“Blockchain will trigger a huge power shift from the energy & utilities providers to the consumer”

An interview with emerging tech researcher & advisor Jessica Groopman Industry analyst and a founding partner of Kaleido Insights Jessica Groopman advises companies about emerging technologies like IoT, blockchain, and...

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August 6, 2018

The convergence of machine learning, AI and IoT will be most notable in the near term, according to Jessica. “The first stage of IoT was about connecting things but the next one will be far more interesting. Once machine learning and AI models begin to underly data from the physical world, our devices start to perceive, to speak, and to learn. That’s a different level of “intelligence” than merely connecting a device to a network. Then consider the role of blockchain or distributed ledger tech, which will be essential to forge trust in contexts of device automation and autonomy.”

She was not merely talking about the technology itself, but about the huge cultural shift that the blockchain’s maturity will entail. “Our entire world is currently running on a highly centralized system. It’s how our governments, our banks, our companies and even technology pioneers like Google are organized. The blockchain is a shared source of truth which will decentralize the power of information effectively to the edge, to the user. “Blockchain thinking” doesn’t just introduce a new technical model, but an organizational, economic, and cultural paradigm.”

“That said, we still have some years to go before the blockchain will reach maturity”, she added in her characteristically pragmatic way. Researching use cases and applications across 20 different industries suggests broader commercial adoption of blockchain remains about 4 to 7 years from now. “We will likely see significant fragmentation across geographies as well”, she commented.

“The blockchain still has quite some issues, especially when it comes to its integration with IoT”, Jessica explained. Scalability, to name a big one: the IoT generates a tremendous amount of data, not all of which is as relevant. Which of these data should you put on the blockchain, knowing that it will render them immutable? Combining IoT and blockchain also has huge implications for the transaction speed. Ethereum currently takes about 7 minutes to confirm a transaction, which is way too long for an industrial energy environment. Last but not last, the scale of IoT environments would require an insane amount of server processing power if it was to be combined with the blockchain. Just take into consideration that the amount of processing per day in the Bitcoin blockchain is equal to the energy consumption of the country of Ireland, and then try to extrapolate that to the ocean of data from the IoT. Current “Gen 1” blockchain architectures are not suited for this today, but this is inviting novel designs configurations and lots of investment into next gen architectures.

“Though blockchain offers security benefits from an encryption point of view, these are still very early technologies”, she added; “As there are very few large scale IoT transactions for the moment that are running on a private blockchain, it means that it has not yet been tested how secure they are at scale. As promising as these technologies are, there are still some boundaries to cross. But once that this will happen, there is no telling what the implications will be.”

When I told Jessica about our upcoming energy and utilities tour to Tel Aviv-, she elaborated with great enthusiasm on the benefits and use cases for that industry.

“Today, there are multiple intermediaries in the energy market - brokers, energy companies, auditors … - between the generator of energy and the consumer of energy”, she stated. “But when generators and consumers of energy share a record keeping system on the blockchain - that will transform, and potentially do away with that entire middle layer. This will greatly lower the costs of transaction which allows smaller players – like schools or small businesses – to enter the energy market more easily.” I loved Jessica’s example of one of the first microgrids in the world in that aspect: 100 different homes with solar panels in Brooklyn built their own microgrid on a blockchain which tracked the entire production, generation and trading of solar energy in their neighbourhood.

The shared recordkeeping in blockchain will also do a lot for compliance and standards in the utilities industry. “Today, auditors conducting compliance and reviews are working retroactively. But if we have a shared recordkeeping system, auditors will become direct users of the dashboard in real-time. The latter will also signify a great reduction in human mistakes or even fraud and make the records keeping a lot more reliable.”

According to Jessica, an increased number of blockchain applications are surfacing in the energy and utilities industry. The Brooklyn microgrid that I referred to above, but there is also the intriguing example of the data market place Verv in the UK. Among other things, they have developed an energy trading platform that enables renewable energy to be traded between peers on blockchain technology. The aim of the platform is to reduce energy bills, improve access to green energy for those who can’t currently afford it and incentivise uptake of renewable technology.

It’s obvious that the blockchain will involve a big shift in power from the energy and utilities providers to the consumer. But Jessica added that companies would continue playing an essential role: the energy market would just become a much more hybrid place. She gave the example of Share&Charge in Germany, which connects both EV charging stations from private residents (about 45.000) and from energy companies (about 6000) into a giant blockchain enabled sharing platform. It’s basically an Airbnb for charging stations, which allows individuals to monetize their charging stations in new ways.

“When we think of P2P (peer-to-peer), we tend to think about 2 individuals exchanging goods or services”, said Jessica. “But in this much more hybrid world, P2P could mean a collaboration between peers as well as between private and public players. With distributed infrastructure for generation, distribution, and monetization of energy (especially in sun and wind), democratized access means a more robust network.”

When I asked her where large industry corporates ought to start, to harbour these exciting opportunities, her first advice was to focus on collaboration: “look out for industry consortia and market foundations, talk about your issues and start finding solutions together. The Energy Web Foundation, for instance, launched its own blockchain platform on Ethereum and 10 companies have already signed up and started testing.”

One of her most favourite examples in the matter, though, was the genesis story of Share&Charge. The idea came from a large German energy provider that asked itself the question “What disruption would put us completely out of business?”. Now seeing that the answer was “if everybody could make, sell and buy their own energy”, they decided to act upon that themselves and created Share&Charge. “That company was smart enough to make the leap from being a central player - which will, as time goes by become increasingly irrelevant - to an enabler of platforms”, she concluded. “It was a genius idea to spin an existential threat into a business opportunity.”

Jessica Groopman
Jessica Groopman
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August 6, 2018