Blockchain enabled Smart Metering in 2019

Blockchain technology is expected to extend the benefits of investments in renewable energy microgrids and a change of ecosystem to the consumers. The year 2019 would be seeing blockchain enabled smart metering technologies with in-built smart contract functionality. - Dr. Vithal N. Kamat

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Blockchain enabled Smart Metering in 2019

With per capita energy consumption reaching 1,150 kWh, India is now the 3rd largest producer and consumer of electricity. Renewable power plants constitute one-third of 350 GW – the total installed capacity. Renewable energy constitutes 15 per cent of the total generation. Though India has surplus capacity it lacks adequate infrastructure for supplying electricity to all needy people. One of the hurdles faced by distribution companies (DISCOMs) are the extremely high Aggregate Technical & Commercial (AT&C) losses.

The government has been enabling smart grids to establish its goal of pan India universal electricity access, while offering affordable power and other benefits to the consumers. Implementation of Advanced Metering Infrastructure (AMI) is the first step towards realising smart grids that can significantly increase the efficiency of energy usage. In spite of sincere attempts, the government has been unable to show results. What mistakes are being committed in its implementation? Here’s an attempt to answer this, hoping that the government would learn, improvise and implement tasks differently in the new year 2019.

India is also the third largest emitter of greenhouse gases in the world, and if India continues with the current mix of fuel sources, the impact on world environment would be devastating. To address this grim situation, the government made plans to install 175 GW of additional renewable capacity by 2022, of which 100 GW would be solar. Coupled with a drop in the average price of solar electricity below the that of its coal-fired counterpart, we anticipate a good future for solar if the producers are given adequate opportunities to sell their surplus power. New concepts in energy trading and metering such as blockchain represent such opportunities. Blockchain enabled smart metering technology is explained later in this article.

Challenges that Indian utilities face with AMI

Though Indian utilities have experimented with AMI, they are yet to reap the benefits. The major challenges that AMI presents are:

  Recovery of high capital costs: AMI requires high expenditures for procurement of all hardware and software components (such as meters, DCUs, MDMS), along with cost associated with the installation and maintenance.

  Increase in complexity: AMI is a complex system of technologies that must be integrated with utilities’ information technology systems.

  Lack of standardisation: With no interoperability standards being defined and non-uniform requirement specifications, different AMI technologies are being deployed that are incompatible.

Unless the above challenges are addressed, it would be extremely difficult for the utilities in India to successfully connect, operate, and maintain an AMI-based grid system. Without a fully operational AMI system, utilities would find it difficult to reduce their AT&C losses and the justify the investments made in AMI. No wonder that AMI is viewed by many as a heavy financial burden that cannot be recovered. Let us first try to understand the initiatives taken in India to help promote AMI.

Indian Initiatives promoting AMI

India Smart Grid Forum (ISGF)

To achieve accelerated development of smart grid technologies in the power sector, India Smart Grid Forum (ISGF), a public-private partnership initiative was set up with a mandate to advise government on policies and programs for promotion of smart grids. ISGF is working closely with government institutions such as CEA, CPRI, CERC, MNRE, state governments, utilities and regulatory commissions.

Energy Efficiency Services Ltd (EESL)

EESL is the world’s largest public energy service company (ESCO) and a joint venture of state-owned NTPC Ltd., Power Finance Corp., REC, and POWERGRID. EESL was formed to facilitate energy efficiency projects and innovative business and implementation models. India’s energy efficiency market is estimated at US$12 billion. With a net worth of over Rs 2.144 billion, EESL has successfully implemented projects such as UJALA LED lamps, agricultural programme with smart pumpsets, etc.

With regard to AMI, EESL has been helping utilities reduce billing inefficiencies through ‘Smart Meter National Programme’ (SMNP). The SMNP aims to replace India’s 250 million conventional meters with smart meters. The smart meter procurement has commenced from November 2017 for Haryana and Uttar Pradesh, with AT&C losses 28.42 per cent and 34.36 per cent respectively.

