Navigant Research Blog

Tackling the 2 in V2G

— January 16, 2018

EV adoption is speeding up around the world, and while electrification offers emissions reductions and other benefits, it creates new challenges and opportunities for grid operators. Navigant Research expects that EVs will make up 5% of the global market for personal vehicles by 2024, and that collective charging requirements will add 160 GW of demand to electricity systems as owners switch from filling up to plugging in.

Vehicle-to-grid (V2G) technologies seem an obvious and low cost alternative to ramping up generation in the face of new demand from EVs. Why not use EV batteries to shift and shave demand peaks during the 95% of the time they sit unused? But making V2G a reality requires significant infrastructure and software developments, and EV owners must also consent to allowing grid operators access to batteries for flexibility services.

Integrating EVs Requires New Technology

If EV batteries are to be called upon for V2G, they first need a physical connection to the grid that supports two-way charging infrastructure, which are not yet widely available. However, major automakers like Honda are already developing two-way charging stations with V2G in mind, and deployment is likely to increase as more EVs hit the road.

Once two-way charging infrastructure is in place, the vehicle-station pair needs a software solution for monitoring grid signals and managing power flows. IBM and TenneT are collaborating with sonnen and Vanderbron to pilot a blockchain-based V2G platform that can adapt to conditions on the grid, such as congestion or oversupply of wind power. The blockchain records the locations and identities of devices involved, exchange volume, and other details as a secure and verifiable basis for settlement with the EV owner.

Consumers Need to Be Compensated for V2G Risks and Services

Technology is only half of the equation—EV owners also need to participate. Owners that participate in V2G take on the risks of doing so, and should expect to be compensated for providing flexibility, services, and for potential wear and tear of the vehicle’s battery (though there are conflicting views on this). Owners will also require guarantees that integrating will not cost drivers the use of their vehicle in emergencies or other situations.

In the short term, compensation might provide enough incentive for owners to adopt V2G. One study estimated the value of flexibility services from £600 to £8,000 ($800 to $10,800) of income each year for vehicle owners. Whether the income is a sufficient counter to real or perceived risks will likely vary with a customer’s individual situation, which constrains the potential of V2G.

The Rise of Mobility as a Service (MaaS) Could Help Maximize V2G Potential

Evolving vehicle ownership models could have a huge effect on V2G. In a world where consumers access on-demand fleets of EVs owned and operated by an MaaS provider rather than owning vehicles, many barriers to V2G adoption disappear.

Since demand for MaaS vehicles is likely to be cyclical, with lower demand during midday when grid congestion demand is higher, a portion of the fleet can be parked and plugged in to act as a buffer for the grid. Utilities and grid operators could partner with fleet owners to ensure that some fraction of the electrified fleet is grid-connected at any given time, providing the grid with a reliable pool of flexible resources in exchange for a new source of revenue. The service provider pools customer demand, and any effects on vehicle battery performance become a straightforward business cost.

As is often the case, the challenge is getting from here to there. Navigant Research can help—check out our latest report on the future of MaaS.


Where Are All the Meter Manufacturers in Transactive Energy Projects?

— December 7, 2017

That’s a question I’ve been asking myself recently. The answer seems to be “nowhere.” In the 110 or so trials of utility industry-related blockchain and transactive energy (TE) Navigant Research has identified, meter vendors are at best the silent, invisible partners of other companies. When asking leading blockchain and TE startups about the meter hardware in their trials, the stock response has been “nothing is available that supports our requirements, so we built our own.” So, why aren’t meter vendors making more noise about a potentially significant growth opportunity?

Blockchain is the hottest, most hyped technology in the energy industry, and TE is its hottest use case. If current TE trials prove successful, I expect rapid adoption, particularly in countries with high penetration of solar, supported by ratepayer-funded incentive mechanisms. TE’s market-based incentives could replace subsidies. Large-scale, fully automated TE platforms have a number of requirements, as discussed in Navigant Research’s Blockchain for Transactive Energy Platforms report:

  • TE pricing requires visibility into local network conditions, including network assets and distributed energy resources.
  • Smart contracts—which determine when transactions are opened and closed—must be hosted locally and fed with market data.
  • Meters measure and record all TE power supplied and consumed.
  • Communication networks will transport data to interested parties.
  • Transactions must be recorded to the blockchain.
  • Significant distributed compute power will support automation of the TE platform.

