Tag Archives: Energy

Duke University Energy Conference 2017 – Duke Talks: Energy and Blockchain Technology

– Hi everybody, is this working? Awesome, cool Okay, whoa

It seems like there's a lot of interest in blockchain I got some shout outs in the previous talks, so thanks for that So the way I wanna start is actually just understand a little bit about what you know about blockchain So, who has heard of Bitcoin? Who knows the difference between Bitcoin and Ethereum? Okay, cool, that's good to know I'm gonna talk about blockchain

I'm not going to explain it in detail I was just saying to Keith that it took me a good four months of full time work to understand blockchain in detail, so if you don't understand it, don't worry, you're not behind Just like, get a full time job working on it and four months later you'll be okay (laughs) So I'm not going to explain the technology in detail I will explain sort of the premise of the technology and why it's interesting, I will explain and talk about why it might be useful in the energy sector, and I am going to also talk about what we're doing as Energy Web Foundation to overcome some of the barriers facing blockchain technology in the energy sector

How do I advance slides? Go (audience laughs) That didn't work Oh, this, thank you God, sorry All right cool, so thank you Brad for talking about the shifts that are happening in the energy sector

There is a cost cross that is underway Cost of distributor resources, energy efficiency, down The cost of regular grid infrastructure is not going up necessarily, but the way that it is financed, energy use is going down, or flattening So the relative cost is increasing, shall we say This is affecting the entire industry

Okay, so we've got the distributed resources sitting on the customer end, and we've got these traditional resources sitting on the other end of the spectrum The value, the money should be shifting to the customer Right? It's not It's not, at least as quickly as it could be, or as quickly as it should be Why? The system is designed right now

It's not designed for distributed resources It's not designed for DERs Sorry for all the acronyms

The system is designed for a relationship between utilities and customers A relationship that has been extremely effective at serving all customers, at serving them at lowest cost, and at socializing the good of energy And not double spending There's not five or 10 poles and wires running down the street, there's one So this system has been very effective so far

But it is not working, it's not very effective for the shift that we are seeing to distributed resources We need a system that can enable participation and interaction, customer to customer, prosumer to prosumer – proactive consumer We need that transactive layer, that network, that ability to transact at the distribution edge, where the resources and value is moving Okay? What is the problem with this, with building this transactive system, what is difficult about this? There's a lot of issues, I'm gonna highlight three issues The first, cybersecurity

This is a big challenge, actually To allow devices to interact with each other in a physical system as fragile, as important as the electricity grid, you really do have cybersecurity concerns The second, transaction costs Sure, it's great, let's allow everybody to sell solar to their neighbor If it costs $10 every kilowatt hour to sell, who cares? It's not going to do anything, it's not going to be useful

So keeping transaction costs extremely low is very important to enable any value to be created at the distribution edge The third is a little mushy, but it's multiparty coordination It's very hard for people to coordinate with each other in this peer to peer way That's very challenging It's one of the, if you're familiar with Bitcoin, one of the sort of revolutions of the Bitcoin network

Is that allowed people to interact with each other for currency, as opposed to meeting a bank sitting in between them Okay Not surprisingly, given the topic that I am talking about, we think that blockchain can address these three issues We think because of its sort of inbuilt cryptography, it can address a lot of the concerns around cybersecurity Because there's no intermediary in the system, it's a direct peer to peer interaction through an algorithm, you can't imagine costs that could go lower

And it by its nature is really designed for multiparty coordination So this is why we think blockchain is valuable as a foundation for peer to peer transactions, for supporting grid edge transactions So this is really about creating a market between traditional consumers who are now becoming self generators, who are now participating as suppliers This is very futuristic We're talking transactive energy, we're talking a full remake of the electricity grid

This isn't the only way that blockchain can be valuable in the energy sector There are many applications up and down the energy sector from sort of process improvement side of things, reducing overhead costs, improving something like a utility billing relationship as an example There's plenty of applications in those spaces There's also applications that are truly disruptive, that are sitting on this sort of transactive energy grid True peer to peer electricity transaction side of things

