— The same technology that is threatening the energy sector’s business models could also help ensure the survival of traditional players.
The innovation hub of the German utility Innogy, a subsidiary of the energy company RWE, has developed a blockchain product that enables electric cars worldwide to charge, without the need for a contract with a utility, a pass or any kind of payment at all. Innogy has teamed with ElaadNL, a Dutch operator of public charging stations for electric cars; the German startup MotionWerk; and the Dutch utility Enexis Groep to launch a pilot project based on this blockchain solution during the first quarter of 2018. Anybody with a charging station and/or an electric vehicle in the Netherlands will be able to register via a mobile phone and use the service for free.
Why would these utilities design and test a service that cuts them out of the equation? Because it is the best way to prepare for a very different future — one in which the cost of energy is expected to be zero, says Carsten Stöcker, the man leading Innogy’s work on the blockchain, a distributed ledger technology that is helping change the way energy is generated, priced and distributed. Innogy — and other traditional energy providers, including electricity retailers and Transmission System Operators (TSOs) — are testing whether the blockchain could not just disrupt but empower incumbents, helping them to compete in new ways, using new models.“I don’t think we will have transactions models in future,” says Stöcker, “so we have to think further and test new models that will monetize things at the edge like systems integration, analytics and personalized services.” Stöcker acknowledges the introduction of services based on the blockchain will “not leave much space for the big traditional energy retailers.”
New blockchain-based ventures are already challenging retailers locally and globally. Grid+, a startup owned by the New York blockchain development house ConsenSys, raised $40 million in September to build a U.S. retail energy company based on blockchain. Among other things, the new company intends to allow peer-to-peer energy trading. Platforms that allow local trading between producers and consumers of power, cutting out the new need for traditional suppliers, are just the start. Blockchain-based energy exchanges are emerging that are planning to use the technology to democratize access to sustainable power internationally. (See the story on pages 36.) Energy retailers aren’t the only ones impacted. Rather than regarding peers on the network as suppliers and others as consumers, TSOs will be required to treat all of their customers as both, radically changing their business model and the way the grid functions.
Blockchain and the Grid
The job of TSOs is to make sure that there is a balance of supply and demand at all times on the high-voltage network. That is getting tougher because renewable electricity generation accounts for a growing share in the overall power supply, making the electricity grid more volatile. TenneT, a European TSO with 41 million customers, is the first to explore how blockchain technology for managing the grid might help. It has joined forces with Sonnen, a German startup; Vandebron, an Amsterdam-based green energy company; and IBM on two pilot projects to develop a blockchain-distributed database for managing the electricity grid in its territory, which includes both the Netherlands and Germany.
TenneT is exploring the use of a permissioned blockchain network to integrate flexible capacity supplied by electric cars and household batteries into the electrical grid.
In one trial Vandebron is working with customers who own an electric car to make the capacity of their vehicles’ batteries available to help TenneT balance the grid. The blockchain enables each car to participate by recording its availability and action in response to signals from TenneT. In the other trial TenneT is working with a unit of Sonnen, a GE Ventures-backed maker of residential batteries that has developed a home energy battery storage unit that connects to off-grid energy sources, allowing users to obtain, store and use free electricity from the community without needing to connect to a public utility.
The batteries can also be used to balance out fluctuations in the public power grid, helping to stabilize it. This energy management service is provided thanks to a pool of thousands of “sonnenBatterie” units that are digitally linked to one another. TenneT hopes to use the blockchain to harness this capability, helping it overcome issues related to so-called re-dispatch measures which were designed to prevent regional overloads on Germany’s electric grid. In Germany, there are restrictions on how much of the wind energy produced in the north can be transported to the industrial centers in the south of the country in order to ensure that too much power doesn’t flow through the grid at the same time.
Controlling the Flow
Under the current system energy suppliers in Germany make a forecast of how much energy consumers will use the next day. Then they go to an energy exchange or the operators of power plants and buy that amount of electricity and provide the information to TenneT, which runs a simulation of the electricity flows on the system to make sure there is enough capacity. If any of the calculations are off-base TenneT might have to pay a power plant in the south to generate more energy and/or pay damages to a wind
farm in the north that produced too much energy for the power lines to handle. That is where Sonnen comes in. In the pilot project a network of residential solar batteries is being made available to store the energy, helping reduce the imposition of limitations on wind energy at times of insufficient transport capacity. The blockchain presents TenneT with a view of the available pool of flexible battery power. If activated, the blockchain records the batteries’ contribution, enabling the integration of renewable energy sources into the German electricity supply system.
Not just the battery energy contributions but all of the billing and settlements can be managed through the blockchain, helping make the entire process efficient, says Rene Kerkmeester, who is in charge of TenneT’s corporate digital transformation program. Other energy-sector players are also testing the blockchain. On October 3 a group called the Energy Web Foundation (EWF) launched a test network, codenamed Tobalaba, that the group developed to enable both commercial and noncommercial blockchain applications. EWF affiliates taking part in the test include Singapore Power Group, Engie and Shell. The stated goal is to create joint standards and further global application of blockchain technology in the energy sector to increase efficiency and enable new business models.
If they succeed, the same technology that is threatening their business models could also help ensure their future survival.
But this will only happen if they embrace the disruption and not just potential efficiency gains, says Arash Aazami, a former utility company executive backing a new global blockchain-based energy exchange from the Netherlands. He has the following advice for traditional providers: “Invest all of your profits into new models that are going to make you obsolete.”
