Consumer privacy and anonymity deals with the tenets of basic human rights and is also imperative to the formation of a truly independent electricity market. All types of consumers, be it a commercial class that has its business interests or residential consumers who can save on their monthly bills, require anonymity and privacy to safeguard commercial interests and larger interests of the nation. The role of Blockchain technology is vital to achieving such a market. Such arrangements related to privacy and anonymity can also achieve better market conditions, higher efficiency gains, bias-free forecasting and scheduling, promotion of green energy, right to consumers for procurement of type of energy as per their preference, promotion for decentralized grids and sustainable communities, better reach of electricity market efficiency gains to the end consumer et.al. The applications of Blockchain technology and related economic activities in the energy grids and markets will further require robust policies and regulations. There is also a potential threat of the Indian energy market being exposed to Blockchain-based technology applications not being indigenously developed suiting to Indian market conditions and sovereign interests. Cross border trading of electricity also requires indigenously developed Blockchain-based applications to bring in better efficiency between transacting parties. The collection and usage of consumer data for academic and policy research purposes also require Blockchain-based data collection and dissemination platforms.
The first Blockchain transaction to appear in the energy market occurred back in 2016 in New York. As per Navigant research , energy Blockchain applications are expected to generate US$ 19 billion in cumulative revenue over the next decade, reaching an annual market size of US$7.7 billion in 2028, at a compound annual growth rate of 66.9%. “As the grid system becomes increasingly digital, distributed, and decentralized, new information technologies are needed to support interactions and transactions between grid participants,” said Johnathon de Villier, research analyst at Navigant Research.
We thus find a growing need for regulations and policies conducive to adoption of these technologies and prepping up for organizational change and IT integrations into commercial and administrative processes. As markets get decentralized and grids, market places and associated business entities embrace Blockchain based technologies and applications, the lack of an efficient regulatory regime will serve as an impediment to the growing needs of the sector in terms of efficiency gains.
The following areas of the energy value chain will be benefited most by the application of Blockchain technology.
Green Energy Financing
The application of Blockchain can provide numerous market opportunities and modes of green energy financing. Many transmission and distribution companies in the world are already experimenting with this technology and many pilot projects have been successful. Countries like Estonia, Australia, Spain, United States and South Africa have been able to run successful projects with both Blockchain based renewable energy trading and financing platforms.
Decentralization of power generation and transformation of power exchanges (Peer-to-Peer trading)
Growth of open access market in India, adoption of smart meters and digitalization of grid will enable newer decentralized and centralized markets, which operate using peer to peer Blockchain enabled platforms. While decentralized power markets can leverage the power of Blockchain and self executing smart contracts to save on energy consumption and trade captive generation within their neighborhood/local grid, centralized/bulk power markets can leverage these technologies to improve price discovery and reduce transaction costs. Centralized/bulk power markets will thus also enable decentralized power markets/decentralized prosumer groups to act as virtual power plants able to trade in the centralized market depending on their regional energy usage and production trends. This further enables the participation of end consumers in the larger national economy.
Wholesale Distribution
Electricity retailers can be supplemented with Blockchain based platforms for real time energy trading and settlement by retail consumers as typical retailers without Blockchain based platforms will suffer from higher transaction costs, no possibility of real time trading by end consumers/prosumers. Blockchain allows everyone in the energy delivery value chain gain tremendously from opportunity to trade surplus energy and take advantage of local conditions to transform usage behavior and purchasing decisions.
Asset Management
Blockchain based platforms can make it easier and less expensive for regulatory compliances related to various green certification schemes, ownership and its subsequent trading. Asset management can also be dynamically linked to plant operations and energy consumption using a Blockchain based interactive smart electricity trader platform. With growing adoption of this technology, transaction costs can be dramatically reduced and advancement in Smart Metering, IoT, Cloud, AI and ML can be better leveraged.
Electricity data management
Electricity data like market prices, marginal costs, energy law compliance, and fuel prices etc. are some of the many data categories that interests market/policy researchers, energy exchanges for trading, other operational processes etc. A Blockchain based mandatory data supply provision for all stakeholders along the energy delivery value chain can serve the above areas and truly democratize electricity industry. Data is also often omitted or intentionally misrepresented to suit individual biases leading to overall financial loss to the nation and wastage of electricity. Blockchain removes these obstacles and provides a transparent way of participation in the electricity market based on internal strengths and external conditions visible to all stakeholders equally. Ethereum based Blockchain and smart contracts are changing the way in which utilities transact and settle commercials between different parties and can attract more participants to increase efficiency.
