The utility sector has been one of the most receptive markets for blockchain-based technologies, with a number of test projects demonstrating its potential value. To date, however, the big boys aren’t diving in – but a wealth of smaller startups are. Energo Labs has announced a new deal with First Gen, in the Philippines, and German battery and solar vendor Sonnen has joined NEMoGrid – a European project for blockchain-powered energy trading.
Both announcements are interesting because they are trying to answer the question of how one goes about consuming electricity without involving the utility. This kind of distributed market requires a completely different business model, and would relegate the utilities to being only the supplier of the pipework that connects people on the grid – and not as a valued service provider.
Should utilities lose control of these markets, there is a risk they could be relegated to merely acting as conduits, charging just to connect homes to a grid. There is even the risk that the utility could lose the customer relationship itself, if that grid connection is bundled as part of a service like Energo’s – reducing the utility to a near-anonymous third-party.
However, a utility is one of the best example of an ‘incumbent’ business, thanks to their huge economies of scale. For decades, the upfront cost of building a new power plant or distribution grid kept the door closed to small entrants, and regulation was much friendlier to the utility than to startups.
Now though, the ability to aggregate the output of hundreds or thousands of rooftop solar panels means that a company that could do this, via smart meters and applications, could rival a utility’s ability to sell power – with the added bonus of using the utility’s existing infrastructure to do so.
Of course, utilities might lobby to block this kind of shift in the market, perhaps asking for cuts of this revenue in return for providing the foundation, which might create pricing or profit problems for the newer rival. It is unclear how different countries would react to such moves, with regard to national appetites for supporting these incumbents or allowing them to be pushed to the side.
What is clear though, is the size of the utilities – even fractions of their collective R&D budgets should be enough to keep them ahead of this curve. If such disruption catches a utility CTO unawares, there’s probably a decent case for the shareholders to let loose the lawyers.
For Energo, the latest win is a deal with First Gen, the largest producer of renewable energy in the Philippines. First Gen will be deploying Energo’s Qtum blockchain technology to control a microgrid project, which is being installed for De La Salle University, in the country’s capital – Manilla.
Energo has donated a 10 KW solar system to the university, to use as part of the project. The deployment will see buildings trade electricity between each other, diverting that solar electricity to where it is needed, and pulling electricity from buildings with a surplus, rather than pulling more in from the national grid.
As with all microgrids, the system can act as an ‘island,’ when it does not need a link out to the national grid to secure its extra demand. However, the solar array is pretty small currently, so this microgrid is unlikely to spend much time islanded. However, once more solar and battery storage is added, such a microgrid could go long periods of time between connections.
Energo’s system begins by installing one of its EME smart meters at a participating home or business, which then uses a cellular connection to backhaul data about solar panel production output and home power usage to Energo’s cloud platform. This data then enables Energo to facilitate trading between consumers, in return for a slice of the money that changes hands – all transactions of which are stored in its blockchain system.
Energo’s blockchain system is not based on bitcoin or Ethereum, two of the most popular approaches. Instead, it uses Qtum, an open source modified version of the Bitcoin Core Infrastructure code that is icompatible with the Ethereum Virtual Machine system. According to the Qtum Foundation, this “merges the reliability of bitcoin’s unfailing blockchain with the endless possibilities provided by smart contracts,’ the latter of which are the bits of code that can be used to automate functions inside Ethereum networks.
This is another small step for Energo, part of a larger (but still small) industry trend of experimentation with distributed energy marketplaces. Due to a blockchain ledger’s ability to act as an immutable record of transactions, it can provide a trusted way for consumers or businesses to trade electricity between themselves, as Distributed Energy Resources (DERs) become more prevalent.
Sonnen’s announcement ties two emerging trends together – that of battery storage, in which it is a specialist, and the blockchain technologies. Specifically, Sonnen is joining the recently announced NEMoGrid project, which was unveiled in March as a European initiative to evaluate business models. It seems that Sonnen has become the first battery vendor to take part in such a blockchain trading project.
NEMoGrid was launched in May 2017, began work in September, and wrapped up a consortia meeting in January. Its current members are Ngenic (Swedish, smart home and demand response specialist), Slock.It (German, blockchain and smart contracts technology), Sonnen, SUPSI (Swiss University project), SUST (Sustainable Innovation, German non-profit), TU Chemnitz (German technical university), Upplands Energi (Swedish distribution grid), and ZSW (German, Center for Solar Energy and Hydrogen Research).
Collectively, NEMoGrid is working on a testbed site in Sweden, and is looking to evaluate the technology itself, the marketplace, and its adoption. Ngenic’s 1MW heat pump system, which serves some 500 homes near Uppsala Sweden, is the foundation on which a lot of the other parts are built. Sonnen is contributing some of its sonnenBattery units to the project, with Slock.It providing the system that connects physical assets to the Ethereum blockchain used to coordinate things. SUPSI is in charge of project management.
The group will also explore centralized utility management and also decentralized voltage or power-based tariffs, in addition to the peer-to-peer trading in Sweden. There are also test sites in Rolle, Switzerland, and Wustenrot, Germany.
This isn’t Sonnen’s first foray into energy trading. Back in 2015, it unveiled a community energy program, based around a solar-plus-storage package. The system, based on Sony Fortelion batteries, would then be able to provide consumers with a small bonus to the feed-in tariff (FIT – the price paid to buy the consumer’s solar production), with Sonnen using the crowd-sourced battery storage capacity to offer grid-balancing services to the German grid.