| 来源类型 | Research Reports |
| 规范类型 | 报告 |
| Assessing blockchain's future in transactive energy | |
| Ben Hertz-Shargel; David Livingston | |
| 发表日期 | 2019-09-23 |
| 出版年 | 2019 |
| 语种 | 英语 |
| 概述 | There are compelling reasons for energy markets, and their governance, to move in the direction of a more transactive energy system. Is blockchain a suitable platform for the transactive electricity market of the future, enabling distributed energy resources to transact with each other and capture value, while collectively helping balance the grid? |
| 摘要 | The global energy transition is fast evolving, and two trends in particular seem poised to converge. On the one hand, the rapid transition toward decarbonization and decentralization in the power sector is prompting exploration of new transactive electricity market models. Meanwhile, distributed ledger technologies such as blockchain are rapidly evolving beyond their initial financial applications to new use cases in sectors such as energy. Some surmise that blockchain could serve as an ideal platform for the transactive electricity market of the future, helping to ensure that diverse, often intermittent assets on the grid work together as a symphony, rather than a cacophony.$To explore the prospective role for blockchain as the platform for transactive energy models, authors Ben Hertz-Shargel and David Livingston produced a comprehensive report, Assessing Blockchain’s future in transactive energy, scrutinizing the benefits and costs that blockchain would bring to this particular application. They find that, at the time of analysis, six costs—scalability, efficiency, certainty, reversibility, privacy, and governance—collectively outweigh the benefits offered by blockchain as a comprehensive platform for transactive energy. $Their analysis further explores which obstacles are likely to be ameliorated as blockchain technology evolves, and which are more structural and obdurate. The report concludes with a set of policy recommendations for advancing progress toward transactive energy models, and lays out criteria for blockchain—or any other platform—to aspire to in order to enable a transactive energy future in the years ahead. $Executive summary$Appendix$Return to table of contents$The electric power system is undergoing a rapid transition toward decarbonization and decentralization. The legacy model of one-way power flow from large, primarily fossil-based generators to consumers on the distribution grid is being upended, driven by the plummeting costs of distributed renewables, battery storage, and smart energy technologies. Residential and commercial utility customers, once simply consumers of electricity, are deploying these distributed energy resources (DERs) at scale alongside project developers, becoming producers themselves in a new, increasingly decentralized power system. $These changes pose a threat not only to the business models of utilities and conventional generators, but to the stability of energy markets and the electric grid itself. At the same time, they offer an opportunity: the flexibility of these new resources and technologies, their low carbon footprint, and their proximity to consumer loads could permanently reduce electricity and infrastructure costs while enabling the power sector to meet ambitious decarbonization targets. In order for this opportunity to be realized, however, legacy retail energy markets must be reformed to allow all distributed resource owners to participate and provide value, regardless of asset size and customer classification. These new markets must achieve for distribution systems what wholesale markets have for transmission systems, which is to align energy prices with real-time grid conditions such that efficient grid balancing occurs as a byproduct of market transactions. In other words, reformed market frameworks are needed to ensure these plentiful distributed resources work together as a symphony, rather than a cacophony, on the 21st century grid.$Blockchain, a technology that allows a network of mistrusting parties to securely transact with each other, has been proposed as a platform to host such transactive energy markets. Blockchain has the capability to bypass existing markets as well as the authority of electric utilities, offering residential and commercial actors a digital platform to directly buy and sell energy with each other, as well as with the utility. It also shares the power sector’s growing ethos of decentralization and democratization, suggesting that it might be the means to transactive energy’s end.$This report assesses the suitability of blockchain for this purpose, as a platform for transactive energy. It performs a first principles analysis of blockchain’s technical attributes in order to align them with the expected needs of a transactive market, regardless of its precise design. Its principal conclusion is that blockchain is not currently well suited for this task, or indeed for hosting any of the primary functions of a real-time energy market, including energy data transmission, financial bids, trades, settlement, price formation, and grid service provision to the utility. While blockchain has many other potential energy-relevant applications for which it may be a far more logical and valuable tool, this does not currently extend to serving as the key platform for transactive energy markets.