Blockchain & the transformation to digital energy
At the beginning of the century the UK had under 100 power stations exporting electricity. Largely thanks to solar technologies, we now have closer to 1 million electricity exporters. In the last few years, it seems that the energy industry has suddenly reached furious consensus as to where we will be by 2030. Closer to 10 million exporters if you count the “Elon” assets of solar + batteries + electric vehicles. The future of our system is decarbonised, decentralised, digitised and democratised.
But this transformation is not just about the physical assets in the system. The shared digital architecture of the industry will also require a complete overhaul. We will need to transition to a more inclusive and extensible digital infrastructure, capable of far deeper levels of asset inclusion.
The full potential and benefits of all these new engaged assets will only be realised in a system that is open, demonstrably fair, low cost, and highly extensible. New decentralised technologies such as blockchain have huge potential here. In our thinking, there are three fundamental pillars of our shared digital energy system that need to transform.
It starts with an asset register. The first thing we need to know is what assets are in the system and endow them with a digital identity. This is akin to a “know your customer” (KYC) platform, though in this case it is KYD (know your device). These registers need to be common and shared such that assets are inter-operable and records can be continuously updated and evolved. Although these registers will need appropriate governance and oversight, they do not need to be centralised. Indeed, centralisation would incur unnecessary expense and data silo-ing which runs against the principles of asset inclusion.
Next, these assets will want 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.
And finally, 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 there. The reason is the asymmetric nature of the value of data (i.e. the disjunction between the value of individual and aggregated data). This asymmetry is exploited by intermediaries, and data owners seeking to address this are faced with the collective action problem.
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. Looking forward to the energy industry of 2030, of bundled services, highly tailored value propositions and machine learning algorithms, these structures around data ownership and control are key to customers becoming the ultimate beneficiaries of this digital energy transition.