(Montel) The hype surrounding blockchain may have waned in recent months but firms are looking at concrete uses of the technology in closed networks, including ways of balancing the grid, said Paul Massara, CEO of Electron.
“We’ve developed a platform [based on blockchain technology] which helps to integrate hundreds of thousands of grid edge assets, for instance EVs [electric vehicles], solar panels, batteries, so that they can play a role in balancing the grid,” Massara, the fomer CEO of RWE subsidiary Npower, told Montel.
He joined UK-based energy firm Electron as CEO in March this year and is keen to stress that it was “an energy company who happens to believe that blockchain is an important enabler. We are not a blockchain company looking for a problem”.
Power transmission and distribution networks across the world were changing from centrally dispatched systems to bi-directional flows, resulting from more decentralised energy, chiefly solar and wind coming onto the network, he said.
Such distributed assets “will hit the grid faster than people think” and new technology needed to be able to adapt to the new market when it happened.
Blockchain or distributed ledger technology, is suited to the balancing market as the technology can easily confirm an asset, where it is located, and to have key information encrypted.
“You can grant permission for people to do certain things on those assets, while the ability to link those to smart contracts is also very useful,” Massara said.
“But we are also very aware of the limitations of blockchain – we don’t store trading or smart meter data on the chain.”
Electron recently signed a cooperation deal with Swiss eEnergy to develop its platform in the country and hopes to have a prototype in place by the end of this year.
“We are addressing markets where there is a massive problem. In the UK the cost of balancing the grid is currently GBP 1.3bn, up from GBP 500m six years ago. It is forecast to rise to GBP 2.8bn by 2030,” he said.
The firm is currently in discussion with UK TSO National Grid and two distribution network operators to see how assets over 1 MW could be placed on an asset register.
In the future, it would look at “vehicle to grid integration, guarantees of origin, and renewables certificates”, Massara said, adding the UK plans were “repeatable in all other markets”.
Electron is currently in discussions with market participants in five other EU markets, although he would not say which ones.
In September, the platform saw a trade in a capacity market obligation between EDF Energy and UK Power Reserve.
Massara saw a need for such trades in the future.
Companies in the UK can enter into the capacity auctions either one year or four years ahead of delivery.
“Perhaps a power plant is under maintenance and not able to meet its obligation, so it will need to trade out of that for a period of time. We have created a platform where that trading can take place.”
Peer to peer
Massara was sceptical of the use of blockchain in peer to peer trading, however, questioning the economics of such platforms and the regulatory framework.
“I’m producing excesss solar but I don’t want to sell it as it could offset my peak demand. In addition, the economics of P2P largely depend on the avoidance of network fees. The economics need to be rooted in reality,” the CEO said.
“There is a problem that the grid is transporting fewer and fewer kWhs, and you’re not going to recover the cost of balancing the grid with fewer units. TSOs are faced with the prospect of higher cost recovery per unit or fixed connection charges,” he said.
But markets are set for fundamental changes over the coming five years and Massara said only companies that “embrace the new reality” would survive.
Instead of building large new power stations we might in the future need to consider the marginal price of energy being the replacement cost of solar panels on a solar farm or turbines on a wind farm, he added.