$This conclusion results from the identification of a fundamental tradeoff, in which blockchain’s disintermediation of a central authority is achieved at the expense of six costs: (1) Efficiency, (2) Scalability, (3) Certainty, (4) Reversibility, (5) Privacy, and (6) Governance. The upside of this blockchain tradeoff has questionable value, and viability, in the context of transactive energy as there exist natural central authorities: public utility commissions, which have statutory authority over retail energy, and the electric utilities they oversee, which are tasked with ensuring the safe, reliable, and efficient operation of the electric distribution system.$At the same time, the costs of blockchain in this particular application are steep. The duplication of data hosting and processing across every node in the blockchain network dramatically limits both capital efficiency and scalability to real-world data and transaction volumes. The consensus methods by which blockchain nodes agree upon the shared transaction ledger rely upon economic incentives for—and the rationality of—its participants, posing risks to settlement finality and the security of the network in the face of hostile state actors. Perhaps most problematic, blockchain faces the opposing obligations of keeping mission-critical electrical and financial data confidential, while making it visible to its fleet of validator servers, which operate outside of a corporate firewall. Moving this confidential data off-chain would eliminate the issue, but significantly reduce blockchain’s role in primary transactive market functions. Cryptographic techniques to allow blockchain to meet these opposing obligations exist, but are in an early stage of research and development. They and their present limitations are discussed in detail in the appendix. $The report makes several policy recommendations, which aim to encourage and focus the development of transactive energy platforms—blockchain-based or not—that are capable of inverting the six costs, meeting specific criteria in these key performance areas for transactive energy. The recommendations include direct financial incentives, such as agency funding and prize-based awards, as well as indirect incentives that clarify the regulatory and commercial landscape for these platforms. They also include the formation of working groups and regulatory proceedings to study the value of transactive energy in light of state-specific policy objectives, such as distribution infrastructure deferral, grid resilience, renewable portfolio standards, and retail market animation, resulting in concrete policy and budgetary roadmaps toward the transactive systems that best meet those objectives. $Importantly, the report assesses blockchain’s suitability as the platform for a real-time transactive energy market. It does not speak to the selective application of blockchain to energy applications in which the six costs have minimal impact, such as those involving less frequent transactions and non-confidential data. Renewable energy credit tracking and energy asset onboarding are two such examples. In sum, this report finds that blockchain should neither be dismissed outright, nor be viewed as a comprehensively disruptive technology or panacea for all energy challenges. Instead, it will likely continue to evolve as an increasingly useful tool for specific applications, building upon (rather than replacing) legacy systems to bring improvements to the function of energy markets as they become increasingly distributed and transactive in the years to come. $Return to table of contents$A pair of technological disruptions are underway today that seem, in the minds of many, destined to join forces to transform the way that electricity is bought, sold, and valued. $The first is occurring in the power sector, where distributed energy resources (DERs) such as solar photovoltaics (PV) are threatening both the operations and the traditional business model of electric utilities. DERs today reduce the revenue that utilities earn from selling power while complicating the power flow on their networks, at times elevating voltages and even reversing the intended flow of electrical current. Many outside of the utility sector are sanguine about this upheaval, seeing it as inevitable growing pains as the industry both decarbonizes and modernizes to accommodate more dynamic and consumer-focused technologies. The most ambitious possible outcome of this transformation is known as transactive energy, or what McKinsey & Company calls “energy eBay.” In short, it comprises a reimagining of the power sector in which end customers become both producers and consumers of energy, empowered to transact with each other as well as with the utility to maximize profit while helping balance the grid. To what extent this vision will become a reality is much debated, but the increasing capabilities and connectivity of consumer hardware such as smart solar inverters, stationary batteries, and electric vehicle infrastructure suggest the building blocks are there. $The second disruption is blockchain, a technology that originated in the financial sector as a means of disintermediating banks from financial transactions. Blockchain enables a set of participants, whether individuals or organizations, to safely transact with each other without investing trust in a central governing authority, such as a financial institution (e.g., Visa or a bank) or platform provider. It achieves this by distributing the storage and validation of a shared transaction ledger to all (or a subset of) participants and using sophisticated consensus mechanisms to ensure that they reach honest agreement on updates to the ledger. $The possibility to leverage this technology at the seams of joint ventures and global supply chains has caught