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Energy Central Power Perspectives: Democratizing Energy with Blockchain: Exclusive Interview with Neil Pennington, Strategy Advisor for the Energy Web Foundation

image credit: Neil Pennington

This item is part of the Blockchain in Utilities - Special Issue - 09/2019, click here for more

Digital solutions are becoming increasingly vital to strategies in the energy industry. The presence of smart grid solutions, the growth in distributed energy resources, and the importance of flexibility in energy generation, storage, and consumption have all pushed forward the opportunity for new tools to come into play. As evidenced by Energy Central’s ‘Blockchain in Utilities’ special issue that was published this week, blockchain sits atop these critical solutions.

The potential impact of blockchain solutions in democratizing energy systems has become the focus of Neil Pennington, a Strategy Advisor for the Energy Web Foundation. Neil has deep senior-level experience of the energy sector, and expertise in innovation, decentralized technology including smart energy, energy retail and grids, blockchain, artificial intelligence, financial tech, and more. He also works with governments on tech issues ranging from energy, security, cryptocurrency regulation and fintech to international cross-border co-operation. His current interests and clients include the Energy Web Foundation, where he works with them as a Strategic Advisor. He is highly networked in a deeply interconnected world. Having worked in large corporates, consultancy, and in start-ups from payments to distributed energy, he understands the challenges of making things happen in those environments and has achieved great results.

This wealth of knowledge is why Neil was invited to speak at the upcoming Smart Grid Flexibility 2019 conference next week, with his presentation entitled “Democratizing Energy with Blockchain – revolutionizing the energy system with an open source, public blockchain that fully supports decentralized flexibility.

If you’re eager to hear a preview of Neil’s thoughts on these topics ahead of the conference, then you’re in luck! Neil was kind enough to answer some questions I had on this important topic so I could share them with the Energy Central community:

Matt Chester: Before diving into your presentation at the Smart Grid Flexibility Conference, can you tell me a bit about you? How did you get involved in the utility industry and in these smart grid topics specifically? What are you working on these days?

Neil Pennington: I have a background in the energy industry, having been Smart Metering Program Director and Innovation Director for one of the major energy retailers. At that time, I had a major interest in technology, including blockchain, IoT, and distributed energy. In particular, I was interested in how the energy system needs to change to embrace new technology and business models that put people at the heart of the system in a distributed and decentralized way to ensure our impact on climate change is as small as can be.

For the last four years, I have been working, in start-ups and as an adviser on topics such as blockchain, AI, distributed energy, digital identity, and payments, helping business and governments make sense of this, develop real-world use cases and business opportunities, and take practical action.

Most relevant to this Smart Grid and Flexibility conference is my work with the Energy Web Foundation. This global non-profit foundation, consisting of over 100 of the major global energy players from large corporates (such as Shell, Duke, SPG, and Centrica) to start-ups (such as Verv), has designed and launched the world’s first public, open-source blockchain-based infrastructure for global energy markets. Unlike the small well-publicized trials of blockchain technology in the UK, which operate as private and unscalable closed platforms, this represents a fully interoperable and open “new digital operating system” for all use cases; an approach that, I believe, is central to having the biggest impact on the energy transition.

The most important topic I am working on is in the area of asset registration. An asset or device is what its says it is; can do what it says it can do; has done what it said it would do; has not been double counted across multiple platforms and markets; and has been settled immediately using real and verifiable data. This is really hard and to use DERs to balance the grid, we first need to trust them. We need to know they were installed properly, that they are who they say they are, that they are located where they say they are located, and we need to be able to interact with them both physically (such as turning them on and off) and financially (such as settling payments with them and their owners). Enter blockchain, and perhaps Libra.

Here at Energy Web Foundation, we are a global nonprofit organization focused on accelerating the energy transition via blockchain technology. Over the past two years, we have convened an ecosystem of over 100 Affiliate organizations—including utilities, energy retailers, corporates, and blockchain developers—in order to begin bringing energy blockchain solutions to market.

Already, over a dozen of these organizations are operating early-stage solutions in support of a transformed energy sector, ranging from blockchain-based tracking and trading of green energy attributes to integrating millions of small-scale devices to wholesale electricity markets in Belgium.

Think of these solutions like applications in an app store. Every app—or decentralized app, in the case of blockchain—needs a platform on which to run. For the solutions noted above and a growing list of others, they are running on the Energy Web Chain, a blockchain purpose-built by EWF and its community for the energy sector.

The Energy Web Chain is unique. Like Bitcoin, Ethereum, and now Libra, it is permissionless (that is, public) at the user layer, allowing any developer or device to build solutions on top of the network. But it is permissioned at the validator layer, meaning only approved entities are allowed to host a validator node. In Libra’s case, that means only their consortium members host validator nodes. For the EW Chain, major energy companies and energy blockchain developers make up the validator network.

This design takes the best parts of completely decentralized public networks like Bitcoin and Ethereum, while taking a different approach to chain validation. This yields a number of benefits, especially enhanced governance (as decisions about the network can be made more nimbly since the set of validators are known) and scalability (since the chain can handle more traffic since there is no actual mining of transactions a la Bitcoin).

