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How blockchain will transform the utilities industry

Gavin  Mooney's picture
Solutions Advisor SAP

Hi, my name is Gavin Mooney. Thanks for taking time out to read my profile. I am a Melbourne-based Solutions Advisor with SAP and help Utilities to simplify, innovate and run better with SAP...

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  • Dec 19, 2018
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What is blockchain? 

Cryptocurrencies such as Bitcoin have been in the news a lot recently. One day it’s the currency losing half its value, another it’s the fact that Bitcoin mining will one day consume all the world’s electricity, or maybe the idea that South Koreans are obsessed with cryptocurrency.

But amid all this coverage what is sometimes missed is the bigger story which is the technology behind it – blockchain. This is the exciting part that looks set to dramatically change the world around us and revolutionise how businesses operate. 

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In a nutshell, blockchain is a reliable, difficult-to-hack record of transactions – and of who owns what.

For more detail, there are some great explanations of blockchain in simple, easy to understand language. For example, this one by my colleague Dwayne DeSylvia or this oneby Jamie Skella

Some of the most important characteristics of blockchain are:

  • Shared record book – the record of transactions is distributed among hundreds or thousands of computers all around the world. And they all have to agree on the details of every transaction that is added to the record book, otherwise it doesn’t get added. This makes it reliable and secure and means that there is…
  • Trust – the whole community verifies the new transactions and reaches a consensus, rather than relying on a… 
  • Middleman – there is no longer a central controlling entity. We have done away with the middleman. 

Sounds good, but so what?

Blockchain may have originally been created for trading Bitcoin but its potential reaches far beyond cryptocurrencies.

Blockchain offers a way to verify the ownership of something digital, even if there are identical copies.

The implications of this are huge. The shared record book concept could include land titles, loans, identities, logistics manifests – essentially almost anything of value. 

For example, imagine if when you streamed music, instead of paying a subscription to a content provider you were paying the artist directly. The artist no longer needs to register copyright and sign with a publisher, they just upload their music and it’s published through the P2P network, ready for everyone to browse. When a user decides to buy music, they make a payment that is visible on the blockchain and the artist receives 100% of the revenue. This is the sort of thing Voise and Ujo Music are working on. 

Logic that works on the “if this happens then do that” principle can be used to automate the transfer of assets or currency between parties when certain conditions are met. (These conditions are known as “smart contracts”, but that’s not a great name.) For example, a logistics company could have a smart contract in place to say:

“If I deliver this product and receive cash at this location in a developing, emerging market, then trigger a supplier – many links up the supply chain – to create another item since the existing one was just delivered.” 

Another example would be the purchase and settlement of a house as illustrated below.

Source: Blockgeeks

What about Utilities?

There are already several examples of blockchain in utilities, here are three:

  1. The much talked about Brooklyn microgrid is a demonstration project where citizens can buy and sell locally produced rooftop solar power from each other. In a similar vein, Perth-based Power Ledger offers a platform to track the generation and consumption of electricity and is one of three finalists in Richard Branson's 2018 Extreme Tech Challenge. 
  2. BlockCharge is a working prototype for electric vehicle charging created by RWE and Slock.it. Using a similar principle to mobile phone roaming, it allows EV owners to charge their car via any charging station network and be billed for the energy used in a simple blockchain-based way. The EVs interact automatically with stations and the electricity payment process is autonomous.
  3. Bankymoon has a novel approach to foreign aid. Their Usizo project enables international crowdfunding for African schools in need of financial aid. The schools have blockchain-aware meters installed so anyone from around the world can make a payment direct to the meter, helping fund the energy or water needs of the school without the need for a charitable organisation in the middle. 

Is blockchain suitable for me?

The sort of scenarios that benefit most from blockchain share these characteristics:

  • Multi-party – several participants, often spread across companies or industries
  • Multiple “writers” – if there is just one writer then a master/slave replication would suffice
  • Intermediaries can be made obsolete – we don’t want to get rid of a middleman if they add a lot of value
  • Need for transparency – to reduce risks, avoid fraud, etc.
  • Need for mutual control – since the blockchain network generates trust

Do you have a scenario that could benefit from blockchain? Come and try it out using SAP’s Blockchain-as-a-Service platform, which provides an easy way to experiment with the technology without the need for a large upfront investment.

Image Credit - ID 111901524 © Pop Nukoonrat | Dreamstime.com

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Bob Meinetz's picture
Bob Meinetz on Dec 26, 2018

Gavin, before we can determine how blockchain will transform the utilities industry, an investor would want to understand whether blockchain can transform the utilities industry. In fact, that's a requirement before investors will put up a dime of their own money.

I'm not a believer, and it boils down to this: when everyone is in charge, no one is in charge. A blockchain-based utility network relies on the wacky assumption "the record of transactions is distributed among hundreds of thousands of computers all around the world, and all have to agree on the details of every transaction that is added to the record book..." So - we're assuming one data transfer error, anywhere in the world, would block a transaction? That any miscreant could stop someone else's transaction by claiming his computer doesn't agree with others?

"For example, imagine if when you streamed music, instead of paying a subscription to a content provider you were paying the artist directly. The artist no longer needs to register copyright and sign with a publisher, they just upload their music and it’s published through the P2P network, ready for everyone to browse."

Now imagine if someone streamed your music and recorded it, then uploaded it and called it theirs. Instead of paying you, streamers would be paying someone else! So much more efficient.

Some have suggested a better name for this scheme might be "blockhead", and I'm beginning to understand why.

Gavin  Mooney's picture
Gavin Mooney on Dec 27, 2018

Hi Bob, thanks for the comment. I think there are challenges for blockchain to break into the mainstream but these relate more to transaction speed and energy consumption. It risks being suitable only for niche scenarios and for the rest could become a hammer to crack a nut. It has certainly been high on the hype cycle in 2018. 

However, the points you raised, namely that someone could effectively derail the blockchain by not agreeing, or someone could claim ownerdhip of property that wasn't theirs, are precisely what the architecture of blockchain is designed to prevent, through concepts such as consensus, trust and proof of work. Don't take my word for it though, there are plenty of better explanations of this out there, written by smarter people than me.

Cheers,

Gavin 

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