Overview
Blockchain technology unquestionably will impact the electric utility industry in various ways. (For background on blockchain – which is distributed ledger technology (DLT) that offers a consensus validation mechanism through a network of computers that facilitates peer-to-peer transactions without the need for an intermediary or a centralized authority to update and maintain the information generated by the transactions – click here.) It is difficult to predict the impacts of blockchain technology on the utility business at this nascent stage. Although there are myriad ways in which utilities can use blockchain technology to their benefit, some view it is a threat to the entire utility model. There are many potential uses of blockchain technology relevant to DERs (including electric vehicles) and optimizing the distribution system. One blockchain impact relevant to this blog is that the technology can be used by DERs to allow them to more seamlessly provide energy to other consumers if state law so permits.
Energy blockchain companies are setting up systems that allow “prosumers” (producers and consumers) to engage in peer-to-peer electricity transactions. Such blockchain-based programs also can raise the same issues for utilities as do as net metering, community solar, community aggregation – cost shifts/subsidies if consumers being served energy by peers are not compelled by state regulators to bear such costs as transmission, distribution, ancillary service, and/or public interest programs. Similarly, as they implicitly do today under other state programs such as community solar (i.e., shared renewables), ISOs and RTOs will need to determine how they will treat load served by peers in determining whether such load should be included in load totals used to allocate their various fees and charges.
The first significant blockchain experimental project involving peer-to-peer electricity transactions in the United States has been operating for several years in Brooklyn. The Exergy project team (part of L03 Energy) developed a system with a blockchain token being tested in Brooklyn. The primary goal is this system is a proof of concept for regulators. Exergy touts the project’s increased resiliency and efficiency. Under this existing program, fees are still paid to the local utility, Consolidated Edison. New York is sensitive to subsidy issues – it overhauled its net metering compensation system in 2017 after finding that the inherent subsidies could reach a level that is oppressive to non-participants. More pilots inevitably will follow, bringing with them new legal and regulatory issues.
