In this post and in the future ones, we'll start focusing less on blockchain technology itself and more on its consequences and implications in the energy transition. We'll discuss about user empowerment and user agency, energy democracy, internet of energy and how blockchain can facilitate the active participation of the end-users in the energy markets.
However, first, we think it's necessary to introduce the topic of smart grid (if you are fed up of hearing about smart grids, feel free to jump to the second part of the article), smart consumer and how blockchain can be the link between the two. So, here it goes.
P.s. If you are wondering why a weird crypto cat is in the banner of this article, i'm sorry but you will have to read it until the very end.
Climate change is very likely one of the biggest challenges modern society has to face and solve. An ever-growing demand for resources by a growing population is putting tremendous pressures on our planet’s biodiversity and is threatening our future security, health and well-being. In order to tackle these issues, the energy sector and the current power system will need to be decarbonized and transformed considerably. The European Union after the announcement of the Energy Union and the release of the European Commission proposal of the Clean Energy Package in November 2016, has made clear that the EU wants to be the leader and pioneer of this change and transition.
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The backbone for the smart, sustainable and inclusive growth, included in the objectives proposed in the Clean Energy for all Europeans proposal, is represented by the famous smart grids.
At the end of 2009 the European Commission set up a Smart Grids Task Force (SGTF). The SGTF defines smart grids as electricity networks that can efficiently integrate the behaviour and actions of all users connected to it — generators, consumers and prosumers — in order to ensure an economically efficient, sustainable power system with low losses and high quality and security of supply and safety [Smart Grid Task Force - EG1 Report, «Interoperability,Standards and Functionalities applied in the large scale roll out of smart metering,» October 2015].
Let’s have a look in more details at what will change (or is changing?) in practice.
Electricity generation will have a more unpredictable and intermittent nature and local injections from PV systems and distributed storage will cause reverse power flows. The grid will enable bidirectional flow of both power and communication between suppliers and consumers, leading to significant changes in the control and protection strategies. The injection will sometimes exceed the local consumption, and cause a reverse flow into the transmission grid.
Thanks to the incorporation of modern information and communication technologies (Internet of Things) the consumers will shift from the traditionally passive role they always had to active players. Moreover, it is very likely that this will be combined with a shift from fossil fuels to electricity. This larger share of electrical consumption will be driven by more efficient and clean technologies, such as electric vehicles in the transport sector, and heat pumps in the heating/cooling sector .
These transitions will lead to a different, more variable and thus less predictable use of the electricity grid. Problems of congestion may arise more frequently without countermeasures, since both production and consumption profiles are characterized by a large synchronicity (e.g. PV panels, heat pumps and electric vehicles). The paradigm of the power system will shift from generation following demand, towards demand adapting itself to intermittent renewable generation, with the help of storage technologies and flexible demand (this is known as demand side response). With more flexible demand, the total cost of production and transport of electricity can be reduced, both by peak shaving (avoiding the use of expensive generation) as well as by an optimal use of the network capacities (avoiding grid congestion).
The biggest change will happen at distribution level, which is now the dumbest and will have to develop into the smartest. DSOs will also have to invest in order to automate the distribution system leading to more reliable and efficient operation. Efficiency will also come from solutions which aim to foster self and local consumption where distributed energy resources are located, in order to alleviate the stress on the distribution grid and decrease the power losses along the transmission grid. Smart meters, which are the cornerstone of smart grids, will be read through an Automated Meter Management system (AMM) and information will also be sent to the customer (control or price signals).
[DISCLAIMER: if you decided that dedicating another 2 minutes of your life to smart grid was too much, you can start reading again from here ]
This is all great. I’m sure that majority of the people within the InnoEnergy Community will say that this change is already happening.
But, aren’t we forgetting about something? Or even better, someone?
What about the end-user?
Honebein et al., 2011, argue that the only aspects of the smart grid that can be truly smart are the people within it.
I never agreed more with a single sentence in a paper. Rephrasing, the empowerment and engagement of the consumer are the most crucial and fundamental drivers in order for smart grid projects to succeed.
This is also acknowledged by the Smart Grids Task Force: “the engagement and education of the consumer is a key task in the process as there will be fundamental changes to the energy retail market. [...] A lack of consumer confidence or choice in the new systems will result in a failure to capture all of the potential benefits of Smart Meters and Smart Grids”.
This concept is further examined also by Gangale et al., 2013, who argue that the two most critical aspects frequently encountered during consumer engagement projects in Europe are “lack of trust by consumers and uncertainties regarding the use of different motivational factors”. Further on, one of the key finding is that in order “to actually trigger behavioural change, energy providers need to build confidence and trust and leverage consumer motivations and values putting them at the center stage of their engagement strategies.”
Since blockchain is a technology able to build trust between peers and to empower them, it is very important to further examine the concept of trust related to consumer engagement. In the same study previously mentioned (Gangale et al., 2013), building trust between consumers is identified as the crucial step to overcome consumer resistance to new technical, regulatory and market solutions and to successfully engage them in energy related projects. Trust is therefore indicated as the main pre-requisite for consumers’ cooperation and goodwill.
However, blockchain is at the same time a very new and premature technology, and as argued by Krishnamurti et al., 2012, when people know little about a technology, as it is clearly the case with blockchain and partially with smart grids, acceptance is low and may mostly depend on trust in the actors responsible for the technology.
Therefore, blockchain finds itself in the peculiar situation of being a technology able to solve the trust issue putting the consumers at the center of the stage, but at the same time, given its abstract nature and complexity, it is still surrounded by skepticism and low acceptance. The creation of the Enterprise Ethereum Alliance and the Energy Web Foundation with the involvement of large and well-recognized corporations aims exactly to help solving this issue, but also, initiatives like the virtual cat smart contract can represent a cool way for beginners to interact with the Ethereum blockchain and break the complexity and skepticism barrier (mystery unveiled, but please click on the link, you will not regret it ).
Once the acceptance issue will be overcome and blockchain will reach a very user-friendly usability, blockchain together with IoT devices, might become the backbone of the future smart grids enabling both consumer trust and empowerment.
In the next blog posts, we will discuss in more detail why and how blockchain can achieve user empowerment - introducing the so-called user agency - and how this could eventually lead to the foundation of an energy democracy. Stay tuned!