Blockchain – it has made waves by tracking and encrypting transactions for cryptocurrencies like Bitcoin. Now, this groundbreaking process has the potential to make waves in the energy industry as well – causing immense changes in how energy is generated, stored and consumed.
Consider if virtually anyone was able to generate and sell energy from solar panels or wind turbines through the help of blockchain. With current technology, we are speedily heading down that path. When blockchain is combined with smart meters, consumers will have the power to form their own microgrids – communities that trade energy freely. This could dramatically change the future of energy and utilities’ place in this energy ecosystem.
For the last century, the grid has remained largely the same. But as distributed energy resources (DER) disrupt the centralized generation model, the future generation of electricity is slowly moving farther away from the utilities’ control. Increased implementation of solar and wind turbines by customers, along with innovation in energy storage, is leading to DER outpacing the annual capacity additions of centralized generation, according to Brett Feldmen, Research Director at Navigant.
While DER may reduce the role of utilities in generation, it also gives them an opportunity to transform into something altogether new, but very much needed. And this all starts with the smart meter.
From Smart Meters to Smarter Metering
Right now, utilities are building a smart meter infrastructure, unintentionally creating a valuable opportunity that will help support this new era in consumer-generated energy.
Current smart meters have provided a number of innovative benefits to consumers and consequentially utilities. It is allowing the consumer to more precisely manage and monitor their energy usage, giving utilities the opportunity to expand services beyond the meter, and ensuring utilities meet their energy efficiency goals. Already, home energy management platforms are providing behind the meter services through the smart meter and creating new revenue opportunities. It is this platform that future meters will use as a foundation to go one step further by including blockchain technology designed specifically for microgrids.
While this will still be in development for some time, picture a day when consumers would be able to buy up excess energy generated from their neighbors at a lower price or save it for their own needs. Consumers could sell this electricity to others for a profit when the price increases or even sell it back to the utility so it can be redistributed to needed areas. Within the platform, each consumer will be able to set up a profile to assign price preferences for the purchase and sale of electricity. The smart meter will then monitor usage and employ advanced algorithms to analyze a user’s pattern of consumption. From there the meter will, at the consumer’s discretion, bid on and execute purchase contracts based on user preferences. All of this will occur in real-time when the best price becomes available and energy is actually needed. It means consumers buying their energy won’t have to think about storing the energy they purchase within the microgrid – they can simply acquire it the moment it is needed. This is the path we are heading down.
As a result, utilities’ role will change within the ecosystem, transformed from being both a generator and distributor to one where they are primarily a distributor, assisting consumers with an unprecedented level of choice, support, and reliability.
With the enablement of net monitoring, the platform will provide insights about consumption, price, and sale of excess energy. Both utilities and energy generators will need that information, which will be obtained through a home energy management platform.
This data will be invaluable, but utilities’ involvement won’t stop there. It could also be used to facilitate the entire microgrid process. From real-time energy transfers to immediate payment collection, consumers would have unparalleled access and control right from their smartphone.
Current Utility Opportunities
As it stands, utility generation has been slightly reduced by the arrival of renewable technologies that can be installed to generate energy locally. But as growing numbers of individuals, communities, and businesses move into the energy generation space, utilities will need to transform to remain relevant.
The Brooklyn Microgrid project is a stellar example of how a community-powered microgrid can offer a sustainable energy network. By using blockchain-enabled smart meters, homeowners are able to buy energy directly from the producer on an as-needed basis. This eliminates the need for the expensive infrastructure that utilities have spent years building. It also eliminates the regulatory hurdles that dictate how traditional utilities can do business.
That’s not to say that utilities won’t continue to dominate, nor is it being suggested that they won’t play a significant role in this sector’s massive transformation. Their role might change, however, as the costs of entry decline and new microgrids come online. Utilities should use their current position – as both a leader and a reliable service to consumers – to start working through their potential strategies for the future. How they address microgrids, and the role they choose to play, will ultimately determine their long-term value proposition.
There are other ways for utilities to positively position themselves for the future as well. They should continue to maintain and strengthen their relationship with consumers, which is arguably their greatest asset. They also need to keep a close eye on the industry’s transformation to uncover additional revenue opportunities to make up for what might be lost down the line.
Establishing Opportunities for the Future
Right now, there many different innovations in the energy industry that threaten to disrupt the way energy generators and distributors operate. DER is headed down the path to replacing some (if not the majority) of centralized energy generation – literally returning the power to the people. In this situation, utilities will be the ones filling in the gaps (if there are any), not the other way around.
To adapt to this sort of monumental shift, utilities have this immense opportunity to become the much-needed DER supply chain manager, that with the help of smart meters and blockchain, will become the core of peer-to-peer energy buying and selling. For instance, when microgrids eventually look to expand and trade their energy with a growing number of consumers, they’ll need the power lines – owned by utilities – to achieve this goal. This will present an opportunity for utilities to license their power lines to those who wish to buy or sell energy on the open market.
The future of the energy industry might look quite different with blockchain, but it still leaves plenty of opportunities for utilities to maneuver themselves into the center of these operations. While the utilities’ value to consumers will likely change in the future, they still have the chance to be a very necessary part of peoples’ lives. And this all begins with the AMI meter and the opportunity it is bringing to utilities today.