widespread imagination, rocketing the idea to the forefront of media and technology innovation. To date, more than one hundred blockchain use cases are being worked on, and the technology has been promoted in industries as diverse as media, disease control, and fishing. The energy sector is no exception, with incumbent utilities and energy firms as well as disruptive startups pursuing blockchain ventures, ranging in scope from green attribute certificate tracking, to financial settlement for grid services, to transactive energy writ large. The degree to which blockchain shares the transactive energy ethos of democratization and decentralization is unmistakable, suggesting that blockchain might be the means to transactive energy’s end. Government has taken notice, with dockets introduced in public utility commissions, multiple US Department of Energy grants focused on blockchain, congressional hearings, and even the formation of a Congressional Blockchain Caucus, which has shown interest in blockchain’s relevance for the energy sector.$ $Despite the breathless proclamations emanating from industry, criticism has surfaced as well, marking blockchain’s initial, and expected, evolution along the hype cycle of emerging technologies. Most prominent have been cries over the lack of sustainability of blockchain’s “proof of work” consensus method, which demands vast amounts of computation—and therefore energy use—to guard against malfeasance in the network, as well as over the instability of cryptocurrencies. As second-generation blockchains have begun to move away from proof of work, more nuanced criticism has taken aim at blockchain’s suitability for broader applications, questioning its scalability, cost-effectiveness, potential lack of data privacy, and cybersecurity.$These analyses have implications for blockchain’s application to energy, but they offer limited insight because they do not take into account the unique economic, technical, and regulatory concerns of the industry. Conversely, appraisals of blockchain from within the energy industry have not viewed the technology with a sufficiently technical lens, raising questions but few answers as to its applicability, and in some cases underestimating—or misunderstanding—its limitations. Common examples are claims that, as a distributed ledger technology, blockchain makes it faster or easier for distributed resources to submit transactions to the network than traditional centralized platforms, or that blockchain relates to the distributed control often proposed for smart grids. $In fact, blockchains today can support an order of magnitude fewer transactions than other modern platforms, and their distributed ledger control has little relation or contribution to the kind of intelligent grid and energy market management required for transactive energy. Blockchain, though offering a number of significant benefits, is not a panacea. A more detailed understanding of its strengths and limitations in particular use cases—for the purposes of this paper, as a transactive energy platform—can help guide its evolution as it matures and gains greater exposure in real-world, commercial applications. What energy regulators, executives, and investors need is a careful, first principles analysis of blockchain that scrutinizes its benefits and costs against specific needs of the energy industry, in order to evaluate its potential as a platform architecture. $This paper seeks to perform such an analysis.$It begins with a review of retail energy today, its limitations, and the opportunities for a future, more efficient, transactive grid. Common designs for a transactive energy market are outlined, along with their core economic and technical challenges. Blockchain’s architecture and key attributes are then presented, followed by its prototypical approach to transactive energy, illustrating the value chain from power generation to tokenization, to downstream market transactions. $The paper then turns to evaluating blockchain’s suitability as a transactive energy market platform, aligning its properties with the needs of transactive energy and contrasting with traditional platform architectures. Rather than paint a straw man perspective of first-iteration blockchain systems that would inevitably be easy to critique, the analysis takes account of advances in blockchain consensus, on- and off-chain scaling, governance models, privacy enhancements, and other extant and prospective innovations.$The evaluation finds that blockchain offers what is termed a blockchain tradeoff for applications, in which disintermediation of a central platform authority is achieved at the expense of six costs: efficiency, scalability, certainty, reversibility, privacy, and governance. The paper characterizes these costs in detail, as well as the innovations that blockchain developers have proposed to remedy them. It argues that the blockchain tradeoff is difficult to justify for some—though not necessarily all—aspects of transactive energy, since decentralization of authority has questionable value (and viability) in the retail energy sector and the costs of achieving it are high, so far. Moreover, microtransactions, smart contracts, and support for third-party application development, often leaned on as selling points of blockchain, may in fact be better supported by traditional platform architectures. This raises, though not insurmountably, the burden of proof for blockchain’s value proposition, which must demonstrate not only viability, but its superiority to proven platform alternatives.