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Why we should consider blockchain technology for integrating DER

image credit: Source: Wayne Pales
Wayne Pales's picture
I help CIOs build IT Leadership Teams capable of delivering the Digital Energy Transformation The Chapel Group

Hi, I’m Wayne, a senior technology leader and energy expert passionate about playing my part in creating a low cost and sustainable energy future.In 2019, I left the corporate world to be a stay...

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  • Sep 20, 2019

This item is part of the Blockchain in Utilities - Fall 2019 SPECIAL ISSUE, click here for more

People often ask me, 'why should we consider distributed ledger (aka Blockchain) for DER?' 

My simple answer is, while you can use traditional technology approaches, my analysis to date is showing a distributed ledger will deliver better outcomes for the consumer at lower costs.

A distributed ledger is not the cure to all ills. When you should, and should not, adopt a distributed ledger architecture is well documented, and I will not expand on it here. I will instead focus on why I believe we should consider a distributed ledger in liberalised energy markets.

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Australia is one of the most liberalised markets in the world and has a growing number of pilots underway to explore how best to integrate DER into Australia's markets and grid operations (click here for a great resource to stay abreast of these developments).  The current design thinking is to leverage the tried and tested serial approach, illustrated in Figure I below, where there are lots of systems all trying to maintain the same information about the actors involved, the devices required, and the information about those actors and assets referred to as meta-data. 

On the surface, you may look at this diagram and see no issues. People assume that the movement of data between untrusted parties will always require each party to maintain independent technology stacks managing their own set of data.  Due to this serial movement of data, each party applies different rules and performs their activities at different times, leading to errors. These errors drive the need for investments in reconciliation and exception management activities.

Now imagine a time where, instead of 100's of actors there are 100 times that number, or 1000 and possibly even 10000 times that number?  How about the millions of IoT-enabled devices that will need to be registered and maintained so they can play their part in generating or curbing demand?

.Take another look at figure I. Think for a moment about the registration process of these actors and devices. Think about the management of the metadata associated with these actors and devices. Now think about the additional complexity of ensuring awareness of local network constraints in near real-time. How about enforcing compliance with standards to ensure appropriate levels of interoperability and cybersecurity? Finally, once all the power has been dispatched or curbed, imagine how you would accurately settle the market for all parties involved?  Gets complex doesn’t it?

So what if there were an alternate approach?  Figure II illustrates how it may look leveraging a distributed ledger architecture.  Don't get caught up in the debate around the maturity of blockchain technologies, instead, take a step back and ask yourself, what if the entire market ran on a distributed ledger, one where the market all had a single source of truth? A market where there was consensus on a transaction before it was executed, where no-one disputed the integrity of data or a transaction, a market where reconciliation and exception management were things of the past? Is this not something worth exploring?

Matt Chester's picture
Matt Chester on Sep 20, 2019

Is this not something worth exploring?

At this stage of the game, while the tech matures and the needs become more fleshed out, this is 100% the right question we need to be asking. Not hailing it as the savior nor dismissing it as infeasible, but exploring what it could bring to the table.

That said-- with all these benefits, do you anticipate any downsides or particularly difficult challenges to overcome, Wayne?

Wayne Pales's picture
Thank Wayne for the Post!
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