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Is Blockchain a Reality or an Innovation Wish List in Utilities?

Blog: Capgemini CTO Blog

The blockchain is poised to radically change the business model of transaction-based industries globally through its multifaceted value propositions that are aligned with the business requirements of today’s environment.

Key Value Propositions of Blockchain:

Powered by the key attributes of agility, security, and cost-effectiveness, blockchain has been welcomed for experimentation and piloting by a large number of different industrial sectors, including utilities, in day-to-day business operations.

In today’s world, utilities face the key challenges of fluctuating demand for energy, demand for improved and personalized customer service, increasing operating costs, cybersecurity issues, and meeting regulatory compliance requirements. Utilities across the globe, therefore, seek to change and leave behind their traditional way of running the business and operations. To do so, they are empowering themselves with digital tools and leveraging innovative solutions and enablers. Blockchain can be the key enabler that will address many of these challenges and become the technology of choice of utilities’ CIO/CEO/CDOs.

Blockchain can be a direct (without intermediary), trusted, peer-to-peer transaction channel between prosumers and consumers (for micro-energy exchanges), prosumers and utilities (helping them meet demand during peak hours), buyers and sellers during energy trading, intercompany data exchanges, etc. Like bitcoin system enables payments to be sent between users without passing through a central authority, such as a bank or payment gateway. It is created and held electronically. Bitcoins aren’t printed, like dollars or euros – they’re produced by computers all around the world, using free software, some site do offer a chance to get free bitcoin. It can thereby potentially disrupt and radically transform utilities that have traditionally relied on a centrally controlled and trusted partnership model.

Other areas of the utilities business where blockchain can be a potential enabler include:

Automated meter reading and SMART metering: Feeding energy consumption data digitally into a blockchain, to verify a customer’s usage with 100% certainty, generate accurate bills, and collect payments on the blockchain without incurring fees associated with bank transfers. South African Bitcoin startup Bankymoon built the world’s first blockchain smart metering solution for modern power and utility grids.

Energy delivery: Car charging with the charging station acting as a point for both customer authentication and payment processing, leveraging blockchain-based smart contracts to authenticate users and manage the billing process to cut costs and improve customer experience.

Smart energy use and lower power bills: Enabling household customers to constantly search for cheaper energy prices and instantly change providers for a better deal, all of which is automatically handled by the blockchain-based application.

Green energy and energy credit: Blockchain can be leveraged as a public ledger with recording of solar energy production and feeding production data directly into a blockchain and owners automatically being rewarded for the energy produced in SolarCoin.

SMART grid: Consumers can use blockchain-based applications to join a smart grid in which participants can track their energy use and production (such as via solar panels) and sell excess energy to others on the smart grid, leading to more competitive energy pricing for consumers.

Blockchain in the Internet of Things: Blockchain combined with IoT can be leveraged to create mesh networks (a flexible and secure network that connects computers and other devices directly to one another) to solve complex utilities infrastructure problems. Filament, an American company, is experimenting with “taps” on power poles, with motion detectors on each pole that can detect any trouble on another pole up to a distance of 10 miles and communicate to the company through the closest internet backhaul location within 120 miles.

In a nutshell, applications based on blockchain are being explored globally and a new ecosystem of blockchain community comprising energy startups such as LO3 Energy, Grid Singularity, Slock.it, Power Ledger, Wattcoin Labs BlockCypher, Ripple, etc.), utilities (Vattenfall, RWE, Fortum, etc.), technology providers (Ethereum, Tendermint, Tierion, Monax, MaidSafe, Ascribe, Digital Asset, and Blockstream, etc.) and consulting companies is emerging. Many pilot partnerships are being established by major utility players (such as RWE and Vattenfall) and investing in utility startups.

The blockchain is a fast-moving disruptive innovation technology across industries, including utilities. While it is difficult to predict how quickly this technology will be adopted in the sector on a large scale, current areas of interest unveil a clear picture of innovation initiatives around blockchain in the near future. Venture capital investments are already in place, with recent patterns in the blockchain ecosystem focusing on moving from financial systems (e.g., payment processing) in 2014 to non-financials (e.g., grid, cybersecurity, power distributing, energy transactions, energy trading, etc.) in the future.

Innovation programs that address the technical challenges that blockchain faces today, such as common network protocol, scalability, transaction processing speed, etc., are essential, in addition to regulatory imperatives and compliance.

Utilities focusing on digital technologies as enablers of competitive advantage and disruptive innovation, such as social, mobile, analytics, cloud, and cognitive technologies, cannot ignore blockchain. It may be sooner or later that we begin to see significant commercial applications of the blockchain technology in use, with many utilities joining the blockchain ecosystem.

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