Not long ago, blockchain was predicted to revolutionize the way the world did business.
A digital ledger technology originally created to establish the integrity of transactions in the cryptocurrency Bitcoin, blockchain was hyped for its wide-ranging applications. That included the power industry, where some predicted its widespread adoption for tracking and securing transactions from the consumer level to regional energy markets.
Blockchain was first developed by the creator of Bitcoin to solve a fundamental problem with cryptocurrency. Because cryptocurrencies have no physical existence and their trades are not cleared through a central bank or other trusted third party, a new method was needed to assure the integrity of transactions.
Blockchain provided a trustworthy way of recording digital transactions between buyers and sellers. It’s essentially what the name indicates: a chain of blocks of data, each one a record of a transaction. The chain grows with each new block, which are linked and secured using advanced cryptography set up in such a way that any change in a record block ripples through the entire blockchain, making it virtually impossible to tamper with a record undetected.
Another key aspect of blockchain is that the digital ledger is not kept in one place or computer server but is distributed across all participating parties. This makes the approach fully transparent while eliminating the need for a neutral “trust agent” to oversee transactions.
These attributes fed early enthusiasm for blockchain. Proponents envisioned it sweeping through online business and finance by enabling direct, verifiable and efficient transactions of all kinds.
'Yet to take hold'
For the power industry, analysts touted blockchain as a way to enable peer-to-peer energy trading, in which consumers and businesses with distributed energy resources (DER) could trade power efficiently without a local utility as middleman.
Some blockchain advocates predicted smart meter data would be stored on blockchains, making it more transparent and easily accessible for utilities and consumers. They also saw it as a way to transform electric vehicle charging networks, with real-time pricing data becoming directly accessible to vehicle operators.
Supporters believed it would become the way most digital transactions in the industry were eventually tracked and verified.
For the most part, those predictions have yet to take hold.
Venkat Banunarayanan, NRECA’s vice president for the integrated grid, says the industry already had effective means of handling transactions in place.
“Blockchain is just a means to an end,” he says. “The end is about security and traceability in transactions. There are multiple ways to achieve that, and blockchain is just one. There are other technologies that achieve the same end.”
Banunarayanan points out the power industry has not had a problem with data integrity either on its systems or in energy transactions.
“One of blockchain’s appeals is the immutability of its records,” he says. “But we’re not in a situation where there’s much of a threat of a record being changed.”
David Pinney, NRECA’s software engineering manager, says blockchain has challenges, including the operating cost, which can exceed other methods for energy transactions.
“There are good alternative systems in place,” he says.
Still, blockchain is attracting attention in some sectors of the industry as an option for verifying and tracking transactions.
“We’ve seen a lot of interest this past year around renewable energy trading, carbon-offset trading,” Sweeney says. “There’s a lot of activity happening in that space.”
PJM Environmental Services, a subsidiary of PJM Interconnection, recently completed a pilot project with the Energy Web Foundation, a nonprofit created to develop blockchain for the energy industry. The project tested blockchain technology for an online energy board for interaction among buyers and sellers of renewable energy. Power was offered in 1 megawatt-hour certificates from specific generators on the board, with blockchain undergirding the transaction records.
The pilot’s transactions were only tests and did not actually broker exchanges. Still, the participants reported generally favorable results, according to the Energy Web Foundation. The principal hurdle was the challenge of integrating blockchain technology with existing IT systems.
Sweeney says another project by California Independent System Operator (ISO) is using blockchain to keep a record of customers responding to “flex alerts,” in which it asks consumers to voluntarily conserve electricity during periods of high demand. The system uses a digital ID that maintains customer privacy while allowing the ISO to better track responses.
In at least one small-scale case, blockchain is being used to allow peer-to-peer energy transactions as its supporters imagined. In Brooklyn, New York, some residents with rooftop solar are part of a neighborhood microgrid that uses a blockchain-based platform for members to buy and sell electricity among each other.
These and other blockchain projects haven’t involved electric cooperatives, but the growth of cryptocurrency mining, which involves blockchain and is energy intensive, is impacting co-ops in parts of the country.
“Kentucky, South Carolina and Oklahoma co-ops are all seeing growth,” says Allison Hamilton, NRECA director of markets and rates.
Digital currency miners use high-powered computer rigs to verify new transactions through a process that involves encrypting the blockchain ledger on which cryptocurrencies depend. Essentially, cryptocurrency miners are rewarded for doing work that protects the integrity of the online currency they are mining by verifying blocks in the chain.
The effort involves solving extremely difficult mathematical equations, and the computer processing demands are energy intensive, making finding affordable electricity a priority. China’s decision last September to shut down cryptocurrency mining in that country has shifted much of the mining to the United States.
“The miners are coming with huge requests for load,” Hamilton says.
Taking on those electric loads requires a careful assessment of risk by cooperatives, she notes. Crypto mining presents a potential for significant load growth, but co-ops should consider the upfront costs of any infrastructure investments.
Blockchain may be integral to crypto mining, but its role in the process doesn’t represent an application for the internal operations of electric co-ops. Despite the different pilot projects underway, Sweeney says, the industry is still searching for the places blockchain fits best.
“I think it will become common when it finds its niche,” Sweeney says. “It’s still developing, still searching for its killer app. When it comes, it might be one that surprises us.”