EESL has a proven model of bulk procurement, aggregation of demand, and monetisation of savings. The roll-out smart meters is under the build-own-operate-transfer (BOOT) model, wherein EESL undertakes all the capital and operational expenditure with zero upfront investment from states and utilities. EESL, on its investment, earns a nominal Internal Rate of Return (IRR) through a mutually agreed automated payback structure.

Ujwal DISCOM Assurance Yojana (UDAY)

The GoI launched UDAY in November, 2015. It envisages financial and operational turnaround of DISCOMs of the country.

Case Study: Deployment of 10 mn prepaid meters in UP

In November 2017, EESL floated a global tender to procure 10 million prepaid meters for deployment in Uttar Pradesh under ‘Saubhagya’ scheme. With an outlay of Rs. 16,320 crores, it aims to add more than 40 million below-poverty-line households to the power grid by December 2018. Prepaid meters offer the poor consumers a facility to recharge electricity (similar to recharging mobile).

In March 2018, 12 bidders, including ITI, Larsen & Toubro, Genus, submitted interest for participating in the reverse bidding. Some large players did not join the race expressing concerns on product safety and tariff regulations. According to them, prepaid meters work on a singular tariff and UP has more than a dozen tariff slabs. However, states such as UP, have regulations for prepaid metering and a tariff that is lower. Quality is a concern, since large players sub-tender the contract to private companies not having BIS certificates. Another cause of concern arises from the sheer volume of meters to be installed. How can a state such as UP, that typically installs 1 million meters annually, possibly install, let alone service, 10 million prepaid meters a year? Third concern is attributed to technology. Why is EESL not opting for smart meters and configuring them as prepaid meters instead of investing heavily on inane prepaid meters lacking smart capabilities?

Expectations of Asian Development Bank from EESL projects

ADB has extended a US$ 200 million loan for EESL to implement various demand-side energy efficiency projects in India. The confidence that the Varanasi DISCOM has obtained, is thanks to an ADB assisted pilot running in a village with smart meters installed in 5,000 households.

ADB finds the Varanasi smart metering project to be a win-win solution for several stakeholders, including the consumers as well as the discoms. Dr. Yongping Zhai, Chief of Energy Sector Group sustainable development and climate department of ADB, is considering scaling up the Varanasi project through a proposed second plan. ADB expects that EESL smart metering projects would bring benefits to all key stakeholders.

Rural consumer would enjoy improved power quality, shorter outage durations, and flexible payment options (prepaid or post-paid). These smart meters provide real-time information about the electricity usage through a mobile app, so consumers can detect any wastage and optimise electricity consumption to save money. These meters also prepare rural households for distributed and decarbonised future of energy systems.

With more rural households installing distributed solar photovoltaic panels on their rooftops, ADB expects that the smart meters be used for net metering – where surplus solar power can be transferred to the grid, allowing customers to offset the electricity bills. ADB would also like that the smart meters be used for time of use tariffs.

ADB expects accurate billing from the DISCOMs. The smart meters can bill accurately without human intervention and can be remotely set to disconnect customers who fail to pay bills on time. With this support, ADB expects the DISCOMs to improve their billing and collection efficiency and reduce AT&C losses from around 30 per cent to 15 per cent. In addition to tracking losses, ADB would like that DISCOMs monitor other parameters such as power availability, voltage fluctuations, reliability of restoration, and load redistribution based on results monitored from the smart meters.

Besides this, with smart meters, DISCOMs can predict power purchase requirements and thus can use energy more optimally. Smart meters are affordable, costing about US$ 35 (around Rs 2,560) to buy and another US$ 35 to deploy for five years. This is fully paid as an initial investment by EESL, which in turn gets Rs 100 (US$ 1.3) per meter per month from local distribution companies out of savings realised over the expected eight-year lifespan of each device, generating a 14 per cent return on equity for EESL. Dr. Zhai, terms it as an innovative business model – invest-own-operate – that can be replicated elsewhere in India and many other developing countries that suffer from high system losses, as it does not burden local distribution companies upfront.