$Next, the paper focuses on a core challenge in transactive energy: how to couple the constantly evolving physical state of the electrical grid to transactive market prices, such that social welfare (gross energy consumption value minus production costs) is maximized subject to grid stability. This is a hard problem at the intersection of mathematics, economics, and electrical engineering, to which blockchain—unlike other proposed decentralized architectures—does not yet contribute to solving. Even if blockchain does play a role in a future transactive energy market, therefore, it is so far unprepared to play a leading role.$The paper concludes by synthesizing the foregoing takeaways into insights and recommendations for policymakers, insofar as they have the capacity to direct further blockchain innovation in the direction of the most appropriate use cases. Innovation does not occur in a policy vacuum, and so there still exist opportunities to shape blockchain development to address sensible applications. $Return to Table of Contents$Retail energy features prominently among industries that proponents of blockchain claim the technology is poised to disrupt. Indeed, there is little question that retail energy is poised for disruption. More than twenty years after the first electric monopolies were broken up and competition was introduced in the 1990s, many vestiges of the industry’s origin exist today. Regulated markets, often in lower population density regions, remain monopolies, with single utilities owning the generation, transmission, distribution, and retail sale of bulk power, and earning a fixed rate of return on energy sales and capital investments. In unregulated markets, companies are restricted to owning only a single part of this value chain, or to owning the distribution and retail sale of bulk power in the case some distribution utilities. Those providing transmission or distribution are regulated by state public utility commissions, similar to regulated markets, while generators and retailers must compete for market share under lighter regulation. In the unregulated setting, energy retailers purchase bulk power, typically through long-term power purchase agreements or real-time wholesale markets, which they then resell to end customers. Wholesale markets optimize the procurement of energy and future capacity, as well as ancillary services—advanced power control necessary to stabilize the grid—and determine the prices paid at each moment and location on the transmission grid.$Retail markets today shield mass market customers from the complexity and risks of wholesale markets. Customers are charged for their use of the grid according to simple monthly rates, whose components can include a fixed charge; a tiered charge based on total kilowatt-hours (kWh) of energy consumed; a demand charge, based on the highest single hour of consumption (primarily for large commercial customers); and a delivery charge levied by the distribution operator. Only in the last several years have utilities begun rolling out time-of-use (TOU) rates, which charge more during the late afternoon and early evening when demand tends to peak, coarsely aligning end user costs with expected wholesale and delivery costs.$While retail customers have benefited from the simplicity and affordability of these rates, they appear increasingly outdated and restrictive in the context of the “modern” grid. DERs such as residential and commercial solar, smart thermostats and water heaters, stationary batteries, and electric vehicles have enjoyed tremendous growth, but current rate structures leave customers limited opportunity to monetize them, for instance by reducing power consumption when it is most expensive. At the same time, wholesale markets are largely inaccessible to residential and small commercial customers, as burdensome requirements on resource size, power metering, year-round availability, and real-time data communication and control present formidable barriers to entry.$There are even more fundamental problems with existing rates from the perspective of an electric utility. In the absence of meaningful incentives, customers consume—and their DERs produce—power irrespective of grid conditions, leading to inefficient behavior at multiple grid scales. At the edge of the grid, excess daytime solar production leads to elevated voltages and reverse power flows, while in the evening excess power demand leads to under-voltage conditions and the risk of transformer overload. Higher up in the distribution network, operators see congestion due to wasteful reactive power demand—the component of electrical power that is required by air conditioners, motors, and other inductive loads but is lost as heat, rather than converted to useful work. At the global network level, system operators dispatch (often inefficient) fossil generators at breakneck speed to adjust to dips in intermittent renewable production and the load ramps leading up to the evening peak, at times offsetting much of the environmental contributions of the renewables.$No retail price signals exist today at scale to alert customers of these phenomena as they occur, incentivizing them to modify their behavior to help alleviate the problem. Instead, utilities shoulder the full burden of grid balancing, relying on dedicated infrastructure and reserve capacity contracts, costly investments with low utilization factors. In a vicious cycle, the lack of market access or incentives for grid-responsive behavior inhibit customer adoption of more efficient technologies, which results in a loss for customers, the grid, and public policy goals such as decarbonization.