Why blockchain can turn Distributed Energy Resources from a big threat to massive opportunity for utilities
image credit: © LO3 Energy
- Sep 25, 2019 4:39 pm GMTSep 24, 2019 4:28 pm GMT
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This item is part of the Special Issue - 2019-09 - Blockchain in Utilities, click here for more
Consumer-owned Distributed Energy Resources (DERs) are threatening to flip the energy industry on its head - but instead of being drowned by this wave of change, utilities can use blockchain to prosper.
Indeed, for the more progressive utilities of this world, this is not a fight for survival it’s the chance to establish a newer, better, and more consumer-centric business model ready for our energy future.
Technology is now at a point where we are starting to see more and more power coming from DERs such as home PV panels in local communities, rather than being sent down the lines from big far-away power stations.
This is creating a THREE-FOLD problem for utilities.
1) More people are creating their own electricity and not buying it from a central source.
This means utilities get less income and because traditional pricing models include a percentage to cover transmission management, there’s less money coming in to manage all the infrastructure upkeep.
2) Whenever a DER cannot produce energy (such as at night time), the consumer still needs a supply to feed their demand
Despite not being paid for the infrastructure upkeep, utilities are obligated to ‘keep the lights on’ for consumers, and so must be ready to supply energy whenever it is required.
3) Any excess energy that DER owners don’t use must be recorded, logged fed back onto the grid and compensated for.
This leads to a complex two-way flow of energy that was never planned for in the existing energy grids and the complexity of logging and managing energy coming onto the grid from private sources is immense.
But that’s why we need blockchain.
Not only can it solve these problems, but if we flip the grid, the energy we can feed into it from these DERs make them a valuable resource right at the heart of our communities, just waiting to be managed.
In addition, the growth of internet-connected devices and appliances like smart lighting, heating and even washing machines, means we now have millions of grid edge resources that can be controlled remotely.
Add to that the inevitable influx of electric vehicles that’s just around the corner, and you’ve got a dynamic, flexible and hyper local energy solution coming to every neighborhood, sooner than you think.
Using blockchain, we have developed, tested and are now commercializing a platform that connects all these DERs together and can log, manage and automatically transact energy between consumers.
The technology creates a secure Local Energy Marketplace (LEM) where users sign up to either sell local energy from their resource or have options to buy local energy from others nearby, and smart contracts do the rest.
The energy network is going to need to re-organize itself around grid edge generation and consumption and we need local energy marketplaces to help balance the clusters of load and generation in different communities.
There will still be a utility grid to enable energy transmission between these communities, but the need for large-scale central station power plants and the long-distance transmission of energy will disappear.
The whole intent of LO3 is to enable consumer choice, so people can decide with their dollars what the future looks like, who they’re buying energy from, where it comes from and how it’s produced.
But that doesn’t sideline utilities – in fact, they are a huge part of this.
This is what customers are calling for. It’s the sharing society. People want clean energy. They want flexibility. They want local. Some want to pay less. Some are happy to pay more for a premium service.
Local energy networks use price-led bid auctions to manage the transaction of local energy resources – and as existing incumbents, utilities can set up these systems and help consumers manage all these local resources.
These are important times with important issues and important decisions for people to make – and it’s no overstatement that providing renewable local energy for the masses can create a whole new future for this planet.
The timing of growth towards commercial viability depends on where different regulators sit and how much change is needed to enable some of the core features of transactive energy to happen.
For example, in New York, the Brooklyn Microgrid is not yet allowed to operate financial transactions for energy as it’s not a retailer – but if a utility was managing it, hey presto, there’s local energy on tap and a retailer may not be needed.
In Australia, a deep-dive into our one-year project with the Latrobe Valley Microgrid showed exceptional results and proved Local Energy Markets will deliver financial benefits for consumers, prosumers and utilities.
And the time is now. Utilities that are looking to establish themselves in the new energy economy by integrating DERs into their renewable energy mix need to embrace these new technologies or be left behind.
If they don’t, someone else will – and anyone that doesn’t start going local could very quickly become another of those in the history books that missed an opportunity and faded out of existence.