Could blockchain streamline distributed generation?

In Australia, Europe and North America, energy companies are beginning to consider using blockchain technology for distributed generation payments between small solar installations. Ablockchainis a shared digital decentralized ledger that records transactions across a peer-to-peer network. Blockchain technology involves strong encryption.

It may take a couple years for this to grow in popularity as utilities have been hesitant. If blockchain catches on, it could streamline small cash transfers between solar producers, helpingdistributed generation grow。

In the interview below, Stuart Ravens, principal research analyst at Navigant Research, described the worldwide outlook for blockchain as a tool for distributed generation financing by utilities. He coauthored a report,"Blockchain Enabled Distributed Energy Trading,"这探索了这个市场的模型。

If blockchain catches on, it could streamline small cash transfers between solar producers, helping distributed generation grow.

Kat Friedrich: For distributed energy peer-to-peer power trading, would blockchain be used with an ordinary financial transaction rather than Bitcoin?

Stuart Ravens:That’s going to be investigated. In the report, I talk about a theoretical power token. I don’t think it will be Bitcoin. Bitcoin is popular with drug dealers. If your PC gets hacked and hijacked with a distributed denial of service attack, you pay in Bitcoin. It’s a preferred currency of criminals. Utilities, which are frequently government-owned, aren’t going to go with Bitcoin.

The reason I recommended a power token rather than the hard currency is that there are a number of things you can trade peer-to-peer using blockchain. It’s not just you selling me power from your rooftop solar. You could trade negawatts with a neighbor.

You might have subscribed to a critical peak pricing program. You want to keep your air conditioner on? Instead of paying extra for that money, get someone else to participate and reduce their power consumption. The utility gains because they are still able to shift their peak load. You gain because you don’t have to pay the usual rates. Your neighbor will gain because you’re paying them a little bit for compiling their consumption.

区块链有潜在的用途：目前，这实际上是关于从小型发电机购买电源的方法。这将是一分钱或少量美元。也许您可以以硬币出售它们，也可以将它们换成不同的利益。我认为电源代币可以通过添加不同的选项而不是仅仅货币来添加服务。

Friedrich: Is blockchain built on a specific software or type of database? If so, what is it?

乌鸦：It’s called a distributed ledger. You distribute whatever the block’s recording. For Bitcoin, it’s stored on different users’ servers. There are different chains. One of them would beEthereum。I think智能合约are the way to go for an energy blockchain, whether it’s run on Ethereum or not. There are a few cracks in Ethereum. I haven’t delved into that in too much detail.

With a smart contract, you move away from the requirement for adata miner。智能合同自动和自我验证。如果我们安装了太阳能，我们不想等待某人来验证交易，说您可以出口电源将其出售给其他人。

As a consumer, you want something that recognizes production’s exceeding consumption. "I’m going to be able to deliver x kWh over the next half-hour, hour, or two hours; who wants to buy it?"

And then someone else participating in blockchain will have a contract that says, "I’m currently consuming power from the grid; I’ll buy it from you instead." Everything will have to be automated. You don’t want to have to do this on your smartphone every half-hour when you’re working. Especially if all you’re going to make is $1.

Where blockchain comes in is if you really need to reduce transaction costs or improve speed.

Friedrich: Why is blockchain advantageous for distributed-energy peer-to-peer power trading?

乌鸦：Because it’s decentralized. The big thing—you have to make this clear—is that it’s not going to replace absolutely everything. If you can quite comfortably do something with a database now, then you probably don’t need blockchain.

Where blockchain comes in is if you really need to reduce transaction costs or improve speed. There are a couple benefits of blockchain. That’s why you see it disrupting the financial services industry at the moment. The big area that I discuss is this peer-to-peer trading. If you try to manage that centrally and a utility says, "We’re going to allow consumers on our network to sell power to each other," it then has to manage all of the whole infrastructure.

And again, where is the business case for the utility to do that if every single transaction is cents or a handful of dollars? That’s going to be a massivewhite elephantfor them. If you can distribute it, you’ve got a reliable, transparent trading network where trust is basically embedded. You can have legal oversight of those different contracts and the way they interact. As soon as you set it up, you can just let it run and it will run itself. Blockchain takes away the requirement for a central market operator.

如果将其与批发权进行比较，则您将拥有一个和解组织（对于批发交易，这是不同的）。他们必须弄清楚谁将投入市场的东西派往市场，谁买了什么。那些人是否赋予了他们承诺交付的权力？他们是否消耗了承诺交付的权力？然后整个事情就解决了。

Doing that for a generator with a 4-kW solar-power capacity on their roof, it’s just going to be so complex—and you’re talking about a few cents each time. Why would you do that centrally? It makes no sense. You can distribute that using the blockchain.

This reduces massively the cost of administering (transactions). There will be a capital expense for setting the blockchain up. And that’s going to be no mean fee. But actually, when coming to the day to day running of it, once it’s up and running, it’s a lot cheaper than doing it centrally.

Friedrich: Are there any issues you think may occur when the peer-to-peer power trading market uses blockchain?

乌鸦：Let’s take a step back. There’s an awful lot of hype at the moment about blockchain. We’ve definitely hit peak blockchain. From the other people I’ve been speaking with about the technology, the buzz and the hype about blockchain at the moment has been about startups going to VCs and angel investors to get seed capital and then using some of that capital to raise awareness about blockchain, about the products they’re developing.

Really what we’re seeing right now is that both VCs and angel investors have more or less had enough of investing in blockchain. You have got to have a really compelling proposition for them. They can’t even seed investment into blockchain. They’re expecting the whole blockchain industry to go quiet in 2017. We’re really at the start of this. It’s a typical cycle—the classicGartner炒作周期—we’re going to hit the trough of disillusionment very soon.

And I’m talking about blockchain in general, not just the utilities industry. A number of companies are going to hit the wall where they fail to demonstrate that their products work. Right at the moment, the individual companies have to demonstrate that they can code properly. And that’s now what we’re waiting for. One thing that’s really going to have to get resolved is legal enforceability. If I commit to sell you x kWh, someone’s going to have to make sure I deliver that. What are the legal penalties if I don’t?

A big issue is utilities’ conservativism. They failed to jump on the blockchain bandwagon when it left the station. The train was leaving a station and a few utilities jumped on the back of it. Billions have been spent on blockchain startups but most of it has focused on financial services. If the utilities industry had been less conservative and had thought about blockchain a couple years ago, there could have been far more startups now looking at blockchain specifically for the energy industry.

That’s kind of disappointing. It’s not surprising given the utilities industry is so innately conservative. It’s conservative for good reason; I like it when my lights work. I don’t like it when they go out. So it’s good to see the industry is conservative. But it’s disappointing when it comes to a new technology when a lot of the development capital is going into other industries.

A big issue is utilities’ conservativism... The train was leaving a station and a few utilities jumped on the back of it.

弗里德里希（Friedrich）：您会在多大程度上说区块链是一个快速增长的感兴趣领域？

乌鸦：It’s difficult to say. If we talk about year-on-year growth, we’re talking about thousands of percent. Growth will be rapid because we’re starting from a small number of projects.

Interestingly, I had another briefing with a vendor who’s working in the blockchain space. They said a lot of utilities are looking at this but not making announcements. These utilities are looking at this as a potential differentiator in the future.

Most of the applications of blockchain are around peer-to-peer trading. Utilities want to create products that will support trading of renewable power and export that into other jurisdictions. I think there will be a lot of appetite for this in the coming years.