Energy crypto-currencies
Different forms of energy generation coupled with their technical/market/local strengths and weaknesses provide a unique opportunity for businesses to source funding through innovative Blockchain based energy coins like Solar-coins, wind-coins, efficiency-coins, biomass-coins, EV-coins and export-coins, sustainable-coins, green-coins etc. Such wallet based systems will detach the markets and its participants from foreign exchange currency risks, will allow markets to react dynamically to changing local conditions, and will provide higher automation of transactions with lowest transaction costs. Blockchain based real time coin transactions will eliminate traditional commercial arrangements, improve liquidity in new markets and can open new doors of financing based on shared knowledge across the entire energy value chain.
Electric vehicle charging and grid integration
Blockchain based solutions provide more power to EV owners to leverage their EV storage capabilities, participate in local markets, earn higher incentive for higher efficiency vehicles and interact with grid and other local energy sources in a manner and fashion never imagined in the past. Blockchain provides opportunities for utilities to create local virtual markets between EV owners to transact and leverage their internal strengths. It can also enable dynamic charging and discharging equivalent to procurement and selling to incentivize EV owners and pass on grid efficiency gains without requirement for additional funding.
Energy efficiency
With IoT based energy efficient equipments and solutions gaining more market prominence, Blockchain based platforms can effectively incentivize such initiatives and can increase the adoption of these technologies by residential and commercial consumers alike. Companies and startups developing and manufacturing energy efficient equipments & solutions can increase their consumer base through additional smart meter based Blockchain arrangements with local utilities and regulators.
Carbon footprint accounting, industry specific common baseline creation and incentivizing reduction
All types of industries can leverage Blockchain to enforce industry specific baseline standards and Government can incentivize reduction efforts through a centralized, automated self monitoring and self regulating AI based Blockchain certification platform.
Green energy promotion and provenance
With consumer class (both residential and commercial) becoming more aware of impacts of climate change and their own consumption behavior, companies are working to develop provenance solution that can track the source of energy consumption. This will create behavior changes and changes in consumption patterns promoting and incentivizing the local grid to procure more green power. Such power in the hands of end consumer can break the age old centralized fossil economy and bring finances in the hands of green energy companies.
While the above is an initial representative of what Blockchain technology has to offer, there are unlimited potential for further application of this technology in all spheres of electricity value chain for all types of electricity consumers.
All of the above market conditions, changing scenarios, expectation of foreign investors in Indian power sector, application of cloud computing, Internet-of-Things, usage of drones and sensors enabling availability of grid big data etc. require the development of Blockchain based open-source scalable platforms, specifically designed for the energy sector’s regulatory, operational and market needs. The current policy and regulatory regime also needs to take into account the growing use cases and application of Blockchain technology while allowing for the following
1.Incentives
2.Opportunity for failure during pilot stages
3.Large scale adoption strategies
4.Sovereign (both national and individual) data privacy issues
5.Issues with cross border trading of electricity
6.Cybersecurity of the Blockchain platforms
7.Grid cyber security issues due to Blockchain based platform integrations etc.
8.Stoppage of illegal money laundering through Blockchain based financing platforms
9.Global developments
10.Regulations enabling acquisition of producers/consumers generation, transmission and distribution level data for both platform development and enablement
Blockchain technology has the potential to empower new players entering in energy paradigm shift linking digitalization to decarbonization via decentralization. As markets evolve using this technology and a variety of Blockchain-based platforms (commercially/operationally interrelated or not interrelated) start interacting in real-time; effective regulations, watch keeping and a dynamic regime that takes care of the complexities of these innovative markets are the need of the hour. The current Policy and Regulatory regime must catch up with this fast-developing global trend to make the most out of India’s transition to a cleaner, more affordable and highly efficient energy delivery network.
Links
http://naseo.org/Data/Sites/1/blockchain-technology-and-energy-outline_v1.pdf
https://www.navigantresearch.com/reports/energy-blockchain-applications-overview
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