Updated: Aug 2, 2019
“Energy organizations embracing a decentralized future today, are ensuring their competitive positioning for tomorrow.”
Energy organizations today face increasing pressure to seek and develop innovative competitive advantages in commodity energy markets
Providing customers with a secure and cost-effective power and gas supply is no longer enough. Energy retailers in competitive markets strive to differentiate a commodity product offering among a slew of competitors vying for an increasingly sophisticated customer base. Further, energy providers must adapt to markets with limited and at time decreasing demand growth as energy efficiency initiatives and demand-side management options become more prevalent. To better serve their customers and retain footholds in their markets, energy organizations are seeking new ways to expand and retain this increasingly flexible and sophisticated customer base by finding ways to generate additional value and move into new sectors.
An emerging trend shows energy organizations actively exploring integrated product bundles, combining smart building technologies with traditional commodity product offerings. The natural adjacency of energy organizations to the smart building sector places innovative energy organizations in an optimal position to take advantage of some of the expected growth from the sector. This opportunity in itself presents an attractive value proposition for energy organizations as shown for example by Navigant Research which estimates that the annual revenue of the global building energy management systems (BEMS) market is expected to grow from $4 billion in 2017 to $13 billion by 2026. Maintaining emphasis on adapting to and finding new ways to utilize innovations has never been more critical in the energy sector than it is today.
Blockchain technology is one way organizations today are looking to expand customer product offerings and drive new value
On this next horizon of energy innovations also sits blockchain technology, promising not just new waves of growth but a re-envisioning of long-standing norms of our current energy systems. The utilization of blockchain technology combined with other evolving technology mediums such as the internet of things (IoT), artificial intelligence, cloud, and edge computing will seek to provide energy consumers with new and flexible ways of transacting, responding to market signals, and managing overall consumption. Similar to the trends surrounding smart building technology, the effective utilization and adaptation to blockchain technology will become an essential element of competitive positioning for energy retailers and consumers on the system.
Through the deployment of localized permissioned blockchain networks, consumers will increasingly have access to a host of transactive energy services ranging from peer-to-peer transactions to advanced energy demand management. Transactive energy focuses on the economic and control techniques used to manage the flow or exchange of energy within a power system. At the center of enabling these new levels of transactions between parties, is the ability to securely and reliably exchange and share data between the parties involved in the power system. This is where blockchain comes in and plays a vital role in allowing these secure and reliable data exchanges and transactions among parties to occur.
Forward-looking companies, such as Direct Energy, are making significant inroads through strategic blockchain investments and pilot deployments
While some of the current blockchain in energy applications seen in the market today focus on building new transaction networks between the traditional end consumers of energy on a peer-to-peer basis, this is hardly the extent of the opportunity at hand. A recent collaboration between Direct Energy and LO3 proves that the advent of blockchain technology creates additional value propositions even for retail energy providers supplying power to end consumers and signals a new era of empowered energy consumers. Via LO3’s Exergy platform, Direct Energy seeks to leverage blockchain technology to provide its customers with the ability to hedge energy purchases in micro-increments to optimize and reduce costs of spot and fixed purchases. Put simply; customers will have a higher degree of flexibility and control over their energy procurement decisions.
The platform seeks to enable transactive energy services by providing three key pillars applications, hardware, and data. The first pillar is a unified application or software layer providing standardized frameworks for users on a power system serving as the control elements. Access to this application layer is facilitated by the second pillar of blockchain-enabled hardware devices such as smart meter infrastructure. In combination, the first and second pillars connect to a diverse set of users within an ecosystem via a series of self-executing transactions. The resulting third pillar then becomes a decentralized real-time data set of transactions, interactions, and market dynamics readily accessible and usable by parties on the power system. The unique attributes of blockchain in creating provenance, trust, and close to real-time visibility generate a host of potential value streams for all parties involved. In addition, the attribution and ownership of generated data by the various users and the incentivization of the usage of this data are set to create entirely new marketplaces yet unseen.
These new concepts differ from traditional energy procurement practices revolving around fixed price procurement of power. In the LO3/Direct Energy trial, customers using this new platform are outfitted with a smart-meter linked to a blockchain network which provides a highly secure method to create, store and share their energy usage data. Using the unique characteristics afforded by blockchain technology and the platform, C&I customers will be able to effectively share data within the market to automatically place orders for customized power hedges in time increments as small as on an hourly basis. While the first deployment of this platform will serve as a proof of concept and will not yet be usable in the actual trade or transaction of energy between parties, it looks to generate insights into customer behaviors and market dynamics while working with the system operator, generators, customers, and regulators to progress toward a working deployment.
The energy sector remains at the forefront of sectors subject to benefit from the proliferation of blockchain technology
The case above illustrates just one application out of many where blockchain seeks to empower consumers in energy systems. Direct Energy and LO3 serve as an excellent example of some of the concepts being tested in the space. In doing so, they are actively carving out a space in an innovative emerging sector which will be an extension of the energy markets we know today. However, the landscape of applications currently being explored is vast. In fact a recent study conducted by PwC found that 84% of companies surveyed reported some degree of active testing, development, or exploration of blockchain technology. As the technology continues to evolve, opportunities are emerging for all players involved in the energy system. Not just consumers but all participants in the energy space, whether integrated utilities, transmission services organizations, infrastructure developers, or retail energy providers, can all soon expect to see significant changes in opportunities presented by the development of decentralized energy systems.
To learn more about blockchain in the energy sector check out our page: PP&A Tech Series: Executive Workshops.
We offer custom tailored private executive workshops and training sessions for organizations and leaders looking to understand blockchain technology and to gain perspective as to how it may fit within their business.
Unlocking Blockchain in the Energy Industry
In our “Unlocking Blockchain in the Energy Industry | Executive Workshop”, we combine a blockchain technology onboarding with energy industry-specific perspectives of how blockchain is impacting the sector today. Our team will elaborate on industry-specific use cases and applications for generators, transmission service organizations, regulators, marketers, and energy service providers.
PP&A offers a comprehensive set of blockchain consulting services through a unique blend of industry experts, strategy consultants, and a leading team of blockchain developers experienced in today's most cutting edge technology, we support organizations with:
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Our teams can help whether you are looking for initial organizational training or looking to develop strategic foundations and business rationales regarding blockchain technology. If you are ready to move our implementation teams can even take you seamlessly into development and deployment of proof of concepts and pilot implementations.
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About the author
Chris is the Founding and Managing Partner of Peoples Partners and Associates (PP&A). Professionally, he has gained more than ten years of professional industry and strategy consulting experience working with leading companies. As a Management Consultant, Chris works closely together with clients to develop innovative strategic approaches to solve complex problems and find new ways to generate value.
As PP&A’s Managing Partner, Chris structures and leads consulting engagements by developing work plans focused on addressing client-specific issue sets and ensuring the subsequent execution of work plans according to specifications. Actively guiding multiple consultant and client teams in data collection, synthesis, and analysis efforts he derives and implements data-based solutions.
In addition, Chris is a certified blockchain developer and leads the Energy Working Group for the Government Blockchain Association focusing on identifying unique problem sets and challenges faced by public and private entities regarding energy supply, distribution, and regulation. This group explores innovative blockchain and distributed ledger technologies geared towards addressing challenges while increasing system efficiency, security, resilience, and sustainability.
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