Jesse Morris, CEO of the Energy Web Foundation, believes that blockchain could increase the value of distributed solar, batteries and grid-responsive appliances and electric vehicles around the world. To prove that point, he's starting with a novel test in Australia.
It’s called Project Energy Demand and Generation Exchange, or Project Edge. Over the next year or so, the project partners will be rolling out a common technology platform to enable distributed energy resources (DERs) to help their local power grids and the larger high-voltage transmission networks they’re connected to — and to earn financial rewards in return.
But unlike the company-by-company DER aggregations already performing these tasks in Australia and other countries, as well as the distributed energy resource management systems that utilities are testing to control resources on the edges of their grids, this pilot project is designed to connect every party involved — and eventually, every participating DER device — using a common technology key.
That’s Energy Web’s Energy Web Chain, an open-source technology now being tested by a growing number of utilities and energy companies around the world. While some blockchain providers have launched peer-to-peer energy trading linking solar-equipped households, Energy Web is targeting an entire ecosystem of energy industry players as its users, from transmission operators and utilities to solar and battery equipment manufacturers.
“What all of us are building here is a piece of shared open-source digital infrastructure,” Morris told Canary Media. “Imagine that we have hundreds of millions of DERs owned by different customers and retailers. Can you use a single piece of technology to share data between those market participants?”
Energy-specific applications of blockchain
Over the past four years, Energy Web, a Switzerland-based nonprofit co-founded by think tank RMI and blockchain technology company Grid Singularity, has been developing energy-centric applications of the technology behind Bitcoin and other digital currencies, as well as a new generation of distributed ledger systems. (Canary Media is an independent affiliate of RMI.)
Whether blockchain is supporting computational “mining” for virtual currency (at the cost of outrageous energy expenditures) or enabling “smart contracts” and other forms of trusted exchanges between corporations, the core premise is the same: allowing massive numbers of individual entities to exchange data and stores of value in a decentralized, transparent and secure way.
In the case of Project Edge, the Energy Web Decentralized Operating System will coordinate the exchange of these data “passports” between the Australian Energy Market Operator (AEMO), which operates the country’s transmission grid markets; AusNet Services, the utility managing the power grid for the state of Victoria; and Mondo, AusNet’s commercial energy business in Australia’s deregulated energy market.
Microsoft’s Azure cloud computing platform will handle the massive data requirements. PXiSE, a Sempra Energy subsidiary that is orchestrating complex DER operations in countries including Australia, will provide the market intelligence platform.
The partners plan to enroll about 1,000 customers with a collective 10 megawatts of DER capacity for a trial that will run through early 2023. Mondo is actively seeking customers to sign up now. It's likely to find plenty of takers in Australia’s solar- and battery-rich market.
About one in four households in Australia has solar panels, a proportion that rises to four in 10 in some parts of the country, according to AEMO. Many of those customers have installed batteries from Tesla, LG, sonnen and other vendors. A significant proportion of these batteries are being aggregated into virtual power plants that allow grid operators to gain access to megawatt-scale load-shifting capabilities to help even out hour-to-hour imbalances in supply and demand.
A whole-grid approach to distributed energy
Unlike most virtual power plant projects, however, Project Edge is also looking at the needs of distribution grid operators. Most of today’s virtual power plants are almost entirely focused on providing services to wholesale energy markets. That leaves out the utilities that run the lower-voltage distribution networks — and leaving them out could become a problem as DERs grow to scales that could actively disrupt those grids.
“Grid operators…effectively [have no visibility into] what DERs are on their system and what [the DERs] are doing,” Morris said. This forces most of them to use roundabout methods to assess their impact on the high-voltage networks they operate. At the same time, most distribution utilities haven’t yet deployed technology to monitor whether solar, batteries or electric vehicles are even turned on, let alone to gauge whether they are acting in ways that are helpful or harmful to maintaining grid reliability.
One of Project Edge’s first goals will be to determine how “DERs can provide services to the wholesale market at scale within limits provided by the distribution utility,” said Morris. Those limits might include ensuring that a wholesale energy market dispatch order doesn’t trigger a grouping of behind-the-meter batteries to inject enough energy at the same time to overload local transformers or circuits, for example.
Moving beyond harm reduction to add grid value
Beyond preventing harm, active DER management can also provide value to the local grid — if that value can be identified, categorized and dispatched by the local utility involved, according to Morris. That’s why Project Edge will test activities including using smart solar inverters to balance local grid voltages and ordering batteries and controllable loads such as air conditioners and water heaters to avoid rare but costly loads on stressed-out circuits or substations. This is a use case known as “non-wires alternatives” because it can allow utilities to avoid or defer grid upgrades.