$Transactive energy is a model for the grid that inverts the present one by decentralizing not only the production of energy, but the complex balancing of the grid itself. In this model, customers and their energy assets are empowered to transact with each other and the distribution utility according to real-time, local prices for energy products such as real power, reactive power, and grid support services. Importantly, these prices are based on local grid needs as well as participant supply and demand, acknowledging the physical limitations of the network. Coupling economic value with physical stability ensures customer capital—DERs and site loads—will act as first responders in grid balancing, depending on leaner, more expensive utility infrastructure only as a backstop. It will also, according to transactive energy proponents, drive greater technological and financial innovation, as the vast pool of revenue for grid management is opened up from large operators to all customers, whose earnings are limited only by the tools and business practices they use to manage their energy. $How these new transactive energy markets will work, what entity will host them, and how exactly they will couple physical stability with economic value are subjects of ongoing research and debate. Bilateral trading is a possibility, either peer-to-peer or through a central exchange, but it is not clear how such bilateral trading could take account of the overall state of the electric grid in determining prices, which is essential for delivering system-optimal, rather than simply bilaterally optimal, pricing. Bilateral energy markets have proven inferior to centralized clearing markets for energy, historically. $Moreover, the physical characteristics of medium- and low-voltage distribution networks—upon which a transactive market would be built—necessitate a full optimal power flow (OPF) calculation in order to produce locational marginal prices: the most economically efficient for electricity markets. This calculation, performed routinely by wholesale market operators for the high-voltage transmission system, is the basis of a centrally-cleared market, further suggesting this market design would be most optimal for a transactive system. It was the design chosen in several of the most prominent transactive energy pilots to date, including the Olympic Peninsula Demonstration project in Washington State and the AEP gridSMART® demonstration in Ohio.$In light of the foregoing considerations, significant research has been devoted to developing a two-sided clearing market similar to wholesale markets but tailored to the distribution system. In this setup, a market engine solves an optimal power flow problem on a recurring basis, which maximizes participant value while meeting distribution system constraints, such as current limits on transformers. Outputs of the process include local prices for energy and reserve products, as well as an optimal power schedule for the network. This real-time market could optionally be preceded by a forward market, in which cleared demand bids and supply offers would financially commit participants to grid balancing behavior, as they do in wholesale markets today. Such obligations would settle according to real-time market prices, based on measurably delivered or consumed energy. $Transactive markets would be administered by a distribution system operator (DSO), analogous to the independent system operators (ISO) that run today’s wholesale markets, which could be a utility, another entity, or a consortium. How the DSO interacts with the ISO, and to what degree it relies on price signals versus active control over DERs in order to maintain distribution stability, remain important questions of grid architecture. $Transactive energy markets will require vastly more data than is involved in distribution operations management today. This includes utility equipment and sensor data throughout the grid, as well as customer financial and electrical data at its edges, likely gathered at a fifteen-minute or five-minute time resolution (consistent with the granularity of wholesale prices today). Capturing this data reliably, efficiently, privately, and securely, while making it available to public markets and the distribution utility in real-time will be an enormous challenge for the hosting platform. Beyond data management, the hosting platform will also be responsible for supporting a range of transactions, from bids and offers for market products to market clearing and settlement activity, the latter made complex by the involvement of utility data. These transactions must be processed at scale, with strict latency, finality, and privacy requirements. $ $In light of these requirements, some blockchain proponents consider it unrealistic for the technology to host transactive energy markets. According to this view, blockchain is positioned to play a focused role, such as enabling energy asset registration and data access, working alongside more real-time communication, control, and grid-aware technologies to meet the needs of transactive energy. This view is credible, and has been explored elsewhere, but is not investigated in this report.$Other blockchain proponents see the technology more expansively, as the natural platform for hosting transactive energy markets. The decentralized control fundamental to transactive energy is analogous to the decentralized consensus of blockchain, and both share the aim of opening and democratizing markets. Moreover, blockchain has established itself as a secure platform for automating multilateral transactions, including complex contracts and financial instruments. Recent innovations enable blockchains to go further, interacting with external systems and, therefore, the physical world, allowing transactions to trigger—and be triggered by—real world events, such as electric meter reads and the initiation of electric vehicle charging.