The way we consume energy is changing fast. On average, people own between three and four connected devices that are charged at home, work, airports, and coffee shops. People are increasingly driving electric cars that plug in versus fill up; and as a result, car batteries are becoming more powerful and capable of storing and sharing energy. To feed the need for increased power, businesses and homeowners are seeking sustainable alternative energy sources such as solar panels and windmills to offset their reliance on traditional resources.
We’re in the midst of an exciting transformation—the “Uberization” of energy—in which people are buying sustainable energy assets like solar panels and car batteries, using them to power modern lifestyles and sell energy back to the ecosystem. The Internet of Things (IoT) is a key driver to this evolution, enabling innovative ways of leveraging devices, data, and remote access to create new business opportunities for a variety of stakeholders. The trouble is, supporting power infrastructure is stuck in the past. To capitalize on this new energy landscape, the physical grid must evolve. Only then can the “Internet of Energy” be optimized.
Evolving the Infrastructure
Tapping energy from renewable sources is generally more cost effective than generating energy from fossil or nuclear sources. Integrating these sources into the existing grid designed to distribute centrally generated power is as appealing as it is challenging. From a commercial perspective, many of the current processes and rules are too complicated and lengthy for new data-driven, decentralized energy resources. Energy plans and agreements are defined in a rigid, process-led environment, where all actors and regulators must agree, and market roles are tightly defined (as they’ve been for decades). Unfortunately, the existing system does not incentivize evolving business models.
Currently, grid operators have a natural monopoly over managing the transaction environment, collecting money from millions of households and then distributing funds to power plants. Unfortunately, this system doesn’t make use of regional, distributed intelligence provided by new energy assets and the IoT. There is a growing need to decouple providing copper lines and power from the gathering of information from assets on the grid’s edge. In other words, we are moving toward divorcing the way we finance physical infrastructure from the management of IoT deployments that enable intelligence in the field.
A more flexible infrastructure can bring in added revenues for both operators and asset owners. As people buy energy assets for their own homes and buildings, they are becoming more independent from the energy infrastructure in the process. Consequently, patterns of grid use are changing, and operators are becoming big data users without being obliged to manage data originating on the consumer side. This is an important evolution because operators are now able to aggregate information from many sources and offer AI for predictive maintenance, outage prevention, and improved quality of service.
Realizing the Internet of Energy
IoT technology is connecting all these new assets to the internet one way or another. Millions of individuals using personal energy assets can become part of the revenue stream bringing clear benefits for energy providers. Energy operators can manage over- and under-capacity in a more intelligent way and avoid extensive investment in grid capacity. However, it’s crucial that grid operators trust the data they receive from these assets. The information needs to be as reliable as that produced by a grid asset operating under full control and ownership of a grid operator.
The Internet of Energy also brings more opportunities for a greener world. If data is trusted and connected devices are properly protected against fraud, green energy consumption can be better incentivized. It becomes easier to identify consumers that care to adapt usage to local, sustainable energy generation and reward them appropriately.
Security, Privacy, and Identity Management Is Paramount to Success
For ensured success, we need end-to-end security and privacy designed in the ecosystem to create a sustainable, trusted transaction environment. This could be achieved through the advantages of blockchain technology and advanced ID management solutions. Blockchain is a trust building entity for processing Information that allows users to publically see and fundamentally trust device data. Also important in building end-to-end trust is authenticating the source and ensuring integrity of the data that is added to the blockchain.
What Is Blockchain?
Blockchain is an example of a distributed public ledger or a shared record system for transactions. It’s been described as “a technology that allows people who don’t know each other to trust a shared record of events.”
The idea is that every authorized party involved in a transaction holds a copy of the entire ledger; there are no centralized databases. Anyone can enter a transaction onto the system, and at regular intervals these transactions are batched together into “blocks.” The blocks are then formed into “chains” (hence the name) using cryptographic technology that provides high levels of security. The chronological chain of transactional information is created in such a way that each block that is added protects the information in the previous one.
Distribution and decentralization are fundamental to blockchain; they ensure that no party in the system has the ability to modify or tamper with the data, thus guarding against fraud, theft, hacking, and other misdemeanors. Plus, as previously mentioned, the blocks in the chain are protected by advanced cryptography that has so far proved immune to hacking.
Paradoxically, for such a complex technology, blockchain actually increases transparency, because any party in the system can verify the information it contains. It also eliminates the need for an intermediary to authenticate and process transactions, saving both time and money.
Flexible Transactions Secured By Blockchain
In situations where energy assets are operated in a decentralized manner and use of them can be “Uberized” (meaning at times, use of the asset will be offered to people who ask for it versus for the owner’s sole benefit), blockchain offers a cost-effective way for smart contract-based transactions with the flexibility and scalability needed for energy management. For instance, in a shared property like an apartment building, individual tenants might wish to be charged separately for their energy consumption. With blockchain technology as a central part of the system, transactions no longer need to be based on pre-defined data exchange and settlement processes. Blockchain can also support micro-transactions between individuals, a necessary component of the new Internet of Energy.
Protecting and Authenticating Devices, Data, and Networks
Another requirement of a successful shared energy economy is that data is secure and protected across the entire ecosystem—including sensors, meters, transactions, and backend systems. Operators currently calculate revenues based on data from closed meters in millions of households. They need to trust that the data they receive from privately owned energy assets, is accurate and reliable. Blockchain technology can’t prevent original data from being manipulated or compromised. For that, basic security hardware and software is needed to protect the system from physical and digital tampering.
Hardware components known as Secure Elements can be embedded in connected energy assets providing an added layer of protection, data integrity, and defense against cyber attacks. Secure Elements ensure that device data is stored in a safe place and that access is granted only to authorized applications and people. It also enables over-the-air management of security credentials, software updates, and evolving security capabilities across the lifecycle of solutions.
Strong authentication solutions that use well-vetted algorithms and end-to-end security are needed to protect sensing and metering devices as well as to secure networks and prevent fraud in the system. These solutions must adhere to state-of-the-art security principles that have been proven in other industries including government and banking. These solutions can safeguard the integrity of energy assets, applications that access them, and the networks that transfer data via mutual authentication, integrity protection, and confidentiality. A trusted transaction environment, secured by strong authentication hardware and software and a trusted key manager must replace the current process-led landscape.
Toward A Smarter, More Sustainable Energy Ecosystem
The expanding use of IoT technology is transforming the world of energy, providing exciting opportunities for a greener world and greater revenue for energy providers. Collaboration, cooperation, and innovation are needed to update the energy infrastructure to better support micro-transactions and to provide system flexibility. In order to achieve success, blockchain, strong authentication solutions, and trusted key managers must form a central part of the new system to create a trusted transaction environment. In this way, integrity of data can be protected across the entire energy ecosystem and maintained over the full lifetime of any connected asset.