A typical day in the life of this market pilot will start with 24-hour forecasts of grid needs and the amount of DER generation and flexibility availability, Morris said. As an aggregator, Mondo “will be looking at all the customers they have relationships with and what assets those customers have. [Mondo] will have their own bidding strategy to participate in either the wholesale or local market.”
He continued: “Then if we step to the utility level, the distribution utility will be saying two things”: either “‘Don’t do this in the next time period’” — the limits part of the equation — or “‘Here’s where we need help in terms of these local services.’”
As for Australian grid operator AEMO, it’s “just running a wholesale market,” which entails assessing the full spectrum of energy demands and grid-balancing needs it and other grid operators are constantly monitoring and dispatching to power plants and battery farms. “The difference is that a lot of smaller assets and portfolios of smaller assets are participating.”
As the day unfolds and grid needs change in real time, AEMO’s and AusNet’s dispatch orders will change, and Mondo will adjust its control of the DERs in its aggregation to meet those changing conditions. Then, as the day comes to a close, the parties will use their common understanding of who did what to settle how much money they owe each other while forecasting what the next day will hold.
Blockchain to enable market access
These kinds of DER distribution values are being targeted by utilities and regulators in markets from California to the U.K. As for coordination between the transmission and distribution grids, national government policies such as the U.K.’s electricity system flexibility effort and the U.S. Federal Energy Regulatory Commission’s Order 2222 are forcing transmission and distribution system operators to find ways to coordinate their activities to grant DERs to access wholesale energy markets.
But few, if any, of these efforts are using a common underlying data-sharing framework. That’s vitally important considering that these DER actions are worth money and thus must be trusted by every party involved in bidding and paying for them.
That’s where the Energy Web Chain comes into play, Morris said. “All of the different companies — and eventually all of the different assets — get this thing called a digital identity,” he said. “These identities are the assets behind which this trust can be generated for activities between these market participants. You can think of them as passports.”
Without some commonly verifiable source of truth to enable this trust, market participants might well have to rely on expensive on-site metering devices hosted by energy market operators. Indeed, some U.S. transmission operators are considering requiring this kind of metering to allow DERs to participate in the market structures mandated by FERC Order 2222.
Cost considerations and trust barriers
The risk is that these metering requirements could end up costing more than what individual DERs can expect to make in the markets, dissuading aggregators from even trying. That rational economic decision could rob the grid of hundreds of gigawatts of capacity that industry analysts predict will become available from solar panels, batteries, electric vehicles and grid-responsive appliances over the coming years.
Beyond solving these trust barriers to market entry, a common technology framework could avoid another threat to DER markets, Morris said: potentially project-killing integration costs.
Early DER integration pilots have shown how challenging it is to integrate behind-the-meter devices with utility systems. A shared IT infrastructure is likely to be cheaper and less complex and time-consuming to implement than one trying to pull together systems from individual actors going it alone, he said.
“Instead of AEMO going out and tendering its own IT stuff and all 20 distribution utilities tendering their own IT stuff, and aggregators doing that [as well], we’re saying, ‘Here’s a chance for all of us to be singing from the same hymnal,’” he said.
This difference in cost and complexity between systems built on disparate proprietary technologies and those built on open-source ones is a salient consideration. It’s the same reason that common standards such as Internet Protocol and open-source operating systems such as Linux have taken over the IT industry, as well as adjacent industries including telecommunications, over the past decades, Morris explained.
Next steps: Device-level integration
Morris clarified that the project team is “just integrating with the aggregators and distribution utilities at this point.” AusNet and Mondo are the first of what the project partners hope will be an expanding roster of participants over the coming years.
Project Edge has yet to enlist DER manufacturers to equip their devices to support the blockchain functionality it will be testing, however. Blockchain is being tested in smart meters in a handful of pilot projects, but for equipment such as inverters and smart appliances, there is no equivalent of the SIM cards that allow mobile phones to operate on different telecommunications networks around the globe, he said.
That level of interoperability didn’t always exist, of course, and it “would not have happened without broad-based, noncompetitive cooperation between” telecommunication companies, Morris noted. It remains an open question whether individual DER makers are willing to coalesce around a common technology to enable their participation in grid markets — and to commit to embedding that capability in their devices at the factory.
There are some existing models for this kind of broad industry adoption, including the IEEE 2030.5 standard for smart inverters. However, those are more centered on data-sharing and functionality as opposed to trust and verification. “We’re using standards as part of our stack, and those standards will shift and evolve over time,” Morris said.
“The challenge is not a technological one; it’s a business and relationship-management challenge,” he said. “If we think a decarbonized grid is going to come about, and this decarbonized grid is going to rely on DERs to balance it, we’re going to require some software” to make that happen, Morris added. “How do we deploy software across an entire market that’s interoperable, not expensive as hell, and secure?”
(Lead photo: Ashley Cooper/Construction Photography/Avalon/Getty Images)