Low carbon future? Give us sandboxes, regulators.

 

If we want to make more progress towards a low carbon future, we have to make it clear to regulators as quickly as possible that local energy is the right – in fact, the only – way to do it.

 

That was the overwhelming take I got from the Greentech Media Blockchain in Energy Forum last month.

The feeling amongst industry experts was that technology is moving fast, with pilot projects starting to turn into commercial offerings (at LO3, for example, we are now rolling out our B-2-B-2-C Local Energy Marketplace platform to customers and getting traction).

But it was also clear the thing holding progress back is regulation.

Change is going to happen, it’s just a matter of time. But the rapid growth of Distributed Energy Resources (DERs) and the challenges of regulating their integration into the grid means time is now ticking faster than ever.

And in my ‘fireside chat’ with Scott Clavenna, GTM’s chairman, some insightful questions brought out some very important points.

 

Evolution of the fittest

There is a lot of new technology and a lot of opportunity right now, but actually I think the amount of disruption we’re talking about is NOT as earth shattering as people anticipate.

The Internet was going to end the Post Office, destroy newsagents, right? But it didn’t. The Internet HAS turned industries their heads – but the Post Office is still here. It didn’t end; it just changed its business model.

Distributed renewables, blockchain and local energy will change things, no doubt. It’s hard to predict exactly how it will develop, but by embracing new solutions, existing players can evolve to exist in new markets.

 

Local Energy Markets (LEMs) are the future

Distributed renewables are appearing everywhere, allowing people to produce their own power. Working alone, they provide a singular benefit to a singular owner – but integrated together in a LEM and their wider value proposition goes stratospheric.

There are two main value elements – value to consumers and value to the network in relation to energy management.

The tech we’re building can do a lot of energy management stuff, and there is incredible future value behind that, but that’s not what sells right now. It’s consumer interest that is driving things; and right now consumers have huge interest in energy choice and price.

We can create varying values for different energy resources in different locations at different times by efficiently and securely recording how and where energy is produced – and by doing that, we can create a local marketplace for that energy.

We’ve proven it can benefit consumers, too. In a study in Australia, we showed over the course of a year that in most cases peer-to-peer energy consistently saved people 6-13% on bills.

On the network side, the value is in ‘nodal’, locational support for grid operations. For example, what’s the value of a particular energy source if it can prevent a utility vault from catching on fire and shutting down Times Square; or likewise if one can stop a substation overheating and knocking out LaGuardia Airport?

That’s the value stack, and all these DERs can be valued that way, it’s just not recognized yet because it’s currently locked up behind regulation.

 

We need to manage energy differently

We have the RE100, companies like Amazon, Google, saying ‘we are going to go 100 percent carbon free renewables.’ Well, that just doesn’t exist. Not even just for them. There isn’t enough on the planet and we’re not going to be able to build it utility scale, so it’s going to have to come from DERs.

More importantly, EVs are coming at scale and one added fast charging EV in LA looks like two new houses to the grid. In San Francisco, in my area, it looks like 10 houses. I can’t fast-charge an EV on my network because it simply doesn’t have the capacity to do that.

So you need a system to actually allow the balance of those things, to help co-ordinate and schedule loads to storage and generation at the edge of the network.

Utilities need to move from generation to managing how we go to load. Currently, they typically control big loads at the end of very big lines that don’t normally have a problem. All the problems on the network are where you and I live, where the network’s not been touched for years and growth has happened up around them.

To solve those problems, utilities need to control your car, your refrigerator or your devices. Now, you’re not going to just let your devices respond to requests, but if your supplier can send you economic signals and incentives – and that is what our tech can do – then you might choose to do that.

 

 

Making the marketplace

We were one of the earliest entrants in the industry when we set up the Brooklyn Microgrid (BMG). It started off as a pursuit for a physical microgrid, with blockchain tech as a comms platform to help organize DERs, and it evolved into a test bed to see how people would respond.

It told us people want peer-to-peer – but not directly, it’s more peer-to-market, more about Local Energy Marketplaces (LEMs). So now we’re totally focused on providing a B-2-B-2-C platform, so utilities, retailers, DSOs, can engage with customers in a different way.

We make it possible for traditional utilities, energy retailers – folks who have access to customers – to run a LEM with self-executing contracts, configurability, all the things that help host the transactive marketplace, and we integrate existing data securely – and that’s one of the key benefits.

As for the BMG, well, it was always meant to be owned and run by the community but after the trial period they now need the regulations to change to allow it to turn into real life trading. They just put a petition up demanding exactly that, so we’ll see where that goes.

 

Consumers driving change

One of the most progressive places we’ve found is Australia, where people are very independent, they have a tenuous relationship with their utilities because there’s been widely reported manipulation in the markets, and they’ve got a lot of grid physics issues. They’re right in the crosshairs.

They want control of their future and they don’t want to be exposed to blackouts so they’re investing in DERs in response to what’s happening on the network around them. That’s forcing network operators to change how they’re operating those grids. They have to. There’s not an option.

 

Changing the regulations

As a regulator, you’re meant to deploy these sorts of new technologies if they prove value. The value has to accrue to the ratepayer; you have to consider the resilience of the network, the service it needs to be providing and the fairness as a whole; and then the tech itself needs to work.

All these solutions need regulatory intervention to get to scale, and while you can’t quickly change, if they can tick those boxes that’s what they do. It’s literally their job.

So, you have to present it to them in boxes they can tick – and there are three things to focus on.

Firstly, do people want to do it – because if nobody wants to, why spend time on it? Secondly, does the tech exist, can it be deployed and at scale? And thirdly, does it break fundamental, essential business models that we need to run our economy?

Being able to put together sandboxes where you can test the technology, the interventions with people, actually trading real dollars to see if they really do care or if it’s not even associated with the dollars, in conjunction with a DSO or TSO or utility partner, is now THE key to making progress.

 

The importance of data

I believed the hype that advanced meter infrastructure was going to roll out at scale, we were going to have meter data streaming from everyone’s houses, and people could access that data – the data needed to manage transactive energy. But I was wrong.

I put all hope in Green Button (a USA energy data sharing platform) but it has a broken business model. A utility doesn’t get paid to put data on, and if they do a third party can come and use it to build a competitive business model. It’s not surprising it didn’t flood with data.

So, we’ve developed a platform called Exergy, which has a business model focused on secure ownership. If you own a data-producing device, that’s your data. Exergy allows you to secure and encrypt it so it becomes an asset to sell or gift – and for a utility with a big data pool, there’s big value there.

Importantly, though, it doesn’t have to be meter data. There are lots of smart appliances producing the same sort of data, so in addition to our LEM platform, our other platform, Exergy, can get data at scale to help support some of these new transactive energy models.

 

So what about the blockchain in all of this?

Well, actually, the innovation here is not blockchain, it’s building the platform to solve this market problem consumers, utilities, retailers and DSOs need solving. It just happens to use blockchain as part of that solution.

Blockchains are like tires on a car – you can change them out if you design right. We’re creating a crypto-agile platform, so we can swap out consensus mechanisms, swap out blockchains, move back and forth, and build multi-layered architecture to put the right data in the right place on the network.

It’s built for the present, and for the future – because this is the future, but it’s happening now.