Energy industry looks to take blockchain beyond Bitcoin

September could become the month that blockchain moves from being associated with Bitcoin mines — and potential higher energy costs — to breaking into the mainstream of how the energy industry does business.

The Senate Energy and Natural Resources Committee took up the issue at a hearing in August. Since then, there has been a new collaboration, conference, or webinar announced almost daily focused on the possibilities blockchain might entail for the energy sector.

“Utilities are looking at blockchain as a way to boost both consumer engagement and grid efficiency through secure energy transaction platforms,” said Sen. Lisa Murkowski, R-Alaska, the chairwoman of the energy committee.

She noted that Puerto Rico is looking at blockchain to help it operate the island’s new, more resilient electric grid, which was developed to restore electricity to the island after last year’s devastating hurricanes.

Even the United Nations is looking at the technology to inform its fourth annual Environment Assembly next year, which will be focused on innovation.

SmartMinds CEO Mark Copeland discussed the prospects for blockchain last week at the U.N. Earth Innovation Forum in Estonia. The forum is the planning session for the bigger U.N. energy meeting in Nairobi next March.

The U.N. wants to know the implications of the technology for combating climate change. The senators wanted to know what the risks are, and the potential benefits associated with it when it comes to guarding the grid against cyber attack.

So, what is blockchain? Basically, it’s a decentralized way of storing and verifying data without too many human hands getting in the way. At least that’s the idea.

The “block” refers to a block of data, which is placed in a chain that can be stored locally or a half a world away on a server or hard drive. It is most commonly referred to as a digital ledger.

The ability to keep the data in blocks across multiple servers around the world means the data is decentralized, which can lend increased flexibility to a business when it comes to running renewable energy projects, or verifying emissions, globally.

But the biggest benefit of blockchain is its role in verifying data, and a way to build trust into a system where numerous transactions are taking place.

The technology is commonly associated with the cryptocurrency rush and bitcoin mining, but has recently captured the fancy of a wider variety of interests, including more conventional industries, like utilities and major oil firms.

This week in San Francisco, on the sidelines of Gov. Jerry Brown’s global climate summit, utilities and major oil companies will be gathering on the bay to discuss blockchain.

The GTM Blockchain in Energy Forum held September 11 will include Tesla, oil giants Shell and Total, the large California utility PG&E, the Florida-based NextEra Energy Resources, Tokyo Electric Power Company Holdings, Inc., GE and many others.

“Momentum around blockchain in the energy sector has been picking up pace as more proof of concepts are deployed successfully around the world,” the forum says on its website. GTM, or Greentech Media, is a company that provides analysis and news on the clean energy market. It is owned by the global energy consulting firm Wood Mackenzie.

Both electric utilities and the oil industry are looking at the potential for blockchain to help them manage customers and meet federal policy objectives, such as methane emission reductions, say industry advisers.

Experts say interest in the technology started with utilities getting requests from customers who had increased power demands for the large servers and computer farms needed to generate the Bitcoin cryptocurrency using blockchain, known as bitcoin mining.

That initial reaction was one of fear over stressing the local power grid due to the overwhelming demand from electricity that comes from the Bitcoin enterprise.

“We had one client, a public power entity, that was very concerned about the volume of requests he was getting for power to get bitcoin mining in his service territory,” said Lisa Frantzis, senior vice president at the Advanced Energy Economy, a business group working to make energy cleaner and more affordable.

“Frankly, I think they didn’t have the load to manage all the requests that were coming in from foreign entities and people from around the U.S.,” she continued. “So, we started looking into how real this technology is; what is the potential impact on the utility sector?”

The utility wanted to understand if it made investment sense to build the infrastructure required to meet energy demand from bitcoin mines, she said.

Later, the conversation morphed into something different altogether.

“And it’s clear that there is a lot of discussion about energy blockchain. Not just on the mining side, but also what are the potential applications in the power sector,” Frantzis explained. “Can it be used to facilitate a lot of these customer focused advanced energy technologies; what are the implications for the utility sector?”

Blockchain, whether used for mining or some other business, is essentially managing a transaction that can be decentralized and spread out. Similarly, the utility industry is becoming more spread out and decentralized as renewable energy, such as rooftop solar panels, become a greater resource. The similarities between the utility of the future and blockchain technology could be compatible.

The businesses that Frantzis’ group represents see the potential in using the new blockchain technology to manage everything from solar arrays to electric vehicle charging stations. Energy efficiency programs that dial down electricity use when the grid is stressed, and big-battery electric grid storage would also benefit, she says.

The Advanced Energy Economy joined forces with the Energy Blockchain Consortium to form a collaborative to begin advising local governments, state authorities, businesses, and others on where the opportunities may be for energy management using blockchain.

Frantzis will focus on the policy side, while the Energy Block Consortium will focus more on the technology side of the equation. The collaborative will host its first call during the last week of September.

The Energy Block Consortium will host a conference in November to discuss the work of the collaborative moving forward.

But these are early days for any industry looking at blockchain, said Frantzis.

“I think everybody is talking about energy blockchain applications, and we kind of know how it’s potentially going to help, but we don’t know if, in fact, there are regulatory and policy concerns,” she said.

“I don’t know yet what the priority, regulatory issues are going to be, but that’s what we’re going to hope to find out,” she explained.

One thing is for certain: If the energy industry doesn’t begin to explore what the policy and regulatory landscape should look like for adopting new technologies like blockchain, there is a good chance the industry will fall behind, Frantzis said.

This is especially a concern when considering blockchain could have real benefits for the industry.

“It’s very clear to me that in some of the discussions we’re having on this topic, there are so many advancements that have happened with technologies, and it’s the regulatory framework that’s holding up the deployment of some of these technologies,” Frantzis said.

“The whole business model framework has to change to encourage adoption of these new technologies,” she said, explaining that “the technology is here, but the regulatory framework isn’t.”

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