Energy heavyweights support blockchain to manage smart grid

This week, two utilities have announced new smart grid blockchain initiatives. Tokyo Electric Power Company (TEPCO) is funding a project to test how the company’s distributed energy resources can be better integrated to its transmission network with blockchain-based systems. The news comes in the same week that Dutch utility Tennet in partnership with Sonnen Battery and IBM will use blockchain to help integrate Distributed Energy Resources (DERs) into its network.

DERs such as solar, wind and electric vehicles are increasing their foothold among wholesalers. Managing these assets presents utilities with a difficult challenge, but also an opportunity to cut costs and move the grid away from fossil fuel – one they are exploring with blockchain.

Energy theft is a huge problem for all manner of utilities, costing $96bn each year according to a recent study from Northeast Group, and so a blockchain system might help a utility identify and prevent those thefts. But the distributed ledger would also allow the utilities to see a very clear picture of their distributed generation, with the ability to trust the ledger and pay those generators accordingly – so that they can make the right decisions when it comes to diverting surplus production to prevent outages.

The TEPCO dollars will go to Energy Web Foundation (EWF), a US non-profit organization already partnered with Grid Singularity. The aim of the EWF is to accelerate the commercial deployment of blockchain technology in the energy market. TEPCO joins a notable list of EWF backers that include Centrica, Elia, Royal Dutch Shell, Sempra Energy, raising capital for the group’s research operations. While at an exploratory stage, and not that large of a sum, the backers have some serious industry clout.

Elsewhere, energy storage firm Sonnen and Dutch power grid operator Tennet have partnered in a pilot project – integrating storage batteries into the power supply system via a blockchain service from IBM. The IBM blockchain service will aim to ascertain the extent to which storage technologies help reduce the need for emergency measures, such as the regulation of wind parks, when the grid experiences bottlenecks.

Sonnen’s vision of the future is one where power generation will be composed of small, decentralized power sources, including consumers and prosumers. The blockchain technology will allow for mass simultaneous exchange between all these parties in future, and is the missing link to a decentralized, CO2-free energy future.

The core concern for both TEPCO and Tennet is the stress that renewable energies are starting to put on their networks. Bottlenecks in the transmission and distribution networks have been increasing, due to the growing feed-in of decentralized renewable energies.

To avoid these clashes on the power grid, operators have to intervene in conventional and renewable power generation, by diverting energy using grid reserves or powering down wind farms. In practice this means either finding somewhere to dump some of the energy or turn off the connection to the renewable source of energy – both of which are inefficient.

Residential battery storage units, that sit in front of these occasionally problematic DERs relative to the grid, allow the utility to communicate with the battery and instruct it to store the excess electricity – until the bottleneck has cleared and the utility can take the energy on its grid, without causing issues with its network.

In the context of the energy market, blockchain is a mechanism of verifying and documenting the performance values of distributed energy devices. In the Tennet project, IBM’s software will verify transactions of energy between Sonnen’s batteries and the grid.

In this model, blockchain has some notable advantages over a traditional data center model – such as a database system from a software provider like Oracle or Microsoft. Many adopters see blockchain-based systems as a highly secure way of logging transactions, and utilities have both operational and security concerns when it comes to logging flows.

Sonnen’s e-services software will be used to adjust the batteries to match Tennnet’s grid status. The project should facilitate better management and integration of renewable energy into the power supply system, enabling the distributed generation and storage, often owned by consumers or businesses, can be paid based on their usage.

Tennet is one of the four transmission network operators in Germany, through its subsidiary TenneT. Due to Germany’s retreat from nuclear and fossil-fuel energy, more renewable sources of energy have been added to the transmission network. The operator states that has meant there has been an increased pressure to be flexible in terms of the management of the energy on the network. Inconsistent weather, and therefore electricity production, patterns mean the grid is faced with the complex challenge of flexibility.

Tennet supplies energy to 41m end-users and has a revenue of $3.5bn. The company hopes that by doing this project it can avoid the costly regulation of wind farms. Rules that regulate energy supply to the transmission network in Germany, which require some renewable assets to be powered down if the grid is under pressure, have an estimated cost of around $870m – which is then passed onto consumers.