$Business models and frameworks for blockchain’s role in transactive energy vary. Startup Grid+ aims to be a reimagined energy retailer, exposing customers to wholesale prices and providing them the tools to manage their energy consumption and generation effectively; Lithuania-based WePower uses blockchain to crowdfund renewable project finance, in which only forward contracts for energy are transacted; and Electron, a United Kingdom (UK)-based entrant, has created an energy asset registration system, and has begun to develop a more ambitious energy trading platform for balancing electricity markets. The companies whose blockchain approaches are profiled below share Electron’s expansive vision for blockchain as the platform underlying the full gamut of energy transactions: consumption and production metering and accounting; energy market bids, trades, price formation and settlement; and grid service provision to the utility. As the use case underlying claims of industry disruption, it is this final, ambitious potential role for blockchain that is evaluated in this report. The findings should thus not be seen as critical against many other intermediate applications of blockchain, or applications in other promising areas that could aid the energy transition. $There may indeed be such a role for blockchains in transactive energy markets of the future. However, this report finds that there are characteristics of blockchains that may prevent them from serving as platforms that can achieve the speed, scale, and security necessary to realize the transactive energy vision. To facilitate a fair and informed assessment, it is important first to understand the basic design of blockchains and the tradeoffs implied by their current design features. While some of these tradeoffs are likely to evolve (or to be eliminated entirely in accordance with computer science advancements), others regard intrinsic structural features that are likely to persist into the future. All these tradeoffs are explored in detail in the sections that follow. $Return to table of contents$ $A wide range of technologies self-identify as blockchains today, making a unified definition difficult. The public blockchains that host cryptocurrencies, for example, differ from the Hyperledger family of blockchains developed by IBM, the Linux Foundation, and others to support private commercial applications. Despite their differences, however, these technologies share several key elements which constitute a working definition. $First, all blockchains involve computational nodes, commonly referred to as peers, operated by participants, each of which owns a copy of a shared transaction ledger. Blockchains are broadly categorized as permissioned or permissionless based on whether these peers are on equal footing, particularly with regard to their involvement in reading from, writing to, and validating the ledger. Permissionless, also known as public, blockchains such as Bitcoin and Ethereum grant all peers equal rights to perform all of these tasks. Permissioned, also known as private, blockchains limit the data access or validation privileges of peer nodes based on participant identity or role. $ $Blockchain transactions most commonly represent the transfer of a digital token or currency from one set of participants to another. Transactions must be cryptographically signed by any blockchain account that is party to them, which requires access to that account’s secret key, and therefore cannot be faked or repudiated. Once submitted to the network, transactions are grouped into blocks in order to be validated and added to the ledger; each block contains a cryptographic reference to the one that came before, resulting in the eponymous blockchain.$Beyond simple token transfers, transactions can also trigger what are known as smart contracts: collections of software functions that maintain internal data about participants and their devices. A smart contract might store the number of kilowatt hours (kWh) of energy produced by a solar array, for instance, and expose one function for a smart meter to increment the value and another for the utility to read the value. Typically, smart contracts are stored on the blockchain itself, inside special types of transactions, making them inspectable by participants and immutable. Despite their name, smart contracts carry no intrinsic legal meaning and can be thought of simply as blockchain-specific computer programs. $ $Peer nodes in a blockchain network operate freely and independently of each other. As they receive transaction blocks proposed by other peers, and new transa |
| 主题 | Climate Change & Climate Action ; Energy Markets & Governance ; Renewables & Advanced Energy |
| URL | https://www.atlanticcouncil.org/in-depth-research-reports/report/assessing-blockchains-future-in-transactive-energy/ |
| 来源智库 | Atlantic Council (United States) |
| 资源类型 | 智库出版物 |
| 条目标识符 | http://119.78.100.153/handle/2XGU8XDN/345786 |
| 推荐引用方式 GB/T 7714 | Ben Hertz-Shargel,David Livingston. Assessing blockchain's future in transactive energy. 2019. |
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| BLOCKCHAIN-0919-WEB.（2415KB） | 智库出版物 | 限制开放 | CC BY-NC-SA | 浏览 | ||
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