It’s time for us to dream a bit, and put the technical details of this mysterious thing called blockchain aside. Electricity needs big ideas right now. Let’s use blockchain as a catalyst for creative solutions to the demands that security, renewables, outdated regulations and the need for modernization are putting on our magnificent electrical grid.
Not since the early 20th century have so many changes come to the electric industry. As we move into the new energy future of renewables and the Internet of Things (IoT), the grid faces significant opportunities that will forever alter the relationship between energy suppliers and consumers. I believe blockchain technology will be a key tool for accommodating the millions of inputs, contracts, and choices that are coming on line from renewables and connected home and industrial devices. To prosper, grid and grid edge companies will need to put themselves in the vanguard of creative change.
The key will be to learn how to uncover blockchain’s potential for your company’s particular issues and desires, and determine how to fit that into your company’s future. That could range from developing a software stack that rides on top of an existing enterprise chain to building a system from the ground up.
This is an exciting moment for everyone who works with the grid, from utility titans to grid edge producers, and lots of innovative companies in between. Renewable energy is entering the grid at an unprecedented rate at the same time that electric cars and other machines on the IoT are making their power demands known. Blockchain has the potential to securely manage an infinite number of transactions, and it will be a game changer for utilities and others as the grid modernizes with renewable inputs. After all, managing the energy of thousands of home solar or wind generators is a different story from managing the outputs of a large coal-fired plant. Blockchain is destined to handle it.
Given its technical complexities, and the way its decentralized nature challenges our traditional ways of thinking, at first blush blockchain can seem inaccessible, lost in the domain of top technologists. But there is no reason for most people to look under the hood and figure out exactly how blockchain works. Instead, time would be better spent thinking about the effects of blockchain, and the potential benefits. Blockchain demands a new way of looking at customer and vendor relationships, payments, supply chain and sustainability. Once companies embrace the fact that there are many unknowns — and let tech be tech — blockchain can unleash creative potential unlike anything the electricity industry has ever seen.
The grid is a web of connections that these days must handle power flowing in both directions, and also track payments to and from a legion of independent producers. Lately, this complex system has found itself challenged by electric vehicles, home solar panels, smart refrigerators and, of course, smart phones. All these devices now communicate their power needs, and could become valuable demand response assets.
This last fact is an amazing advance, as it realizes the long-held desire for a smart grid. As a co-founder of Unchained, with Reagan Richmond, I see the coming decade as being the most exciting time for innovation on the grid since rural electrification began in the US in the late 1930s. The ways in which companies respond to the entry of millions of data points from the IoT, as well as all the connections from solar roof panels, hydrogen cells and other innovations, will determine how successful they are as they enter the new electrical age.
The easiest path is to ignore the coming changes to the grid, and blockchain’s ascendence within that. That’s what many people did at the turn of the 20th century when they brushed off the combustion engine automobile as impractical, and were left gritting their teeth when those autos had replaced horses within the decade. There’s a pattern whereby seemingly inconsequential technologies appear, are dismissed by many, and then take over the world. The telephone, which was derided as frivolous, is another example. And now, the smartphone, without which most of us would have a hard time living our lives, but which was derided as simply a conspicuous luxury when it was first introduced.
Blockchain fits this profile. The tech was created in 2008 by a mysterious person (or group, no one really knows), using the name Satoshi Nakamoto, as the underlying platform for bitcoin. At the time, most people thought bitcoin, which was virtually worthless in its first two years, was a scam, or at the very least a juvenile anarchist dream. These days the coins have traded for over $7,000 each, and institutions like Goldman Sachs are embracing the stuff.
Yet bitcoin was built on top of blockchain, a technology with far more disruptive potential than digital currencies. Blockchains are distributed ledgers, where information — trades, historical data, supply chain records, even novels — are recorded in an immutable, and often transparent process in “blocks” of data that are strung together in a “chain.” The ledger is maintained on the devices — computers, phones and other drives — of everyone who participants. In effect, together they form one distributed computer for the entire chain. This makes it largely impossible (so far — surely there will be security challenges in the future) for anyone to hack the blocks, because in order to change one bit of info, you’d have to change all the succeeding info, which is linked to it, and change it on every computer that forms the blockchain.
While applications for disparate purposes are being developed to stack on top of, and work with the chains, one, called the smart contract, shows incredible promise for utilities. Smart contracts are automatic agreements that can be programmed by humans, or bots, to keep track of even the smallest exchanges of money or energy between people, or machines. That’s right, machines. Human programed AI algorithms will make the most efficient decisions, based on the criteria they are programmed to evaluate. With smart contracts, a self driving electric car could purchase its own power from the grid, paying for it with earnings from the transportation business, without any human intervention. Strange, but true, and the companies that recognize these sometimes bizarre developments — and their real world potential — will lead the grid tomorrow, and for the future. All it takes is imagination.