I am dreaming about what the future of energy might look like for customers, prosumers and utilities.
“The future is already here, it’s just not evenly distributed.”
Author William Gibson’s prophetic words are clearly in evidence as the centre of gravity in the energy system moves towards the consumer. Among market participants there is remarkable consensus that the future will be decarbonised, decentralised, digitised and democratised.
The falling cost of renewables, and policies aligned with the Paris agreement are driving the decarbonisation of the generation mix. Electricity generation will Increasingly avoid high voltage transmission grids, and communities will benefit from the enhanced network resilience of mesh topology and islanding capabilities.
Augmented Reality and drones will facilitate network maintenance, with Internet of Things (IoT) and digitisation of grids delivering enhanced monitoring and analysis to identify risks before faults occur. Electric Vehicles, energy storage and IoT will enable buildings and microgrids to reduce their use of monopoly networks, and in some countries to go off-grid altogether.
We must embrace a new mindset
But if that is the destination, there is much less agreement on the journey there. As Cedric Neike, Member of the Managing Board of Siemens AG, outlined in his opening keynote at European Utility Week 2017, “to build a sustainable, affordable and reliable grid we must also embrace a new mindset”.
Balancing the grid is becoming more challenging due to the increase in distributed and inflexible generation. But whether within intelligent buildings, microgrids, or active network management by Distribution System Operators (DSOs), optimisation is increasingly occurring at every level. This is changing the role of network operators, especially at the transmission level (TSOs).
DSOs are already identifying alternatives to expensive network reinforcement. The IoT is enabling a vast increase in data produced by assets connected both on the grid and behind the meter. Analysis of this data could identify DSO investments that could be deferred or avoided. Yet little opportunity is being taken to use the data that is currently being collected. Only 3% of data collected in closed SCADA systems delivers meaningful insights. In an industry beset by data quality issues, more data won’t deliver value if it remains in proprietary silos and without incentives to ensure accuracy of shared data.
In addition to data-driven transformation of network management, new solutions like Siemens’ Medium Voltage Direct Current PLUS (MVDC) can make more efficient use of existing infrastructure. Whether connecting existing networks or a sequence of microgrids, MVDC can increase resilience, or even act as virtual transmission lines for distributed generation. This could bring competition to one of the last monopolies in the sector, the distribution network, and bridge the TSO-DSO interface.
But despite talk of a transition to a more customer-centric energy system, there is considerable industry and regulatory focus on technology innovation, and not enough about people. That consumers want and will engage with this future seems to be a foregone conclusion. However, traditional approaches to increasing consumer engagement with energy have had limited success.
Community energy and local markets may change this. Transforming people’s relationship to energy has been one of the benefits of the Brooklyn microgrid and other community projects. In the future consumer markets will be more diverse than they are today, where engaged consumers can participate in flexibility markets to deliver services to the grid. At the other extreme, the cost of energy could be invisible where smart appliances engage directly with energy markets to deliver consumer services.
The Potential of Blockchain
More flexible regulations, better functioning markets and shared infrastructure that align with the increased decentralisation of generation are needed to support the development of these new services. While many of the elements of a future digital energy system are already here, it will not be a simple task to piece them together with the existing institutions.
New decentralised technologies such as blockchain have huge potential to support the three fundamental pillars of an inclusive and extensible shared digital energy infrastructure.
As the energy sector remains highly regulated, there is a requirement to know what assets are in the system and endow them with a digital identity. These registers need to be common and shared to ensure interoperability of digital assets and records can be continuously updated and evolved. Although these registers will need appropriate governance and oversight, they can avoid the unnecessary expense and data silos of centralised systems.
If these assets are to interact and trade on their digital identity, they need to access common trading venues in which to express interest and be matched with other market participants. These platforms will need to be trusted, low cost execution environments. In order to maximise efficiency and avoid creating missing markets, these would also need to be extensible, user driven innovation platforms. A permissioned blockchain architecture, alongside real-world oversight, seems to be the best solution here for bringing millions of new assets and trading preferences into the market in an organised and efficient way.
Asset registration and trading can both generate data and verify its provenance. However, that still leaves a problem: the incentives to share, sell, maintain and analyse data are not supported by existing infrastructures. Again, blockchain technology can address this. Data generated through interactions on a decentralised platform does not become the de-facto property of a central platform operator. Instead, network participants remain in control of their own data and receive the proportional benefits of its value where they choose to participate.
These structures around data ownership, collaborative governance and control are key to consumers becoming the ultimate beneficiaries of the transition to the bundled services, highly tailored value propositions and algorithmic optimisation of the future digital energy industry.