Meter Vendors Can Support Many TE Functional Requirements

TE markets will have to be settled in much the same way as wholesale power markets are today, in accordance with strict market regulations and technology standards. This is a complex system, where a lot of trust will be placed on the technology platform. Meter vendors have many capabilities that could put them in a commanding position to lead the TE space:

  • Smart meters already provide visibility at the point of consumption.
  • Advanced metering infrastructure communications could provide the data networks on which TE runs.
  • Smart meter data concentrators could be used as nodes for the blockchain, store smart contracts, provide compute power for localized pricing calculations, and so on.

There is another feature that meter vendors have so far overlooked: it is difficult to amend records already committed to the blockchain. Consequently, it is vital to ensure that transaction data is correct before it is recorded. This will be a difficult task in a largely automated TE platform. While smart meter accuracy is generally high—between 99.5% and 99.9%—a validation algorithm is run regularly to estimate missing or erroneous meter readings. In TE, a similar algorithm must run on transaction data. However, it is likely that validation will be distributed alongside the ledger, rather than a centralized batch process. Most meter vendors also offer a meter data management system with an associated validation algorithm.

Despite meter vendors’ requisite hardware and software, they are nowhere to be seen in the TE world. There are many reasons: ongoing major smart meter rollouts command a lot of attention, and there is little money to be made in TE right now. However, I would have expected at least one vendor to have taken the leap into the world of TE. The biggest risk is that meter vendors are trapped in the old utility world, where metering innovation was driven by utilities—with whom meter vendors have decades-old relationships—and adoption of new metering technologies was slow and incremental.

TE adoption will be different. It is driven by startups that have no previous relationship with meter vendors. These startups could develop their own validation algorithms; they could choose to use public 5G networks for data communications; or they may decide to deploy their own distributed compute. If this happens, meter vendors will miss out on potentially billions of dollars of value created by TE. Meter vendors must wake up to the reality of TE and the opportunities and threats the market presents.


If You Build It, They May Come: Solving for Customer Experience in TE Platforms

— November 16, 2017

The utility customer of the future lives at the center of an ecosystem of networked and largely automated smart devices. Their household is within their preferred temperature range whenever they are at home; their EV charges when electricity prices are cheapest and is always ready for the morning commute; and they store any surplus electricity generated by their rooftop PV or, if the price is right, sell it in a digital market. Every decision made by each of these devices is a data point used by different service providers to refine and optimize customers’ distributed energy resources (DER) and integrate them with wider grid processes.

Transactive energy (TE) platforms will underpin tomorrow’s consumer energy market. The interface between energy producers and consumers, TE platforms allow parties to interact with one another in an open market while ensuring the needs of end users and the grid are met. These platforms will incorporate multiple technologies—including blockchain and machine learning—which have attracted a great deal of interest from the energy industry. But what should the consumer experience with TE platforms look like in practice?

TE Platforms Must Balance Grid Needs, User Preferences, and Ease-of-Use

TE service providers must supply an appealing product that creates value out of the box while providing options for users who are more hands-on. Optimizing household energy consumption to minimize costs requires a multitude of forecasts, calculations, and decisions. Since electricity bills in the US average around $115 per month, or 0.2% of the median household income ($55,000), the typical consumer has little incentive to manage these processes themselves.

Grid+, a technology startup and TE platform provider, solves this problem by supplying users with intelligent agents—hubs that integrate price signals, user preferences, and grid needs to coordinate a household’s smart device (TransActive Grid and Grid Singularity have a similar approach). While some user preferences may be set manually (e.g., preferred temperature range), most will be automated based on analyses of user behavior (e.g., heating the house prior to the customer’s return from work). The user decides their preferred balance of comfort and profits and they need only supply the agent with enough currency to pay bills and execute the necessary transactions on their behalf. All transactions are recorded rapidly and securely on a blockchain.

