New York Utilities: We Believe Blockchain Is ‘Transformative’
Avangrid, Con Edison, National Grid, the New York Power Authority and Indigo Advisory Group describe the many attractive use cases for blockchain.
The potential of blockchain in the energy industry could be transformative.
Over the past two years, we have seen a host of energy companies engage with the technology and launch pilots. Some common trends are emerging, but a lot still needs to be defined from both a technical and business perspective.
Our view is that experimentation at this stage is worthwhile as it will enable utilities to explore the technology and see its use, limitations and scaling potential.
As a result, four New York utilities — Avangrid, Con Edison, New York Power Authority and National Grid — are excited to be working together to understand how shared blockchain infrastructure may benefit our customers.
It makes sense to explore the technology collaboratively. Many blockchain solutions inherently involve multiple parties sharing information to enable new services, and we are looking to provide value and stimulate innovation across our networks in the state. We are constantly evaluating new technologies that can provide value, defer investments, and improve the customer experience; we’ve come together to explore blockchain technology in order to increase our impact and focus on use cases applicable across New York state.
How could blockchain benefit utility customers?
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Simply put, blockchain is a way of structuring data by forming and linking blocks of cryptographically signed and time-stamped transaction data. The blocks record who transacted “what” with “whom.” Once stored on the blockchain, these blocks form an immutable and shared database of records.
Another important element are smart contracts, in which the rules for completing transactions are carried out by executable programs. As a result, transactions occur automatically when the system detects that the conditions in the contract are met.
To reach agreement among all parties, there are several processes for the “nodes” (participants) in the blockchain network to approve transactions — this process is called “consensus.” By using the combination of these components, blockchain technology enables participants to keep track of transactions without centralized oversight, thereby creating trust among a group of participants in a network. The idea is that participants can be assured that there is one version of the truth. As a result, blockchain may not only be suitable for transactions among parties that know and trust each other, but also those that don’t yet know and trust each other.
We as utilities have many existing processes with partners that involve forms of automated transactions: our customers, the wholesale market, third-party energy suppliers, community solar companies, regulators, and many more. In the changing energy landscape, we are deploying smarter infrastructure and devices across the grid that are creating large volumes of data, while also seeing the rise of a whole host of customer activities as they engage with energy more.
All of this means that there will be many more transactions that require transparent processing, data privacy, and automation. As these technologies mature, we are looking at these blockchain technologies and how they fit our needs.
Selecting use cases
Working alongside New York-based Indigo Advisory Group, we began to evaluate potential applications across both blockchain and utility industry specific criteria. This year, we identified applications that may be suitable for blockchain from several sources.
In total, a pool of over 50 use cases emerged. These use cases were then evaluated against criteria that flow from two core questions: 1) Does the use case actually need a blockchain solution or will another solution perform better? and 2) What are the benefits to participants at this stage?
High scores across the first set of criteria were a prerequisite for exploring blockchain for a particular solution. Below we highlight our findings on use cases that warrant further exploration. They include: customer management, clearing and settlement, decentralized energy markets, cybersecurity, DER management, and electric vehicles.
Trust portal: A portal that offers customers a place to transparently manage consent of energy sharing across the participating New York utilities and registered third parties. The distributed ledger administers shared registration of third parties (e.g., DER providers) for participating New York utilities, and keeps track of data sharing transactions from utilities to third parties and vice versa. An immutable distributed ledger would provide operational and compliance efficiency by allowing customers, utilities, third parties and regulators to trace back transactions in a reliable and shared record.
Clearing and settlement
Manage C&S confirmation process: An auction platform for wholesale commodity procurement that provides end-to-end control of the process. The same system could later be expanded to include peer-to-peer energy trading.
Managing carbon (RECs) positions and P&L: In New York state, load-serving entities are required to buy Tier-1 renewable energy credits every year. Blockchain could provide automated purchases via smart contracts, a lighter certificate of origin reporting system, reduce administrative costs, and eliminate costs associated with aggregation of small certificates coming from distributed resources.
Decentralized energy markets
Transactive energy: A decentralized peer-to-peer transaction and supply system where the valuation and settlement of electricity over time and location can be fully automated through smart contracts and recorded on a distributed ledger — enabling process efficiencies and improving audibility and transparency.
Device authentication: Deployment and provisioning of IOT devices such as smart thermostats at the grid edge. Blockchain’s one-way encryption and distributed ledger could help prevent intrusions and tampering with authentication records.