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Blockchain Potentials in the Utilities Sector

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Julian Jackson's picture
Staff Writer, Energy Central, BrightGreen PR

Julian Jackson is a writer whose interests encompass business and technology, cryptocurrencies, energy and the environment, as well as photography and film. His portfolio is here:...

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  • May 26, 2021

In recent years cryptocurrencies have moved from being the province of a few obsessive geeks to something that financial institutions and public figures like Elon Musk invest a lot of money in. The financial gyrations of Bitcoin and other cryptocurrencies shouldn't obscure the real technological advance: the blockchain.

The blockchain is a public or private, secure, decentralized ledger. It doesn't need to rely on “Trusted Third Parties”, like banks, brokers and other middlemen. As such it can be used for many purposes depending on the end result desired. Just looking at the currency aspects is like inventing the internal combustion engine, and insisting it should only be used in race cars or farm tractors.

In reality this technology is moving into many different business areas. Some examples where blockchain-based systems have advantages over existing ones are: supply chains and logistics: instead of paper-based trails, a more streamlined, transparent and lower cost journey from production to end user could be monitored by storing information on the blockchain.

Digital IDs are another area – as the blockchain is impervious to tampering, a blockchain ID would verifiably be you. It could also hold public data, for example name and country of citizenship, while also holding medical or financial information that could only be viewed by someone with the correct access key.


Blockchain and Utilities


Firstly, it needs to be made clear that blockchain technology is in its early stages, and has not reached mass adoption yet, so industrial sectors, who incline towards conservative practices, are not yet ready to do more than experiment with use cases. Here are some areas where cryptoassets and blockchain might improve utility performance, lower costs, and most importantly, help to reduce carbon emissions.


Microgrid Performance


Utilities now have to run networks that have many microgrids involved. These are more intricate than just having centralized power stations. They need a proper network monitoring solution. Blockchain, together with Artificial Intelligence (AI) and Machine Learning (ML) will be a major improvement in monitoring energy transactions. Predictive systems to deal with the use of greater levels of renewables will also be part of this structure. Google's charitable arm recently announced funding for several innovative ventures in this sphere.


Peer-to-Peer Energy Trading


In future lots of consumer nodes will be able to either generate or store electricity. Examples are a solar panel on a domestic roof, or a bidirectional electric vehicle battery that can feed into the grid. Although neither the blockchain, nor the IoT, is absolutely necessary for this advance, it will facilitate accounting. Consumers will be able to utilize unused energy. For example, they could sell surplus electricity or battery storage directly to another peer that needed it. So people could earn money passively; it only works if the accounting is quick, extremely low cost, and transparent. These conditions can be fulfilled most easily by blockchain and smart contract based systems. Shell and Centrica are backing a pilot project to establish a P2P energy trading network.


Tracking Carbon Emissions


If you can't measure and track something, it is hard to calibrate and reduce it. Again the low costs, robustness and transparency of blockchain could well become a major method for tracking carbon emissions. There is already an initiative to track emissions from mining. This kind of application could be suitable for the utilities sector.


Data Management and Cyber Security


Here is another area where the advantages of blockchain with its low transaction costs and robustness to attack will be of benefit to the data management and control aspects of utility operation. There are considerable obstacles to be overcome, for example legacy infrastructure, the need for legal structures and regulatory oversight. That is the situation for any new technology – it takes time to perfect and time for law and governance to catch up. The IEEE estimated that while P2P blockchain implementation could happen in 2-5 years at a wholesale level, for other areas it might well be more that ten years before widespread adoption.

While the security of most blockchains has been impressive, we do not know what their actual performance would be in critical infrastructure such as a utility network where the malicious actors could be criminal networks or the intelligence arms of hostile countries, which would be more of a threat than mere hackers.


The Practicalities of Blockchain Adoption


Although there are many possibilities to use these new technologies, there are countervailing forces to stay with existing methods and systems. We touched on legal and regulatory issues above. There is also the basic business case of will there be any ROI on it? It isn't clear that complex investments would provide significant returns yet, so of course may companies are waiting to see what happens. Scalability remains an issue – some blockchain projects work well as pilots, but have difficulty scaling up, particularly where the entire blockchain has to be updated on many computers – nodes – to validate each transaction. The crypto sector is well aware of this problem, but so far no widely-accepted solution has been found.

Nevertheless, like many technologies, it is likely to reach a tipping point where sufficient users are on the network to ensure benefits, then it will take off like a rocket. We have seen this will other similar new systems like email or smartphones. So it would be wise for utility managements to keep abreast of developments in the field.


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