Smart meters benefit the whole society through reduced carbon emissions and positive environmental impacts. ADB is thus supporting EESL’s smart metering initiative that is part of a larger low-carbon energy transition program by the Indian government.

Is the smart metering initiative by EESL showing results?

EESL’s smart metering initiative under UDAY scheme hoped to address the ailing

operational and financial health of DISCOMs. It mandated the installation of smart meters – for consumption above 500 units per month (by December 2017) and above 200 units per month (by December 2019).

The scheme aimed at improved data tracking and monitoring in order to reduce AT&C losses. But despite several initiatives and mandates under UDAY, as per CSTEP, Bengaluru, the uptake has been substantially low. In Karnataka for instance, under the 500 units/month category, only 610 of 137,456 consumers (0.4 per cent) targeted have installed smart meters. Similarly, in the 200 units/month category of consumers, only 1,876 of 2,91,650 consumers (0.6 per cent) have installed smart meters.

DISCOMS attribute reasons, such as high cost of implementation, lack of skilled manpower and data integration and inter-operability issues, to the slow uptake. Whatever be the reason, the slow uptake means that the smart meters are geographically widely dispersed. Hence, they pose considerable operational, logistical and project management challenges for both DISCOMs and the implementing agency. Since the meters are dispersed across multiple feeders and widely scattered, they do not allow actual auditing of energy consumption. Without a proper audit mechanism, it is not possible to calculate the AT&C losses at the feeder level or consolidate them at the section office level. The absence of consolidated data at the feeder level affects the efficiency and accuracy of billing and collection. Therefore, the objective of reduction the losses are not met.

Feeder-wise deployment as an implementation solution

Instead of targeting the consumers based on their consumption category, if the smart meter installation is carried out by picking up an entire 11 kV feeder at a time, then audit, AT&C loss calculation, and reduction of losses, all become possible over the feeders thus targeted.

ISGF also promotes such a deployment of smart meters for all consumers associated with a feeder. Reduction in AT&C losses with such a deployment has been experimented and verified by CESC in Karnataka, EPDC of Andhra Pradesh in Vishakhapatnam, consolidating data at the feeder level reduces not only the implementation cost but also allows the DISCOM to understand challenges to loss reduction specific to the area. More importantly, it will help DISCOM witness the improvement in efficiency that smart metering brings in and thereby motivates them to take up bigger projects. An impact assessment of the feeder level project reveals the gaps therein which help DISCOMs assess whether the project can achieve the desired objectives. These need to be taken into consideration and addressed before a large-scale roll out of the project for best results.

It is believed that the implementation solution described above is consistent with the expectations of the project planners (EESL) and funding agencies (ADB). Only when the DISCOMs act and implement accordingly will they be able to reap the benefits as per the full potential of the smart metering project. Else, DISCOMs would find yet another technology to blame for their poor performance.

A powerful tool in the form of smart metering is available to the DISCOMs. Now it should be used wisely so that ADB’s loan gets repaid from the savings in losses.

Application of blockchain technology to metering

The Reserve Bank of India (RBI) issued a circular in April 2018, prohibiting all financial entities regulated by RBI, from dealing in Virtual Currencies (VCs) or cryptocurrencies including Bitcoins. This meant the end of road for Bitcoins as well as VC exchanges (Zebpay closed down).

RBI’s crackdown on VCs was aimed at combating money laundering and terror financing. However, RBI itself is considering issuing its own digital currency called Lakshmi. The government is thus looking to develop and encourage our own research and development of blockchain technology. This is a good sign since this would build an ecosystem where cryptocurrencies would be central, and once its potential is felt, then there is no going back. However, being essentially decentralised ledgers, bitcoins lose meaning if centrally controlled by RBI.

