Blockchain — a distributed database technology that allows transactions to be conducted securely between parties — is considered a game-changing innovation in the power industry because of its potential to host energy trading markets and facilitate decentralization. For example, in one much-touted application, residential and commercial actors can use blockchain to bypass existing electricity markets and electricity utilities and buy and sell energy directly to each other through digital platforms. And, as IBM experts pointed out in October, the technology could provide smart, transparent and automated offerings to existing systems. These properties, they note, could help "mitigate the substantial capital investment required to rebuild the physical mesh."

1. Some experts believe that blockchain promises to be a boon for power and utility companies, but a report titled "Assessing the Future of Blockchain in Transactional Energy" suggests that it may not be a panacea for all energy challenges.

But according to a September 2019 report by the Atlantic Council, a U.S. think tank, blockchain is currently unsuitable for carrying any of the major functions of a real-time transactional energy market, including energy data transmission, financial bidding, trading, settlement, price Forming and providing grid services to utility companies. "While blockchain has many other potential energy-related applications, and it could be a more logical and valuable tool, it has not yet expanded to serve as a key platform for trading energy markets," the report concluded.

This report stems from a careful study of the technology's costs and benefits to target specific power sector needs in the real-time cross-active energy market. But its authors Ben Hertz-Shager, director of EnergyHub, the energy resources (DER) management platform, and David Livingston, DOE's deputy director for climate and advanced energy, said: "The report does not take into account the Blockchain consensus, on-chain and off-chain scaling, governance models, privacy enhancements, and other existing and forward-looking innovations.”

The concept is attractive to the power sector, which, like many other industries, such as media, disease control, and fisheries, seeks to use its "Energy eBay" potential to reimagine and change the way traditional businesses operate. Today, a number of utility and energy companies and startups are exploring blockchain ventures, with applications ranging from green attribute certificate tracking to financial settlement for grid services.

However, these efforts are still in their early stages. A July 2019 survey by the Electric Power Research Institute showed that most U.S. utilities are in the early pilot or research stage, while European utilities are about a year ahead. At the same time, policymakers and federal entities have taken notice. For example, public utility commissions in Arizona and Nevada have begun discussing blockchain-related issues, and the Department of Energy has prioritized new blockchain-based concepts in its grid modernizaTIon blueprint released in November 2019 Develop cross-sectoral guidance and standards.

But the report noted that criticism has also been running high with industry statements about blockchain being stifling. One of the biggest concerns is that blockchains require a lot of computation—and therefore a lot of energy consumption—to prevent wrongdoing in the network, and the instability of cryptocurrencies. “As second-generation blockchains begin to move away from proof-of-work, more nuanced criticisms have targeted blockchains’ suitability for broader applications, lack of scalability, cost-effectiveness, and potential data privacy,” the report states. And cybersecurity has been questioned.”

To make matters worse, the industry lacks a technical understanding of the limitations of blockchain. Common examples are, as a distributed ledger technology, blockchain makes it faster or easier for distributed resources to submit transactions to the network than traditional centralized platforms, or blockchain involves distributed “In fact, blockchains can support an order of magnitude fewer transactions today than other modern platforms, and their distributed ledger control has little to do with the smart grid and energy market management needed to trade energy. or contribution. Therefore, while blockchain has many significant benefits, it is not a panacea.

The report’s conclusions come from what the authors call a “fundamental trade-off,” which is essentially the disintermediation of blockchains to central authority over six “costs” (efficiency, scalability, certainty, reversibility, privacy, and An assessment of how this is achieved in the context of governance).

The cost of blockchain when considered as a transactional energy tool is steep for one reason: “The duplication of data hosting and processing on each node in the blockchain network greatly limits the real data, transaction volume capital Efficiency and scalability. In order to agree on a shared transaction ledger, participants must rely on economic incentives, but this poses a risk to the final outcome of settlement and the security of the network. Perhaps most problematically, blockchains face the opposite Obligation to keep mission-critical electrical and financial data private on the one hand and make it visible to the validation server farm running outside the corporate firewall on the other. Moving this confidential data off-chain would eliminate this problem, but would significantly reduce the area The role of blockchain in key exchange market functions. So far, cryptographic technologies capable of solving these core problems—such as zero-knowledge proofs, multi-party computation, and secure hardware enclaves—are in the early stages of research and development, and they exist limitations, and some have not even been tried in energy-related applications.

However, the report makes several policy recommendations that could encourage and focus on the development of trading energy platforms (blockchain or non-blockchain) and help reverse these six “costs.” These incentives include direct financial incentives, such as institutional grants and awards-based awards, as well as indirect incentives that clarify the regulatory and commercial prospects of these platforms. It is also recommended that a task force and regulatory process be established to study the value of trading energy in light of state-specific policy objectives, such as distribution infrastructure delays, grid resilience, renewable portfolio standards, and retail market dynamics.

“In sum, this report finds that blockchain should neither be abandoned entirely, nor should it be seen as a total disruptive technology, or a panacea for all energy challenges.” Even if it is not well suited for real-time transactional energy markets applications, but it has shown better survivability for applications that require less frequent transactions and non-confidential data, such as renewable energy credit tracking and energy asset registries. This means that, for now, blockchain is likely to continue to evolve into an increasingly useful tool for specific applications, building (rather than replacing) legacy systems to improve the functioning of energy markets, because They will become increasingly decentralized and frequent over the next few years.

Responsible editor: ct

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