So it's not just the disruptive future, it's also the process improvements where we believe it can be valuable How are people doing so far? Are we with me? You're doing okay? Okay, just checking It's easy to lose people on this topic Okay So there's a lot of value there, there's a lot of value to be captured

It's unclear who is gonna capture it, but there is a lot of value And there's a lot of activity in the blockchain space and in the blockchain energy space There are some real barriers to blockchain scaling in the energy sector The first, and this is a little difficult to grasp for people who are less familiar with the technology But actually, the technology is not there yet

Bitcoin can practice seven transactions a second, Ethereum, the second most used blockchain in the world can process 25 transactions a second That is nothing, that is so low It's not gonna support any applications in the energy sector at 25 transactions a second So the core technology needs to be, there's several advancements that need to be made, especially in scalability for it to support transactions in the energy sector, for it to capture that value in the previous slide The second big barrier is that there is very little examples of physical connection between blockchain and the world

Blockchain is really good at getting agreement on something like a currency, on cutting out a bank and allowing people to transact with trust between each other But it's only as good as the data that is entered And so it's really easy for virtual interactions, but once you start dealing with interactions with the physical world, you have to trust that data coming in, as well That hasn't been solved yet So that's a barrier that's gonna need to be overcome in the physical world of electricity

The third is incumbent adoption There's a lot of big players in the space that can put real capital behind this work and scale it quickly, but they're unfamiliar with the space, they're unfamiliar with the technology And they're not ready to move in and to implement it and to benefit from it And the last is regulatory awareness These regulators and standards making bodies aren't familiar with the technology, they don't understand it that well, they're not ready to regulate around it in a productive way

So I work for the Rocky Mountain Institute which is a non-profit based in Colorado I also work for the Energy Web Foundation The Energy Web Foundation is a joint venture between RMI, a mission driven non-profit organization, and Grid Singularity, which is a blockchain technology company now based in Berlin So we founded the Energy Web Foundation to address these barriers Really, our goal is to create as much value as possible by scaling blockchain in the energy sector

And as RMI, the reason we started Energy Web Foundation is because we believe that it has the potential to scale distributed and renewable resources faster than anything else in the space And we're gonna do it as Energy Web Foundation by building an open source core tech So building the blockchain core that will support the applications at the appropriate speed We're gonna do it by identifying, and assessing, and proving the value of applications to incumbents, to the energy space We're gonna build an ecosystem – we are building an ecosystem

I'm saying all this in the future, I'm used to giving this as a pitch We're already doing this We're building the ecosystem of users, application developers, and infrastructure providers And educating regulators and standards making bodies So this is the work we're doing, these four points

In terms of the role that we intend to play in the market, it is an open source role So we are building what's in blue We are building what we believe should be shared, should be a core, open source foundation, not a competitive space So it's essentially the app store, we're building the app store And the application space, we believe, should be competitive, should be open to competition

This core foundation space is the technology that we are building and will be releasing, open source We think that coming together as a consortium of energy companies and as a group, to build this core technology, is more efficient and more effective, and faster than there being you know, many different proprietary platforms, for every different commercial application has to build its own proprietary core tech platform So our belief is that that core technology platform should be shared and should be open source These are our founding corporate affiliates, so these are the companies that agree with this proposition, want to enter the commercial, competitive space but don't have the core technology support to do it yet And so have funded Energy Web Foundation to build that core tech support and build awareness in the energy sector

And we've actually got another five companies that have joined us in the past few months This is our governance structure If you're familiar with the blockchain space, governance has been a little unruly We have tried to keep a very small governing board for decisions and to not sort of grow and to be an unruly organization So we've got a small governing board between Rocky Mountain Institute and Grid Singularity, and our fifth board member, Christoph Frei, the Secretary of the World Energy Council

