See our research and views on blockchain adoption in energy and utilities featured in Greentech Media here.
Utilities remain wary of blockchain despite the technology having been touted for energy applications for more than three years, new research finds. In a survey of 15 utilities and one regional transmission operator across North America and Europe, 69 percent saw blockchain as "still emerging."
Despite hype from more than 150 energy blockchain vendors and startups, “there’s very little live activity” among utilities, said David Groarke, managing director of Indigo Advisory Group, which carried out the research for the Electric Power Research Institute (EPRI). Groarke said North American companies, in particular, were adopting a wait-and-see approach to blockchain. None of the four utility blockchain pilots reported in the U.S. lasted more than six months, the researchers found.
In contrast, European utilities were more willing to test the technology. The research uncovered three live utility blockchain implementations across Europe, two of which had been ongoing for more than a year, along with a couple of pilots.
“Many utilities around the world have made an effort to understand and test blockchain, but the technology may need to mature before real-world applications become common,” observed the report.
Utilities’ tepid response to blockchain was evident in the resources that companies dedicated to the technology, Groarke said. The researchers found companies had an average of just 2.2 full-time employees working on blockchain projects. This was a tiny proportion of the headcount of many of the companies surveyed, which included Centrica, Consolidated Edison, EDF and Enel.
Lack of standards a turnoff
The muted utility response to blockchain contrasts with the hype generated by startups and technology developers, most of which have only been in existence for a couple of years.
Indigo estimates more than a quarter of these startups have completed or are planning initial coin offerings (ICOs), a common but unregulated cryptocurrency venture funding mechanism that usually requires a significant promotional effort by the fundraiser. A handful of energy blockchain firms have pulled in more than $200 million apiece through ICOs, the EPRI paper says. In March 2018, GTM reported that more than 70 energy blockchain demonstration projects had been deployed or were planned around the world.
Beyond a few published cases, such as Iberdrola’s use of blockchain to certify clean energydelivery or Kansai Electric Power Co’s investigation of the technology for peer-to-peer trading, most of these demonstration projects have not involved utilities.
On the contrary, said Groarke, the utilities consulted in the study had tended to dismiss blockchain after looking into it. “We know some utilities started off in 2017 with six proof of concept [tests] and today they’re doing none,” he said. Plus, in North America, said Groarke, “there’s probably more of an acknowledgement that the technology is middleware and it needs very solid use cases for applications.”
He said 77 percent of U.S. utilities expressed wariness toward embracing blockchain because of the lack of industry standards for the technology. “Utilities are risk averse over here,” he said. “Without standards, they are reluctant to engage in even proof of concepts.” That could change with P2418.5, a standard for blockchain in energy being developed by the Institute of Electrical and Electronics Engineers. Groarke predicted the launch of the standard could lead to higher blockchain adoption by North American utilities.
Another factor that could help improve uptake would be the merging of blockchain with other technologies, such as artificial intelligence and smart contracts. “Once a technology becomes commercially deployable within this sector, it can get deployed pretty quick,” he said.
As for what kinds of blockchain will ultimately be used by utilities, the EPRI paper points to an early lead by the platform that Energy Web Foundation (EWF) has developed specifically for the industry. The EWF blockchain was the most widely used of those employed within four utility-led consortia, followed by ethereum, bitcoin and Hyperledger. Groarke cautioned about reading too much into the figures, though. “It’s really a mixed bag,” he said.
“It’s not who’s winning, it’s who’s reducing risk for utilities the most. The Energy Web Foundation is reducing risk by having multiple utilities involved, because there are no standards in place. [But] I don’t think there’s any clear winner at this point.”