 

MC: One of your main points is that energy is coming back to the people, a direction in which the industry had not been moving for some time. Can you expand on what you mean by that? And is that shift a positive or negative thing for utilities? What about the customers? How should the stakeholders be looking at this shift?

NP: According to Bloomberg/NEF, utilities invest globally in the region of $710 billion in energy assets every year. They predict that, by 2030, this will be turned on its head and the major source of investment in energy assets will come from people (in the form of PV, batteries, electric vehicles, community energy, etc.) by a fact of 3 times! This will be truly transformative and evidence that power really is coming back to the people. In this world, people will not stand by passively and simply buy energy from suppliers, based on the pass through of costs plus margin from wholesale through grid to retail; they will expect full value from their devices and assets in ways that support their lifestyle.

On the whole, this is massively positive for people and communities. Whether it is positive for utilities will depend not only on their willingness but on their ability to change, and to do it rapidly.

For grid operators, they will be able to make much better investment and operational decisions by having visibility and access to data, assets, and new market-based mechanisms (for example flexibility at kilowatt level) from which to make real-time decisions, but they will need the technology to do so. For utility companies with a retail aspiration, they will need to be much more flexible and agile, as lock-in will no longer be achievable by owning the customer through proprietary systems or reliance on inertia due to slow and complex switching processes. Instead retailers will only develop lock-in, or loyalty, through consistently returning value to customers through the devices and assets that customers have in their homes, cars, neighborhoods, and businesses.

Stakeholders need to respond and fast. They need to change mindset and move away from a system that relies on centralized organizations flowing data between them; they need to move away from developing closed proprietary platforms to the use of open-source, interoperable systems; they need to recognize that the future is based on millions and billions of devices operating.

 

MC: How does an increasingly decentralized grid factor into the move towards zero carbon? And is that shift being done in a way that interrupts reliability or resilience of the grid from baseload generation?

NP: To achieve net zero, then optimization is the issue: “how do we best optimize the grid to deliver net zero”? The answer is that for a truly optimized grid we need every asset (including solar panel, home battery, building, car, and EV charging point) to act individually or in aggregate from the bottom up, making decisions using the best and most up-to-date information. This is a complete transformation of how we do things today, which is a top down, large asset focused, centrally managed approach, and it requires a completely new digital operating system to make it happen.

There is real “fake news” going around our industry: that somehow centralization is more secure and resilient than decentralized, open, distributed systems. This is untrue on so many levels from physical security to cyber security.

We need to question the prevailing binary mindset about renewable generation being intermittent and large nuclear/gas/coal being baseload. If we have a top down, centrally managed, and dispatched architecture, based on large assets, then this is an issue and there is a clear concern of responsiveness to a call for action. However in a distributed grid that is optimized for people, resilience, and zero carbon, the concept of baseload becomes a moot point, as diverse, distributed, and often mobile sources of generation act responsively at the hyper-local level and provide resilience by backing up through a mesh or cellular structure. This will be true resilience and the technology is mature enough to begin to make this a reality.

But you hit upon a great issue when you ask the question about how the “shift away from” is happening. At present, I see a positive shift in the focus of the regulator, as demonstrated by the report from the EDTF and by Ofgem through their open letter to the ENA and their strategic outcomes in the position paper on Distribution System Operation, in particular their drive towards whole system and zero lock-in. We also see a small number for future system and flexibility

innovation projects, usually funded by bodies such as Innovate UK and the Network Innovation funds. Although a great move forward, those projects are using closed, non-interoperable, proprietary systems and are not addressing the issue of how to migrate from centralized to fully distributed and decentralized energy systems in a large-scale and managed way.

 

MC: In the face of this evolution you see in the industry, how do you think decision makers in utility companies should be acting? How do they stay ahead of this trend?

NP: There are three behavioral shifts I would like to see in utility decision makers:

  1. Have an open mind: don’t apply the rules of today to the world of today and tomorrow.
  2. Act, with commitment: a POC is good, but only as a first learning step to a fundamental change.
  3. Always buy or invest on the principle of open-source, interoperable, distributed unless there is a really good reason otherwise: no more proprietary platforms, even those that use blockchain.

Innovation must be mainstream and avoid trendy innovation theatre approaches. Utilities need to move away from employing large established consultancies to produce generalized reports or unwieldy, slow change programs that state the obvious under the banner of thought leadership, but leave you with the feeling of “so what?” and “what can I do”?

Build high-quality, impactful capacity in your organization and with partners who are committed to and incentivized by your success.

To stay ahead of the trend, decision makers should be willing to get out of the office and listen to and co-create with people and companies that are tackling difficult issues; get into the detail; don’t stop at the buzz word or marketing message. Take advice from people who are in the middle of this change.

 

MC: Outside of your own presentation, are there any others that you’re particularly looking forward to? Or any general topics you want to learn more about that might not be your specific expertise?

NP: I think the conference in general is going to be a great event with a really strong set of topics and speakers. In particular, I am interested in views on Vehicle-to-Grid technology, especially how we can ensure interoperability across charging networks. I’m also interested in the progress of the developments around the TSO-DSO interface.

 


If you're interested in learning more about democratizing energy, be sure to attend Neil Pennington’s presentation this topic at the Smart Grid Flexibility 2019 conference next week in London, UK. You can learn more about the agenda and register for the conference here.

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