Enel to the discovery of the blockchain

Published on Friday, 10 February 2017

Bloomberg has included the blockchain among the ten 'disruptive' technologies of 2017 capable of changing the face of industry, the economy and people's lives. The blockchain is a database of records distributed along a chain of blocks which is virtually invulnerable in terms of cybersecurity and allows exchanging information, ownership records and contracts between parties without a "trusted third party".

The blockchain was initially created to carry out transactions with the cryptocurrency bitcoin, but as is often the case with innovation, someone soon realised that its true potential is to be found in other applications linked especially to peer-to-peer exchanges.

An opportunity or just hype? Beyond cryptocurrencies

“The evolution of the blockchain deserves to be kept under close observation since both the technology and the ecosystem are still at an early stage. We do not know whether it will have a disruptive impact also in our business as usual or if it is just hype," explains Luciano Tommasi, Head of Start Up Initiatives and Business Incubators at Enel. “However, there are signs like the interest of large investors and numerous startups as well as technological macro-trends that are pointing toward distributed and virtualised approaches that have led us to believe that we need to keep an eye on this frontier to be ready to benefit from it and not be passively overwhelmed," he added.

Already in April 2016 Enel set up a multidisciplinary working group to explore the potential impact on our business involving, in addition to the Innovation function, a number of leading experts from the company's various business lines, including Global Trading, Grids, Thermal Generation, Renewables and the Italy and Spain Market divisions. This effort has allowed us to better understand the business rationales and led us to open a debate with other energy utilities to lay the foundations for possible common applications and possibly a technical standard in the field of energy.

A guide for utilities

The first opportunity for sharing ideas on the issue with other European companies came last November during the European Utilities Week and then materialised in early February with an event promoted by Enel in Amsterdam, titled "Blockchain Utility Meeting: which use cases to move beyond the hype." This 2-day workshop held at the offices of the Dutch startup incubator Rockstart brought together some of Europe’s major utilities, including EON, EDF, Innogy, CEZ, Fortum, Vattenfall, Iberdrola, EDP, BSE, Eandis, ACEA and Alliander, as well as the British TSO National Grid and Eurelectric and other big players from the IT sector engaged in the development of the blockchain, including IBM and Microsoft and a number of startups.

The main advantage of the blockchain is that it is a distributed database that has no need for an authority to guarantee the veracity of data and transactions (Distributed Ledger Technologies). Moreover, it does not have the burden of having to defend individual data items, since these are distributed across multiple nodes, each of which is a point of defence. In order to break the chain, you would have to compromise at least 51% of the nodes: to do so, for example in the case of bitcoin, you would need a computing power greater than that of Google and Facebook put together.

In this perspective, the blockchain, even in its most common form (payment systems), could have an impact on Enel in the future considering that it has over 60 million customers and every day it is engaged in trading on the commodities market.

Tommasi concluded, “Moreover, you can even imagine that in a world where machines are exchanging information autonomously and making decisions based on this information, new architectures based on or taking inspiration from the blockchain may emerge to support the management of complex infrastructures, such as power grids."

The Amsterdam event helped to leave all the hype aside and have a concrete discussion on this innovation to raise awareness and to understand, together with other utilities, how to approach this technological frontier using the same logic as the blockchain, i.e., not in a centralised manner, but by tapping the full potential of all the expertise distributed across the energy ecosystem.

Three applications for Enel

In its effort to switch from theory to practice, the Enel team has developed the functional specifications of three possible applications ("use cases") linked to grids (to verify the applicability of a blockchain architecture for managing medium and low voltage grids), trading (to create a peer-to-peer trading platform in the commodities and energy markets) and renewable energy (to enable payment systems on micro-grids). Enel is now launching these challenges to a number of startups to identify the partners who are best able to carry out development.