Real time data to incentivise behaviour

Costs of renewable energy technologies have been decreasing rapidly in recent years, enabling home and land owners to generate and store their own energy for use or sale back to the energy grid. According to the Department for Business, Energy and Industrial Strategy (BEIS), the share of renewables within the UK’s energy mix increased by 16.7 to 29.4 per cent during 2017 relative to the year before. There is a trend towards decentralisation of the energy system, which will continue to accelerate with improvements in renewable technologies, such as increases in solar panel efficiency (from 17.8 per cent in 2012 to 29.8 per cent in 2016) and as costs continue to decline.

 

While the upsurge in renewable energy generation is having a positive impact upon the UK’s emissions, intermittency issues mean that multiple storage technologies and incentive mechanisms for balancing demand will need to be developed and optimised to ensure we can keep the lights on during evening periods when the wind isn’t blowing.

In 2017 the UK Government put policy in place which will see the banning of sales of new diesel and petrol vehicles by 2040. This policy places a huge burden on our future energy system, with demand for energy for vehicle charging typically aligning with current peak energy demand.

The sheer scale and speed of these changes requires an incredible amount of coordination of actors at all levels within the energy system. In my opinion, such coordination can most effectively be achieved through collection and dissemination of real time capacity, generation, consumption and cost data to enable incentive mechanisms to be developed for installation of additional capacity, shifting of consumption to lower demand times and optimal tariff selection.

In short, there is a need for a tracking technology which not only maintains a record of transactions, but can provide system users with real time price, supply and demand data at a local level so as to incentivise behaviour beneficial to the whole system; enter blockchain, which is an open distributed ledger technology (DLT).

 

Distributed ledger technology

Typically, we hear the term blockchain bandied about in connection with cryptocurrencies and financial bubbles. To put it simply, distributed ledger technology (DLT) enables the linking of large amounts of data sources to make meaningful insight. But we believe there is a whole wealth of benefit the underlying DLT can enable, especially within the context of our rapidly decentralising, smart energy networks of the future.

In a nutshell DLT, is a shared, encrypted, decentralised ledger system maintained by a network of computers, or nodes, removing the need for a vast array of intermediaries and privately held data sets, whilst providing real time, tamperproof data to optimise system performance. There are a number of ways in which DLT can enhance efficiency, cooperation and development of future energy networks while delivering price value for consumers.

My colleagues and I are already providing insight to our clients on emerging opportunities and benefits associated with DLT in the context of future energy systems. We were also recently shortlisted for I3P (Infrastructure Industry Innovation Platform) funding to develop a series of rail sector focused solutions and have developed our own in house DLT application, “lifechain,” which collates health and safety data from across our supply chain, giving project teams insight into emerging trends and potential future issues on the horizon and, crucially, providing trust, security and transparency to all our stakeholders.

This shows how DLT is providing solutions to help meet the critical national needs of the UK’s infrastructure.

According to Eurobat’s 2016 report, homeowners with renewable energy sources only use 30 per cent of the energy they generate and about 60 per cent if they own battery storage as well. Using a DLT solution, this excess energy could be used through localised energy trading networks in which small scale generators can automatically supply their neighbours once their consumption requirements have been satisfied.

The Brooklyn microgrid project is researching the potential of DLT for managing a decentralised peer-to-peer power grid with live tests across 10 homes within a community. Once vehicle-to-grid technology takes off, the role of consumers as providers of energy will only become more enhanced and provide additional streams of value. 

 

Smart contracts

DLT can enable management of energy networks through smart contracts. These contracts can provide signals to the energy system to initiate certain transactions based on times, behaviours or any other predefined variables. A smart contract backed system could ensure that efficient energy storage takes place whenever excess energy is generated.

In the reverse situation, where generated output energy is insufficient to meet consumer demands, DLT could directly control network flows through activation of balancing activities, such as storage facilities, to ensure supply meets the excess in demand.

A recent study by Imperial projects a £3-5bn reduction in overall annual costs of running the electricity system if flexibility resources can make a full contribution by 2030. With DLT ensuring system accessibility, transparency and automation this projection could easily become reality.

These are three key benefits which DLT could bring to the energy sector in future. There will likely be benefits available to less tech savvy consumers. Firstly, due to the simplification of transactions through disintermediation and digitisation of all documents, transaction costs could decrease. Additionally, the greater market transparency entailed by DLT solutions would likely lead to lower prices as consumers will be able to marry up their consumption with the most cost-effective tariff based on their behaviours.

 

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