Blockchain for Utilities - Amazon S3...Energy Blockchain Webinar Series: Webinar #4 Blockchain for Utilities: Vetting Utility Use Cases Disclaimer Any product, individual or company

Sept 14, 2018 CONTENT COPYRIGHT © 2018, ENERGY BLOCKCHAIN CONSORTIUM 1

Sept 14, 2018Richard Shandross, Associate Director, Energy Practice, Navigant

Content Copyright © 2018, ENERGY BLOCKCHAIN CONSORTIUM and NAVIGANT

Energy Blockchain Webinar Series: Webinar #4

Blockchain for Utilities:Vetting Utility Use Cases

Disclaimer

Any product, individual or company mentioned in this webinar should not be construed as an endorsement by the Energy Blockchain Consortium. We have avoided the use of names so any mention is purely coincidental or for illustrative purposes only. All participants are expected to conduct in the webinar per the professional, business like and common sense norms.


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Your Presenter

Richard Shandross• Rich focuses on the transition of the modern power grid, including

transactive energy, distributed energy resources, microgrids, and blockchain solutions. He also performs feasibility, commercialization, marketing, and strategy work for new energy technologies and products.

• Over 25 years of experience as a project and program manager, consultant, systems engineer, and researcher in industry, consulting, government, and academia

• Clients have included utilities, global energy firms, U.S. Department of Energy, design and engineering firms, and National Laboratories

• BS in Environmental Engineering from Northwestern University PhD in Chemical Engineering from MIT


Shout out to Brett Feldman, Erik Gilbert, Erik Larson, and Tom Mahowald

About Navigant• Navigant is a global consulting firm with three key business segments

• Energy • Healthcare• Financial Services

• Energy Practice – who:• The industry’s largest energy consulting practice. Clients include:

• 50 largest electric and gas utilities• 20 largest independent power generators• 20 largest gas distribution and pipeline companies• Governments at all levels, NGOs, and much more

• Energy Practice – what• Technology change: renewables, distributed generation, storage• Grid modernization and resilience• Energy efficiency regulation


Topics

• A Framework for Blockchain Solution Vetting• Two Examples of Utility Use Cases• Q&A



A Framework for Blockchain Due Diligence

It’s a system, not a sculpture

Why Do Proposed Blockchain Solutions Need to be Vetted?• The nature of your need is not “to implement blockchain”

• Will it meet your needs?• What role should the blockchain play?

• Unproven technology • Case studies are rare and lack detail• Risk can be great

• Evolving technology • Hundreds of use cases, but … • Also hundreds of variants

• Every implementation is unique• Problem characteristics• Underlying system• Solution architecture

• Other available technologies• Unintended consequences and safety


There are dynamics involved …

• How’s your game theory?• Market dynamics• Network dynamics• Token dynamics

… Are there winners and losers? … Can it be gamed / manipulated?… Will it generate value? What are the

consequences of value creation?… Is it stable? … How will it evolve?


Source: http://www.learnaboutstructures.com/Chapter-4-Practice-Problems

vs.

http://www.learnaboutstructures.com/Chapter-4-Practice-Problems

What’s your asset?


Lessons:1. Extrinsic ≠ BTC2. GIGO3. Hack surface > 0

Four-Step Due Diligence Framework

1. Benefit fit• Screening• Vetting

2. Compatibility check3. Blockchain property verification4. Vulnerability screening

This framework is universal: it’s not just for utility use cases, and not just for energy use cases – it’s for all blockchain scenarios


Step 1: Benefits

• You can apply these steps to: • GENERATE potential use cases• SCREEN a set of use cases• START VETTING a particular use case

• Steps 2-4 are primarily for deeper vetting


• Break down the application into constituent processes and/or functions

• Enumerate blockchain (BC) intrinsic strengths

• Find components of the application that overlap with strengths of blockchain

• Compare BC to existing technologies and solutions

• Identify where BC can improve on existing technologies

Step 2: Compatibility Check


• Is decentralization what you want or need? What type of decentralization?

• Can your system cope with data immutability? Can you design the solution to manage it?

• Check the fit into system (software and hardware) architecture– Check for side effects, e.g.,

• Time scale issues• Inadequacy of BC as a database• Underlying BC system transaction fees

– High-level dynamics check– Investigate the usage in practice (rough scale)

• Test net, pilotPhoto source: Simon Law on Flickr, https://www.flickr.com/photos/sfllaw/222795669

https://www.flickr.com/photos/sfllaw/222795669

Decentralized

Centralized

ImmutableRevisable

Programmable

Static

Step 3: Property Check


• Determine which BC properties you are relying on

• Analyze the solution architecture – are the desired properties either present or emergent from the system?

– BC properties are not universal – they are emergent characteristics of the architecture!

• How will the system evolve over time as it gets implemented?

– Cautionary tale: reduction in Bitcoin decentralization due to mining pools

– What will be involved in making upgrades or other needed changes to the system over time?

