Part of a series of insights from leading smart-grid, clean-energy, and utility experts speaking at gridCONNEXT. Questions asked by Clean Edge managing director, author, and gridCONNEXT co-chair Ron Pernick.
Ron Pernick: You’ve been a pioneer in transactive energy. What first got you interested in the concept/sector?
Lawrence Orsini: I have always been interested the energy sector and its influence on the environment, and throughout my career I have focused on exploring ways to optimize the world’s use of energy. During that time, the evolution of the consumption and generation of energy has been dramatic, with the growth of distributed technologies such as batteries, solar panels, and CHP physically moving energy generation to the grid edge. It was clear to me that with generation right there with load – in your house, across the street, on top of the roof of your grocery store – it would be far more efficient to consume that local energy right there within the community.
One obvious solution: developing a transactive energy model that not only makes it possible for people to participate directly in a local microgrid energy marketplace (either as a consumer or a prosumer), but also encourages them to co-invest with other community members in their own energy future (rather than relying solely on large corporations, big power plants, and long-distance transmission lines). This is being borne out with old utility business models evolving and even disappearing as the energy industry moves from a centralized to a distributed model. LO3 Energy was founded to focus on those new changes and the Exergy blockchain was developed to help pull all the pieces together.
Pernick: Your firm is perhaps best known for the Brooklyn Microgrid (BMG) project – where you have been deploying blockchain technology for distributed energy transactions between neighbors. Tell us about that project and what you’ve learned from it?
Orsini: One of the driving forces behind BMG was to give people a choice over the type of energy they use and support. The growth of distributed renewable energy resources has moved energy generation away from remote power stations and into the heart of communities. That new model for the energy sector is the basis of the BMG. Our proprietary smart meters connect local residents together ‘virtually’ by using our Exergy blockchain to securely log and share their energy consumption and production data and smart contracts to automatically execute energy transactions within the community. It enables prosumers who have invested in solar and wind energy to sell it in the local community and has also encouraged the community to collaborate to support investment in new renewable generation sites within the area.
The world’s first successful peer-to-peer energy transaction took place on the BMG in April 2016 and now more than 500 like-minded prosumers and consumers – from both residential and business sectors – are involved in this localized energy market. It has shown us that the concept is viable and that the transaction mechanism is secure and stable and has also clearly demonstrated that people are very keen to embrace the adoption of new technologies that give them a wider energy choice. The biggest work to be done now to move this from a project to a large-scale commercial reality is with the regulatory bodies, to progress the changes needed for local peer-to-peer transactive markets.
Pernick: Pardon the generalization, but should utilities view blockchain more as an opportunity, or as a threat?
Orsini: That’s a good question...with perhaps a surprising answer. You might think that promising to use blockchain technology to put energy in the control of consumers would immediately set alarm bells ringing within the big utilities. But we have found the opposite to be true – because utilities are starting to open their eyes to the way the energy market is evolving and realize that to be part of it in the future they need to see technologies like blockchain and local microgrids as an opportunity, not a threat.
In Germany, for example, E.On and RWE recently radically changed their business models to move away from traditional large-scale generation and long-distance distribution to supporting the growth of local renewable energy communities, with one now focusing on renewable energy generation and the other on grid operation and retail. Local transactive energy networks will inevitably require secure ways to allow long-, medium-, and short-term energy data to be shared and automatic transactions to be placed on a small scale – and that is exactly what the Exergy blockchain can offer. The fact that Centrica is an investor in LO3 Energy demonstrates the importance forward-thinking utilities are putting on this technology.
Pernick: Right, in early April you launched a business-to-business transactive energy network in Texas, with Centrica subsidiary Direct Energy. That’s quite a shift from Brooklyn (known for its local, hand-crafted ethos). What are your plans with Exergy?
Orsini: Indeed, one is focused on consumer energy and the other business trading – but they both use the same Exergy blockchain to make it happen. Exergy is simply a platform to enable the real time transaction of energy for anyone – from major utilities with large energy farms through prosumers with solar panels to consumers who, through demand response, can dynamically react to price triggers that encourage them to reduce energy use at peak times and help balance the grid. Exergy makes it possible to operate small energy marketplaces within local microgrids and allows those microgrids to then trade any excess energy between each other.
Pernick: What exactly is “micro-energy hedging?” Can you tell us more about what that entails?
Orsini: Energy costs are an increasingly important part of business budgets, yet most companies are on utility supply contracts based on fixed price, long-term agreements. This gives price security but means they miss out on the potential of futures trading and hedging on the constantly changing price of energy on the wholesale market. The problem is, even the smallest traditional wholesale energy contract requires the purchase of many megawatts of energy and is too large for small retail customers – and that is where micro-energy hedging with Exergy comes in. By capturing and sharing data on a micro-scale, Exergy makes it possible for renewables producers to sell small amounts of energy to small-scale consumers in real time, offering even the smallest businesses access to major efficiency improvements and cost savings.
Lawrence Orsini is the founder of LO3 Energy, an energy and technology centric company thatbuilds tools and develops projects to accelerate the proliferation of the emerging distributed energy and computation economy.
He was a panelist at gridCONNEXT 2017 in Washington, D.C. The conference provides an unprecedented opportunity for utilities, policymakers, regulators, investors, businesses, service providers, end-users, and other stakeholders to explore policies and share best practices on building a modern 21st century grid. For more information, visit www.gridconnext.com.