What is a blockchain?

Before its use in cryptocurrency, it had humble beginnings as a concept in computer science — particularly, in the domains of cryptography and data structures. A very primitive form of the blockchain is the hash tree or Merkle tree. This data structure was patented by Ralph Merkle in 1979, and functioned by verifying and handling data between computer systems. In a peer-to-peer network of computers, validating data was important to make sure nothing was altered or changed during transfer. It also helped to ensure that false data was not sent. In essence, it is used to maintain and prove the integrity of data being shared.

In 1991, the Merkle tree was used to create a “secured chain of blocks” — a series of data records, each connected to the one before it. The newest record in this chain would contain the history of the entire chain. And thus, the blockchain was created.

In 2008, Satoshi Nakamato conceptualized the distributed blockchain. It would contain a secure history of data exchanges, utilise a peer-to-peer network to time stamp and verify each exchange, and could be managed autonomously without a central authority. This became the backbone of Bitcoin.

How blockchain works?

  Blockchain keeps a record of all data exchanges — this record is referred to as a “ledger” in the cryptocurrency world, and each data exchange is a “transaction”.

  Every verified transaction is added to the ledger as a “block”.

  It utilises a distributed system to verify each transaction — a peer-to-peer network of nodes.

  Once signed and verified, the new transaction is added to the blockchain and cannot be altered buying and selling power using blockchain.

The blockchain technology (BCT) has found its application in the electricity sector. For buying and selling power, blockchain offers the following benefits:

  Customers can turn into service providers by selling surplus energy produced through solar roof tops; opens up entrepreneurship avenues for many.

  Process of energy generation and distribution becomes more direct between

  suppliers and consumers requiring minimum interface and no middlemen. This will, among other things, reduce bills.

  Eliminates scope for any error or manipulation of the bill amount.

Using BCT, one can sell the surplus power generated from his solar rooftop to a neighbour rather than to the grid without the involvement of any middleman, including a DISCOM. All this can be done in a completely decentralised system, automatically balancing demand and supply and transacting against a set of pre-coded set of rules.

UP government has come forward to implement blockchain technology for renewable energy generation and supply. Critics believe that executing the idea might not be that easy in UP which had not been able to fully operationalise the open access system (where buyers have a choice) even 15 years after it was provided in the Electricity Act. They feel that UP needs to tackle various legal and regulatory issues before the blockchain idea is put to practice.

The UP Electricity Regulatory Commission (UPERC) feels otherwise and organised a conference in October 2018. UP plans to produce a lot of solar power that would make it the greenest pasture for investment in the renewable energy and distribution sector. Hence, BCT is expected to play a significant role in extending the benefits of these investments and a change in ecosystem to the consumers. During the seminar, UPERC sought and compiled information on:

  Business model for increasing metering billing & collections in rural area using BCT.

  Use of BCT to scale up distributed rural energy generation and supply in rural area.

  Use of BCT in providing quality reliable uninterrupted power by mini grids having different generating technologies (solar, wind, biomass).

  Regulatory framework for creating enabling environment for distributed renewable energy developers.

Blockchain enabled smart meters

Implementation of the idea requires smart meter technology and blockchain with inbuilt smart contract functionality. These blockchain-enabled smart meters know when to buy and sell power and record all the transactions between various households. The payments will be made using traditional methods or cryptocurrencies in a transparent, secure and decentralised set up without any intermediaries.

Conclusion

Year 2019 would see consumers having access to the best technological tool to reduce AT&C losses, namely blockchain enabled smart meters. To promote renewable DERs, it is necessary to create an ecosystem using such meters. Small pilots need to be implemented and tested. Private energy players should be given an opportunity by providing essential infrastructure like micro grids, smart meters and a blockchain platform. They can then act as an aggregator to bring all energy producing points in a village or a community together. Such a move would promote competitive pricing and make energy more accessible for everyone in the country.


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