Uncle Joe’s HomemadeBlockchainSolution

Step 4: Vulnerability Screening


• Identify potential attack vectors and modes

– IT compromise

– Attacks from within

– Malware and illegal behavior in the metadata

– Smart contract issues

– Infrastructure connections and their unintended vulnerabilities

• Evaluate the strength of the solution under both plausible and currently implausible circumstances


Two Examples of Vetting Utility Use Cases

Transactive Energy Activities

Block diagram definition of a grid-edge TE scenario


Power Grid (Distribution Level)

Bulk Power Generation, Sale, and Transmission

Local Non-Prosumer

Generation

Prosumer TE Energy Supplier

Pure Consumer

PV, storage, EV charger

Power

Coordination, information,

fees

Combined aggregator & marketplace

Power

Power

Power Purchase, sale, coordination, information, fees

Purchase and salePurchase and sale

Sale

PurchaseNOTE: “Power” flow could also refer to energy flow

(Edge) Transactive Energy Processes/Functions







• Let’s use our Step 1 use-case generation and screening capabilities to select use cases to touch upon:

Blockchain Intrinsic Strengths


• Transaction-based – can include much more than financial data• Resilience – via distributed nature• Data integrity and immutability • Smart contract – programming and automation• Decentralization – or, more precisely, disintermediation • Multi-party – suitable for many parties from different

organizations • Tokens and currencies – exchangeable value within an ecosystem• Massive investment in technology [existing use cases] –

solutions are being developed and deployed in other sectors






Overlap Map TE process vs. potential BC value







= worth studying further

Vetting use case 1: TE negotiation


• Goals• Develop a platform on which actors can set -

• Price• Amount of energy, power, or storage• Delivery window or schedule

• Must be compliant with rate laws• Must be transparent, up-to-date, and as fair as possible• May have one or several types of agreement (binding, non-binding, or

conditional)• Allow for fixing errors (“I meant to type in 100 kWh, not 1,000!”)• Integrate with value-finding, responsive interconnection, and contract-setting • Keep some records immutably

Vetting use case 1: TE negotiation - continued

• The reference blockchain solution:• Private blockchain (for throughput) • Validators are the TE provider, prosumers (and the

distribution operator?)• Smart-contract capable• Allows error-correcting transactions (within one minute)







Vetting use case 1: TE negotiation - continued• Compatibility:

• Blockchain computational resources likely can’t do market clearing computations • Live integration with other pieces of the TE system may be difficult or “clunky”

• Properties:• What purpose is decentralization serving here? (Unclear if it’s achieved anyway.)• Smart contract execution – can the system both protect proprietary information

and have strong validation?

• Vulnerabilities:• Error-correcting period could be used to game system• Lost private keys could lead to stranded transactions or other complications


Vetting use case 2: Responsive interconnection


• Goals• Interact – send and receive information – with power grid systems:

• Distribution operator’s DER Management System (DERMS)• Wholesale market (e.g., ISO) APIs or other online access points

• Interpret signals and determine actions based upon them• Interact with prosumers’ inverter and/or other power management hardware

and software*• Read meter and/or submeter• Send price (or other incentive) signals• Send some control signals (limits, type of service to provide, etc.)• Read customer system’s choice signals (e.g., participate or not, parameters, limits)

* Aggregation functions are lumped in with responsive interconnection here

Vetting use case 2: Responsive interconnection







• The reference blockchain solution:• Private blockchain (for throughput) • Validators are the distribution operator, TE provider, and

prosumers• Smart-contract capable

Vetting use case 2: Responsive interconnection – cont’d


• Compatibility:• Biggest BC benefit is smart contracts, but why not use a simple application?

• BC can’t perform activities on short time scales, especially complex ones• Live integration issues as well

• Properties:• How does the system do system governance – not always a matter for the

customers – and maintain decentralization? • Do validators have liability exposure?

• Vulnerabilities:• Not appropriate for system-critical activities

• Transactions can get delayed or denied (consensus is not appropriate)• Physical system access opens possibility of safety or system compromise issues


Conclusions

“What have we learned from this?”

In summary:

• Blockchain is a technology toddler … we’ve got to nurture and develop it to get the full benefits and minimum drawbacks

• So much to check that a vetting process is a must!• A due diligence framework should check at least these areas:

• Benefit / Compatibility / Properties / Vulnerabilities

• The actual vetting is very situational (at this time …)


Can We Make Vetting More Standardized?• Recommended program for blockchain researchers and industry

members: develop and publish the following in a standardized form –

1. Evaluation and analysis methods …• Decentralization• Immutability• Stability and resilience

2. Stress testing methods3. Penetration testing methods (malware and attacks)4. Standards of performance (e.g., for making claims)


Energy Blockchain Conference


Lead Sponsor

Thank You!


Contact Info for this Presentation:Richard Shandross

[email protected]

General Questions:Tony Giroti

[email protected]

mailto:[email protected]

mailto:[email protected]

Documents

Blockchain for Utilities - Amazon S3...Energy Blockchain Webinar Series: Webinar #4 Blockchain for Utilities: Vetting Utility Use Cases Disclaimer Any product, individual or company