WHY THIS MATTERS IN BRIEF

Renewable energy, and decentralised micro and tied-storage grids, are transforming the way energy is produced, transmitted and sold, so Centrica is testing the waters to see whether or not blockchain could play a vital role in the future of energy.

Blockchain is increasingly being used, or at least looked at, within the energy industry as a way to help companies in the space create more resilient energy grids, as well as helping create new decentralised energy grids, like the ones from GE and Nasdaq, but now Centrica, the UK based energy behemoth, is hoping the blockchain could help rein in renewable energy curtailment that affects up to 10 percent of energy production in the UK and they’re planning a pilot to help prosumers buy and sell locally produced energy in a county, Cornwall, where significant amounts go to waste.

Last month Centrica announced a partnership with blockchain energy startup LO3 Energy “to explore how blockchain technology could revolutionise the way consumers buy and sell energy,” according to a press release.

New York based LO3, which received undisclosed funding from Centrica Innovations last October, will roll out its Exergy blockchain peer-to-peer energy trading platform, which it first tested in Brooklyn, across 100 homes and 100 businesses in Cornwall, Southwest England.

The pilot is thought to be the largest blockchain energy trading initiative in the UK and it’s one of four projects that is part of a £19 million ($26 million) program called the Local Energy Market.

The program aims to see how flexible demand, generation and storage might help relieve grid congestion and it aims to allow homeowners, businesses, renewables producers and network owners to buy and sell energy. The trial project will also involve giving volunteers equipment including energy storage batteries, like the ones Tesla sells, monitoring equipment, solar panels and smart meters for blockchain-based trading. The homeowners will get to keep the equipment for free after the pilot ends in March 2020.

The University of Exeter, National Grid and local distribution network operator Western Power Distribution are partners in the program, which is being funded by Centrica and the European Union’s Regional Development Fund.

Separately from the Local Energy Market pilot, Centrica’s US subsidiary Direct Energy is also working with LO3 on a blockchain project to investigate something called “Micro-energy hedging” among commercial and industrial customers in Texas, and Centrica is reportedly planning to invest £700 million into its distributed energy and power business between now and 2020.

The company, which is the largest residential energy supplier in the UK and the owner of the nation’s emblematic British Gas brand, is under pressure to improve performance after seeing its share price fall by more than half over the last four years.

Mark Futyan, distributed power systems director at Centrica, said the business is interested in investigating decentralised generation and digital technologies that might help cut the cost of operations, for example through grid upgrade deferrals.

“We’re in a rapidly changing industry in which new technologies are emerging [that] may well disrupt the market we’ve got today, whether we like it or not,” he said, “we can either sit back and watch that, and probably decline as a result of it, or we can be on the front foot.”

“Blockchain may have a role in the transformation Centrica is hoping for,” he added.

“The question we want to answer through this pilot is [whether] blockchain [can] deliver significant value to the system as a whole,” said Matt Hastings, program director at Centrica Distributed Energy and Power, “we don’t know, being brutally honest, if blockchain can deliver value.”

The blockchain distributed ledger technology might be able to cut operational costs and create new revenue streams, he said.

“It feels as though it could turn into something quite significant, but unless we test…we don’t know,” he commented.

Cornwall, at the tip of Great Britain’s Southwest Peninsula, was chosen for the project because it was one of the first places in the UK to start experiencing network congestion as a result of renewable energy generation. On a national level, up to around 10 percent of renewable energy production is curtailed at a cost of £20 million a month, said Futyan.

Recent research, meanwhile, indicates energy congestion management costs have risen 74 percent in the UK since 2010 and onshore wind curtailment is as high as 16 percent in Scotland.

With the LO3 Energy partnership, Centrica will be able to test the use of blockchain to address curtailment in a controlled atmosphere, and if nothing else, the company will gain experience in managing  community-level microgrids, which could be a valuable part of Centrica’s business in the future.