Electron is trying to sell a blockchain makeover to the UKs energy sector
UK startup Electronis hoping to convince the energy sector to buy into the transformative potential of blockchain technology and, down the line, unlock commercialization opportunities for over the top services running on a decentralized infrastructure platform.
At this point its built a demo platformon the Ethereum blockchain, and has pumped in simulated data from 53 million metering points and 60 energy suppliers as a dummyrepresentation of the UK energy market using that to run tests which it claims show such a platform wouldenable energy supplier switches to be executed up to20x faster than current switching rates.
Thats the efficiency and cost-saving carrot its hoping willconvince industry players to buy in to avision of upgrading their current hodgepodge of processes, says co-founder Paul Ellis, whosefinancial services background led him to the idea of applying blockchain to a sector thats not renowned for innovating business processes without being marched into doing soby the stick of regulation.
The energy market is built on technology that mostly is around 25 or 35 years out of date. Its been built up over a period of time its a hodgepodge of different systems. And it tends to be driven more by regulators than for example the financial services industry is, he says, arguing that blockchain in particular could providea lot of very helpful benefits for this industry.
The financial services industry is incredibly focused on this, in large part because of one of their core functions is acting as a custodian of record. [But] the energy industry dont see that as one of their USPs [Yet its also] a highly competitive, heavily regulated industry operating over a shared infrastructure.
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Thesectors existing shared infrastructureincludes platforms for balancing and settlement, and for shared registration facilities. Electrons aim is toencourage the energy industry to collectively shift these functions onto shared blockchains.
An example of an area it reckons could benefit from utilizing blockchain technology is registration services aka mechanisms whereby various energy industry assets are recorded. So a blockchain herewould be both the place of record where energy providersgo to obtain information about particularassets, and also to record any transactional changes.
These are good reasons to have blockchains. Theyre very cost effective. You dont require third party intermediaries to operate these shared platforms, argues Ellis. A blockchain provides a way to remove the cost inefficiencies and the barriers to innovation that a central service provider would necessarily bring.
He says Electron would not be looking to monetize anyshared blockchain infrastructure directly, only covering its costs there, but rather via the commercial services opportunity these platformswould unlock.
Where we see benefit is when you start commercializing the opportunities that this throws up, he tells TechCrunch. For example the kind of thing that could be done would be offering services that make switching or registration of change of ownership of properties easier to do when the property changes hands.
It might be connecting in things like births, marriages and deaths so that suppliers are better informed about the status [of their customers] Or it would be licensing and selling the technology into other areas, or extending it to other utilities such as water or telecoms.
Electronalso touts the potential for blockchain to lay the foundations for households to participate in peer to peer energy, and flexibility trading in future turning energy surplus and varying demand into a potential market.
Ellis also reckons energy regulators could potentially gain by, for example, being afforded privileged access to the blockchain to gainreal-time intelligence on the marketshareof the various energy providers instead of having to survey providers to generate market data.
All this is the grandvision of whats possible with a radically differentinfrastructure. But of course for any of itto be possible Electron needs the UKs energy industry to buy in and be convinced that investing in decentralized blockchains is worth its while, vs, for example, having a single provider runa centralized database that all players plug into which would be an alternative route to improve switching efficiency, for example.
We have a number of conversations going on, says Ellis of progress on its sales pitch. Theres a degree of interest in finding out more.
I think the logic of co-operating to develop this is very strong so were very optimistic that well get a lot more buy-in on this, and get a lot more people around the table, he adds.
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Hereckons a best case scenario for getting its blockchainplatform up and running in the domestic energymarket is within about two years, noting that regulator Ofgem has set a similar timeframe for the industry to provide a next day energy provider switching platform for consumers so theres still some regulator stick being brandished here. If Electroncan sell the conceptin the UK hes confident the approachcould be replicated in other energy markets.
The London-based startup, which was founded at the end of 2015, has raised around 400,000 (~$500k) in pre-seed funding from private investors to date, as well as securing two Innovate UK grants (totaling 150k) to develop its technology.
In terms of other blockchain startups targeting the sector, Ellissays most in the energy space arefocusing on peer-to-peer energy trading name checking the likes ofTransactive Grid in New York, and Power Ledger in Australia vs pushing to decentralizetop down, as Electron is hoping to do.
Were not aware of anyone else whos focusing top down. And thats the reason why weve started our process with this registration platform because thats very much a top down energy industry infrastructure issue, he says.
But the challenge of convincing a slow moving industry to takea radical change of technologydirection perhaps explains whyfew others are focusing their disruptive efforts on building an industry-wide collaboration.