2017-2018 marked a period known as cryptocurrency mania, where bitcoin became a household name and alternative crypto token prices were pumped and dumped by crypto-speculators. I am glad the cryptocurrency hype is over, now we can get back to trying to change the world for the better. However, let us separate hype from value – and the blockchain from the frenzy surrounding the fallen digital coin.
There was a tulip hype in the Netherlands in the 1630's, where fortunes were made and destroyed on the tulip mania bubble. Just because there was a hype around tulip prices driven by speculators who overestimated the price of a bulb, does not eradicate the core truth: tulips are a beautiful flower that many people will buy when offered at an affordable price.
The same was seen with the internet boom of the early 2000s, when there was a huge spike in the value of internet stocks. Just because there was an internet bubble around e-commerce, does not make the internet irrelevant. The speculative bubble was built around the central truth that the internet had the potential to disrupt the commerce industry. The same can be said of blockchain.
Blockchain is often mistakenly derided for its association with crypto mania – but that’s not where its true value lies. Separate blockchain from cryptocurrency and you’re left with the central truth: it is not just a relational database built on some powerful cryptography, instead it opens up new kinds of ecosystems among participants that don’t trust each other.
People forget how long it took HTML and HTTP to gain critical mass and change the world, but when it did, it disrupted a long list of incumbent industries who were not paying attention because they did not appreciate the power of an exponential adoption curve.
Blockchain is a tool, not a silver bullet
At the same time, I also find it amusing how many people make broad claims that blockchain will drive the transition to a sustainable energy system. Blockchain is a tool, a protocol – albeit a powerful one, but it is important to remember that blockchain is just a technology layer that needs to be embedded into a technology stack and a working business model before it can create any value. HTML alone, can't deliver books to your home.
However, HTML is a vital part of the technology stack that enables Amazon to deliver books to your home. AI needs quality data sets to work, while IoT needs intelligent algorithms, data storage, and insights to create value – both need a security and transaction layer to coordinate the network. This is why we believe blockchain is going to be an important enabling part of the technology stack of the decentralized decarbonized energy system of the future. Which compels me to ask myself and my team a difficult question:
What is the role of a DSO in a world of distributed energy resources of privately-owned-production, privately-owned-storage, and privately-owned-distribution, which all play in the system at marginal costs?
Soon the machines will also be our customers
I like blockchain because of its role in the bigger picture of the future energy world. DLT will form an important part of the technology stack that allows for a world where an autonomous electric vehicle can sell flexibility to the energy network, while selecting a new insurance policy that also covers hail damage for the same price as its current policy, before self driving to an auto-workshop to have its winter tires changed to summer tires, while autonomously negotiating a power purchase agreements (PPA) from the neighbours solar panel for in two weeks’ time, while shorting carbon credits on the Leipzig European Energy Exchange, based on some weather data it collected while researching the hail damage insurance policy. In that world, many of our customers will be machines, who will use E.ON’s open platforms to participate in a machine-to-machine economy.
This world of the future will be enabled by the current accelerating combination of faster computing power, AI algorithms, the falling costs of storage capacity for big data, the explosion of cheap IoT devices, high-speed connectivity – all coordinated by a decentralized security and transaction layer protocols – otherwise known as blockchain.
Sounds like a pipe dream – right? However, in view of our pilot with Vandebron, IBM, and Tesla, I can assure you, it’s not just a pipe dream. The building blocks for this future are being built today. Here, blockchain technology facilitates the necessary data exchange between electric vehicles and the grid to provide flexibility.
But, in a world of cheap, beyond Capex solar, cheap wind turbines, and cheap batteries – do our customers need us to sell their excess capacity to their neighbours?
At E.ON Strategy & Innovation we are systematically identifying energy-related blockchain use-cases and conducting pilots and stress tests. We have co-written the Blockchain Strategy of the German Federal Government, where – according to Peter Altmaier, the Federal Minister for Economic Affairs and Energy (BMWi) – energy is seen as the most important sector for funding, alongside finance and decentralized identities. Not only that, but we also go beyond theory by demonstrating blockchain’s powerful practical application in the green energy space.
Grass roots DLT technology
We are well positioned to find and identify the best solutions by actively undertaking pilots with leading DLT startup technology companies - such as Gridx, Ubirch, FlexiDAO, Parity, Energy Web Foundation, Grid Singularity and Greencom, in order to leverage the skills and know-how of the innovation ecosystem and integrate these cutting-edge technologies into our innovation projects. For example, we participate at the Odyssey Hackathon to understand how a bottom-up energy market, based on AI and DLT, could look like. As well as cultivating home-grown innovation in projects like Powerzone that develops and implements End2End trustworthy data streams based on cryptographic signatures.
We will not be caught sleeping, like the music industry was when Napster and illegal file sharing disrupted the industry. We will help disrupt ourselves and build that sustainable green energy system – because if we don’t, someone else will.
By the end of this decade, ~€102 billion globally will be invested into DERs per year. In the same timeframe, the EV market is forecasted to be worth ~€2 trillion per annum. In addition, before the decade is out, there will be well over 10 billion internet connected IoT devices. This leads me to ask the question – which operating system will coordinate all these assets?
The future is coming faster than we think
There is and always has been the need for strong coordination between economy, ecology, and governance in the energy sector. The current climate crisis and inability to effectively take this issue head-on is the result of ineffective coordination between these three areas. The energy industry is often blamed for the climate crisis, but we can only play by the old analogue rules, laws, and regulation that have been dictated by our industry. We are still using analogue methods for our coordination between these incredibly important areas of human existence in a fast-moving digitalized world, which I see as a challenge. DLT provides innovative and robust models of decentred governance and coordination that would be needed to create real time coordination and consensus between economy, ecology, and government.
I see a future where there is a union between AI, IoT, and blockchain that will unleash a new paradigm of human organization, coordination, and governance. This will be as significant as the industrial revolution. The acceleration of globalization, technology, ecological forces, demand for innovative governance, and demand for a sustainable energy system will culminate in the need for a decentralized, autonomously regulated, fringe computing network.
There will be an acceleration of value driven by Metcalfe's law. The complexity of our networks and technologies will make it near impossible for effective centralized control or regulation. The need for fringe control and self-regulation by networks will become needed to effectively coordinate between economy, ecology and governance, and simply make things work sustainably and securely.
At E.ON, we have the ambition to inspire an entire industry and to partner up with the best technology alliances not to create a new hype, but to lead the energy transformation towards a connected and sustainable world. These are some of the bold, ambitions, and exciting challenges that we are tackling within our new Strategy & Innovation unit at. E.ON.
28 June 2020
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