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by Kelvin Ross, editor, Power Engineering International

The digitalisation of the electricity sector marks the second energy revolution, according to Joanna Hubbard of blockchain company Electron.

“If the first energy revolution was clean energy, the second energy revolution is shared data structures that anyone can build-out on top of,” she told me in an interview.

“I see that happening over the next three-to-five years and it’s going to completely change the energy market and the whole supply-consumer relationship.”

She added: “What’s exciting about the digitalization of energy now, is that it is a foregone conclusion. I don’t think that was true a year ago. There’s a huge amount of work going on.”

And she says that in 2019 "we are going to see an even greater fracturing of energy markets. We are going to see so many new ideas of things that we can trade, not least energy and grid services, but also data. We will see lots and lots of pockets of innovation.”

Hubbard is chief operating officer and co-founder of UK-based Electron, which has already won government backing as well as the support of several major energy sector players including EDF Energy, Statkraft and TEPCO for its decentralized energy trading platform.

She says that “there’s a lot of different flavours of blockchain: a lot of different use cases. The overarching benefits for me are enabling price transparency in markets – and I say ‘markets’ because there’s not going to be one market for all energy like we have today: there’s going to be a market for grid services, local energy, clean energy, big energy – so the blockchain can provide the co-ordinating layer for all those different value streams to move on top of one another instead of against one another.”

Hubbard says that “the reason a lot of people don’t understand blockchain comes from the fact that it is usually explained as a particular blockchain”.

 “People are making claims like, ‘blockchain is transparent; blockchain is opaque; blockchain is secure; blockchain is not secure; blockchain is fast; blockchain is slow’ – and they all might be true for ‘a blockchain’, but they aren’t really true of blockchain in the abstract.

“Blockchain in the abstract is a technology. Essentially, it’s a protocol, a set of rules, which is enforced across participants in a network. And when all those participants adhere to those rules, they are able to essentially update the status of the network and maintain that network together.

“So in the energy space, blockchain is very exciting in terms of being this co-ordination mechanism.”

She says in an increasingly decentralized energy world, “we need a new co-ordination mechanism that is capable of enforcing a set of rules across all those different assets. And that gives them the ability to access a market in a rules-based, auditable fashion. And that’s why I think the energy industry is getting very excited about this technology.”

She stresses that blockchain in itself is not a business model: “It’s a technology that enables much more granular business models and much more asset participation in the energy industry.

“What’s almost been misleading about recent waves of press coverage, is blockchain does not necessarily enable new business models. Business models like peer-to-peer or vehicle-to-grid are possible with a central intermediary: blockchain allows them to do it without the central intermediary – which can improve the cost efficiency function and also the trust function.”

She highlights decentralized energy as one aspect of the energy industry that is “particularly ripe for co-ordination. Co-ordination across potentially competing, potentially non-competitive parties. And that’s Electron’s core focus – the flexibility markets.

“There’s a really exciting component of the flexibility trade that doesn’t really exist on any of exchange product today.

 “Our application is an enterprise application that is solving a problem that a lot of asset owners or flexibility providers or aggregators want solved and participants on the other side who are buying this flexibility haven’t been allowed to solve themselves.”

“Co-ordination is key to realizing the full value of digitalization. There are three core platforms that need to be co-ordinated and shared. It’s the asset register: what is it; where is it; there’s the trading platform and the rules around how you are allowed to interact; and then there’s the data repository.

“Everything else – all the other competitive business models – can be built on top of that structure, but that infrastructure needs to exist first.”

Hubbard says the key to developing the blockchain platform is “about building something that’s future-proof. We know we need to build an infrastructure that enables greater asset participation in the system. Because that creates more competition, it increases the efficiency of the system, and it also increases the resiliency of the system.”

Are you interested in the role blockchain can play in a smart energy future?

You'll enjoy this video interview we had with Joanna at European Utility Week 2018.

[youtube https://www.youtube.com/watch?v=OqUKg1eHsuw&w=640&h=360]

This article was originally written by Kelvin Ross, content editor for Power Engineering International, a Clarion Power and Energy Brand.