Thinking with Portals

Aspiring platform providers must devote as much attention to the end-user experience as they do to their platforms’ underlying technology. Customers balance their own comfort levels, convenience, financial costs and profits, and societal or ethical goals when making decisions about electricity consumption. Automation and machine learning solutions have the technological capability to deliver on that balance, but optimizing behind the scenes won’t be enough to inspire consumer trust or purchasing power.

The reality is that the Energy Cloud customer won’t care whether their platform rests on blockchain or a centralized database or a traditional billing system. They’ll care about outcomes and will need on-demand access to a portal that elegantly consolidates and visualizes their Internet of Things (IoT) ecosystem’s performance: What are their profits from selling power to the neighbors? How well is their PV system performing and have they paid off the install costs? How efficient is their home? Positive, confident results will drive further investment into the platforms themselves (so might friendly rivalries between local users).

For TE platform providers, competition for users will be fierce, and consumers will have their pick of platforms vying for their attention. The TE leaders in the Energy Cloud future may not have the most advanced technology, but they will have a blend of technology, functionality, user interface design, and perhaps gamification that creates an attractive and compelling user experience.


Trust in Blockchain

— October 3, 2017

Trust. You can’t touch it or smell it, but it’s a vital ingredient in every commercial transaction. It exists between companies and their staff, suppliers, and customers. The entire worldwide monetary system is based on the principle of trust. One could argue that trust, above all else, is what binds the modern world together. However, trust is not blind: mistrust will also exist between the parties of financial transactions. Consequently, it is hard to build trust, but it can turn to dust in a matter of seconds.

Part of the attraction of cryptocurrencies, like Bitcoin, is that trust is placed in its consensus mechanism and not between a transaction’s counterparties. Anonymous users exchange Bitcoin without the need to measure a counterparty’s trustworthiness. Blockchain technology creates trust across the entire Bitcoin network through its distributed ledger and consensus-based transaction verification. While Bitcoin receives a great deal of media attention, blockchain technology is coming out of Bitcoin’s shadow as a potential game changer for transactions. Many industries are investigating blockchain’s potential to remove the requirement of central market functions, speed up transaction processing, and reduce overall costs. In addition, there are other use cases outside of transaction management. However, there are many issues with the technology that must be resolved before it becomes a mainstream technology.

Ironically, Trust Could Be Blockchain’s Undoing

Few technologies as immature as blockchain receive comparable media interest. Despite any current large enterprisewide deployments, blockchain evangelists have touted it as a technology panacea. It will likely be years before blockchain applications move into the mainstream. Blockchain startups have attracted billions in investment, yet these companies are exactly that: startups. In some cases, little more than a handful of enthusiasts with a good idea and some seed capital.

And therein lies the problem: blockchain could suffer from a huge trust issue. Not in the creation of trustless networks, but trust in the technology itself. The expectation of blockchain’s potential—driven by an unrelenting hype machine—far exceeds its current ability to deliver. It will likely be 4 or 5 years before we see any large-scale blockchain deployments. In the interim, some startups will run out of capital and close, others’ products will fail to deliver on their promises. What is certain is that blockchain developers will come across many issues converting blockchain from an open source software into something that is enterprise ready, scalable, and able to provide viable alternatives to existing technologies.

Expectations Could Be Set Too High

The problem is that 4 or 5 years is a long time to wait. The hype around blockchain is such that expectations can be set unrealistically high. I expect a great deal of negative press if too many startups fail or if too many projects become encumbered by too many unforeseen technology problems. The industry will lose its trust in the entire blockchain industry. A dollar value can be attributed to companies’ trust in blockchain—it’s currently the total amount pouring into trials and proofs of concept. A breakdown in trust will mean an end to project funding and the end of the road for blockchain.

Blockchain has some unique features that could benefit many organizations in the future. But it is not a panacea. It needs time to overcome its teething problems and to demonstrate its value. The hype surrounding the technology could well be its undoing.

Companies investigating blockchain should do so with the full knowledge that it is an emerging technology. It will take time, patience, and investment to adapt blockchain for enterprise-class deployments.


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