Joanna Hubbard’s enthusiasm for the blockchain platform she is helping to pioneer is evident within minutes of meeting her.
Instead of delivering a thinly disguised sales pitch for a bit of technology, she makes a lucid and engaging argument for a solution that she passionately believes is the key to helping deliver a successful decentralized energy market.
As the co-founder and chief operating officer of UK company Electron, Joanna – or Jo-Jo as she likes to be known – has for two and a half years been delivering the message that blockchain is the missing piece in the 21st century decentralized energy jigsaw.
And it’s a message that has gained considerable traction: since its early days Electron has had the backing of the UK government, Siemens and Japanese energy giant TEPCO, and this year it formed a blockchain consortium comprising Baringa, EDF Energy, Flexitricity, Kiwi Power, Northern Powergrid, Open Energi, Shell, Statkraft and UK Power Networks. Last year Electron was named by the World Economic Forum as one of the top 30 most promising technology pioneers.
Hubbard’s journey into blockchain started when she was working for consulting firm McKinsey in its Digital Strategy Transformation team. She read that ‘blockchain 1.0’ is the transfer of payments with bitcoin, cryptocurrency etc, and ‘blockchain 2.0’ would be the settlement of contractual relationships.
“And I had this moment of ‘Wow, that’s what you need for a decentralizing energy industry’,” she says.
She and her co-founder Paul Ellis worked on the concept, with the help of ex-npower chief Paul Massara as a “mentor and sounding board”, and Electron was born. Massara has since become the company’s chief executive.
Before we get into what blockchain is and does in the digital energy landscape, I ask Hubbard for her definition of what exactly ‘digitalization’ means in an energy sector context.
“Digitalization means a lot of different things to a lot of different people,” she says. “In the 4D energy sector [digitalization, decarbonization, decentralization and democratization], the digitalization of energy refers to the collection of data.
“But for me, and for Electron and our focus, we’re looking at two key components: physically representing digital assets in the system and we’re looking at digitally representing the flows of those assets: the trading and the operational data.”
She says that as we move from a traditionally centralized energy system to one that is increasingly decentralized, “suddenly that data becomes incredibly important: that ability to represent the system in a digital fashion. Because all of the new business models coming up around optimization, flexibility, energy services, tariffs… they all rely on having access to that fundamental data and optimization.”
So what is blockchain? And why is it so often misunderstood – or not even understood at all?
“The reason that a lot of people don’t understand blockchain comes from the fact that people aren’t usually explaining blockchain in the abstract – they are explaining a particular blockchain. So they are making claims like, ‘blockchain is transparent, blockchain is opaque, blockchain is secure, blockchain is not secure, blockchain is fast, blockchain is slow’. And they all might be true for ‘a blockchain’, but they aren’t really true of blockchain in the abstract.
“Blockchain in the abstract is a technology. Essentially, it’s a protocol, a set of rules, which is enforced across participants in a network.
“And when all those participants adhere to those rules, they are able to essentially update the status of the network and maintain that network together.
“So in the energy space, blockchain is very exciting in terms of being this coordination mechanism.”
She says in an increasingly decentralized energy world, “we need a new coordination mechanism that is capable of enforcing a set of rules across all those different assets. And that gives them the ability to access a market in a rules-based, auditable fashion. And that’s why I think the energy industry is getting very excited about this technology.”
She stresses that blockchain in itself is not a business model: “It’s a technology that enables much more granular business models and much more asset participation in the energy industry.
“What’s almost been misleading about recent waves of press coverage is that blockchain does not necessarily enable new business models.
“Business models like peer-to-peer or vehicle-to-grid are possible with a central intermediary. Blockchain allows them to do it without the central intermediary – which can improve the cost efficiency function and also the trust function.”
Hubbard highlights decentralized energy as one aspect of the energy industry that is “particularly ripe for coordination. Coordination across potentially competing, potentially non-competitive parties. And that’s Electron’s core focus – the flexibility markets.
“There’s a really exciting component of the flexibility trade that doesn’t really exist on any exchange product today.
“A single turn-up or turn-down action from an end user has multiple non-rival value components for different players in the energy market. So, if I’m a battery and I take a turn-down action, the net effect of the system balancing has a value to the system’s operator, and they might pay for it. The location of that action will have a net positive or negative effect for the distribution operator who’s trying to manage flows and constraints and asset lives, so he’s capable of putting a price to that. And it also has a value to a supplier because they are trying to balance their trading position.
“And you might have people in that area who want to reward that person for producing local or green energy.”
So she says that while today only bilateral trade is possible, “as soon as you bring in a blockchain-trading layer, you can coordinate all the different trading elements. You can make sure that one asset receives the full value stack.”
Electron has built two blockchain platforms: an asset registration platform and a trading platform.
“Our application is an enterprise application that is solving a problem that a lot of asset owners or flexibility providers or aggregators want solved, and that participants on the other side who are buying this flexibility haven’t been allowed to solve themselves.”
Hubbard says the reason Electron has enjoyed such swift success “is because we have done it with the industry”.
“Coordination is key to realizing the full value of digitalization. There are three core platforms that need to be coordinated and shared. It’s the asset register: what is it; where is it; there’s the trading platform and the rules around how you are allowed to interact; and then there’s the data repository.
“Everything else – all the other competitive business models – can be built on top of of that structure, but that infrastructure needs to exist first.”
However, the key element Hubbard stresses for the energy industry, is that “you can start doing it in little pieces. You can build it up piecemeal as the market requires it.
“With blockchain you can build a living, breathing data set and you can decentralize the responsibility for keeping that up to date – maintaining it and correcting it – and you have this perfect auditable record of who has changed what data, and how, and when.
“You fulfil the governance functions that you need for something like national infrastructure.”
Hubbard says the key to developing the blockchain platform is “about building something that’s future-proof”.
“We know we need to build an infrastructure that enables greater asset participation in the system. Because that creates more competition it increases the efficiency of the system, and it also increases the resiliency of the system.”
Electron is focused on the UK energy market but the company is attracting global interest because of the adaptability of the technology.
“Almost every country with a developed renewable energy market is looking at these issues,” says Hubbard.
Jo-Jo Hubbard will be speaking at European Utility Week in Vienna in November. Click here for details.