Our technology timeline, we actually on the 1st of November released our test network, open source, for use So this is the first iteration of the core technology that we'll be releasing on our go live date, April 2019 In April 2018, we'll be releasing some of the applications and projects that we've been developing with our corporate affiliates over the past few months and onto 2018 That's it I'd love to take your questions

(audience clapping) And feel free to rewind all the way back to the energy, blockchain stuff and why that's important So I think it's just hands up, questions You know, anybody Go ahead – [Audience Member] Are there any pilots of this, like in New York or like Sonnen, is there something in Brooklyn, can you talk about those for a minute? – Sure, so the question was are there any pilots, New York, Sonnen were mentioned

There are some pilots, and there's some really good work that's been done to demonstrate what can be valuable in the energy sector using blockchain So in Brooklyn, there's a Microgrid project whereby several households on a street were connected to a blockchain network and were selling their electricity peer to peer And I almost did air quotes there Because it's a financial transaction They're using Con Edison's poles and wires, it's not a physical transaction of electricity, they're not doing any power flow analysis

But they are matching load curves and understanding and buying and selling peer to peer, financially And that has been a really effective demonstration of how peers can essentially trust each other, use the blockchain shared ledger as a foundation for their transactions Yep (inaudible) So the question was Bitcoin's a currency, is what we're doing a currency as well? The answer is no We also don't want to get into currency risk

What we want to do is to provide the transactive platform, essentially, and if you're familiar with tokens, Bitcoin is a token, is this sort of virtual currency We also will have a token, but the token is only used to pay for transaction costs So it's only used to pay for the computing power to run the network, and it will have a floating exchange rate with US dollars, so you're paying a set amount in US dollars There's no risk of inflating transaction costs Yep

– [Audience Member] So it seems like every day, there's a new company focusing on blockchain Do you have a sense from your perspective of the landscape? What characteristics would make companies have a higher chance of succeeding verses being a good headline? (laughs) – You're asking me for financial advice in your investment company (laughs) So what companies are going to be successful versus less successful in the blockchain space? I think that you really get back to differentiating between companies that have sound fundamentals and those that don't And in the blockchain space there has been a lot of excitement and just in the energy side of things a company recently raised 40 million dollars, another raised 70 million dollars off of nothing, a white paper And that's alarming

I would say just as any other investment, I think that there are business models that make sense, and there are business models that don't make sense And I think there's a lot of excitement, and that's what's leading to some of these investments that maybe don't make as much sense, in my mind – [Woman] I think we have an audience question up in the back – Yeah – [Audience Member] Comment a little bit about transactions cost associated with blockchain, if I understand correctly there is still mining which again requires power, and it's privative for some of the applications, how is that in context for energy? – Absolutely, great question

So transaction costs are extremely high in Bitcoin Bitcoin is driven by a process of reaching consensus in the network, that's called proof of work And that process is very energy intensive It is also totally unnecessary It is the way that they have decided to achieve consensus, but there are other ways that are currently being created and being tested

And our network will be based on a new kind of consensus mechanism called proof of authority, which does not require the energy spend of proof of work, and does not incur the same transaction costs It's really designed in order to keep transaction costs as low as possible – [Woman] Okay, we're gonna do one more question – [Audience Member] Thank you Is your platform gonna be able to work disconnected from the internet, so like in a small pocket such as a developing country, somewhere that doesn't necessarily have you know, broadband access

– Yeah, great question So each node on the network does need to be able to communicate with each other You can use mesh networks, you can use internet, it doesn't matter As long as the nodes on the network essentially And because this is the last question I'm gonna extrapolate a little bit But the core idea of blockchain is that you're getting all of these nodes to agree with each other You're taking the individual idea of truth from every organization, from every person, and instead of it being held individually and then disputed and had legal debates around and audited and all of these things, you're taking that idea of the truth in the network and putting it in the center So that everybody can transact based on the same information that is trusted and agreed upon

And so in order to do that, the nodes just need to be able to communicate with each other in some way Happy to answer more questions over lunch, or in another break, but thanks a lot for having me (audience clapping)