Blockchain brings 'Virtual Power Plant (VPP)' to disrupt the energy market

In this day and age, if you randomly pick out a well-known software company engaged in cloud computing services, it is very likely that this company has already been involved in research and experimental work related to blockchain technology.

Just last week, Google revealed that it was working with the Royal Bank of Scotland to conduct blockchain research experiments, mainly for the clearing and settlement of financial transactions. Microsoft and Bank of America Merrill Lynch are also working on similar projects.

IBM is also very high-profile in the blockchain field. On September 28, IBM released a self-funded research report, which stated that by the end of 2017, 15% of banks will be involved in blockchain technology, and in the next three years, nearly two-thirds of banks will be able to provide formal blockchain services.

Likhit Wagle, global industry general manager for IBM Banking and Finance, said:

“Being an early blockchain adopter has many advantages. The first blockchain movers will set blockchain business standards and create new models that future blockchain technology adopters can use. We also find that these early adopters are better able to anticipate the disruptive impact of blockchain and fend off new competitors along the way.”

While much of the early blockchain activity has been driven by financial institutions, experts believe that blockchain technology will definitely play a role in corporate sustainability strategies. For some, blockchain is a way to increase transparency in the supply chain. According to a panel of technology experts at VERGE 2016 held in Santa Clara, USA last month, blockchain technology may also have a profound impact on corporate energy procurement.

David Bartlett, CTO of Current, GE’s digital power services business, told VERGE attendees:

“Blockchain technology is not only useful for transferring money, it can also be used for other assets in a transparent and reliable manner.”

You can think of blockchain as a gatekeeper, said Reid Williams, another VERGE participant and design director at IDEO CoLab, a research and development organization that is experimenting with applications using blockchain, artificial intelligence, virtual reality and the internet of things.

Technically, a blockchain is a type of code that manages the handover of assets from one person to another — these assets can be in digital or physical form — and each time an asset changes hands, it is recorded in a permanent ledger while ensuring that the record cannot be duplicated.

Alex Zinder, Nasdaq’s global head of software development, has been researching blockchain applications for three years. He said:

"The bitcoin blockchain makes it very simple, where every participant in the network has a unique address, and then you have coins and objects that can be transferred from one address to another. That's real, that's what this technology enables."

Achieving 'frictionless' commerce

In other words, blockchains make it easier and more cost-effective to experiment with new barter services or ‘event’ systems that are not possible with existing transaction models.

Zinder said:

“Blockchain can help you verify all of the different touch points and their provenance.”

What can be done? Using blockchain as a potential catalyst for experimentation, Nasdaq, along with IDEO CoLab and IoT device startup Filament, have cracked a new system for automatically creating renewable energy certificates (RECs), going from concept to viable product in just four weeks.

At the heart of their prototype are solar panels and batteries with Filament sensors that collect data on the amount of electricity produced and stored. The collaborators are now investigating how this data could be used to automatically create RECs, which could allow more companies to participate in the research.

Systems of this nature could upend existing methods of acquiring and trading RECs, a process currently controlled by regional market authorities.

Williams said:

“All of a sudden, the cost of each transaction becomes so low that you can start using blockchain technology for things that you couldn’t even think of before.”

'Virtual power station' becomes possible

Blockchain technology is also playing a central role in the rise of so-called ‘virtual power plants (VPPs),’ where energy resources are connected via smart grids but are not necessarily concentrated in a central location, such as a traditional power station.

Bartlett said:

“Imagine living in a community where your neighbors are able to provide you with excess energy. Instead of just buying a credit card, you know you are buying energy from your neighbors. You are achieving the most efficient energy transfer.”

In a recent report on VPPs, Navigan Research said that by transforming the grid, VPPs can help optimize the use of existing power resources and help the industry move toward a more distributed model.

These VPPs can aggregate new generation energy sources — including solar panels, microgrids or energy storage devices — and link these resources to demand response programs that can help companies reduce their energy consumption rates.

According to Navigant, spending on metering technology, communications equipment and necessary software will reach $182.6 million in 2016 and grow to $2.1 billion by 2021. The research firm notes that the primary goal of a VPP is to help asset owners maximize profits while maintaining the proper balance of the grid — and at the lowest possible economic and environmental cost.

According to Bartlett, this is largely because the model eliminates centralized control of energy generation assets. He said during the VERGE panel discussion:

“Distributed energy is really about generating your own energy, being self-reliant, and selling excess energy to others.”

Blockchain technology seems increasingly likely to play a role in automating and securing transactions. Companies like Nasdaq, IBM and Microsoft could eventually play a major role in driving the creation of networks that support barter or peer-to-peer transactions.

IDEO CoLab’s Wiliams said:

“It’s hard to imagine a market like this being used for more than one purpose today, in part because the trading platforms are too expensive to be used for just one purpose.”