utility blockchain applications, Davis said one of her group’s goals for the next year is to track these projects. Navigant has been tracking blockchain vendors and utility projects since 2016 and currently has a database of more than 200 each. Vendors who partner with utilities tend to show more success than those who don’t, de Villier noted in a September blog post on Energy Central.
Blockchain has gotten a lot of hype in the last few years, Davis said. Now, stakeholders want to figure out realistically what they’ll use this technology for. “I’m not sure if it’s the only answer,” she said, “but I think we’re at a point right now where we need to understand the value of blockchain.”