The way the world produces and consumes energy is changing fast.
- Sustainable energy sources such as solar and wind are on the rise.
- Smart meters have become an industry standard, and deployments are growing across the globe.
- Hybrid and electric vehicles have gone mainstream, giving rise to a new breed of powerful car batteries capable of storing and sharing energy.
There's more.
Internet of Things solutions (IoT) are enabling compelling new business models that support an increasingly complex energy infrastructure.
Let's see the present picture and what can be done to reap the benefits of new technologies, step by step.
How is the IoT changing the energy ecosystem?
We're in the midst of an exciting smart energy transformation.
New stakeholders join the energy marketplace as they install solar panels on homes and businesses and purchase electric vehicles where power is stored.
The IoT is a vital driver of this smart grid evolution, enabling innovative ways to leverage devices, data, and remote access to create new business opportunities for various stakeholders.
The bad news?
The supporting power infrastructure is stuck in the past.
To capitalize on the new energy landscape and "Uberize" power production and consumption, the physical grid needs to evolve.
Without it, the world will never realize the "Internet of Energy" and the smart energy ecosystem's full potential.
How do we "uberize" energy?
It takes some doing changing a well-established, 100+-year-old industry!
- Many of the current energy processes and rules are too complicated and lengthy for the new data-driven, decentralized energy landscape from a commercial perspective.
- Energy plans and agreements are defined in a relatively rigid, process-led environment, where all actors and regulators must agree.
- Market roles are tightly defined, as they have been for decades.
Unfortunately, the existing system does not incentivize evolving business models.
However, integrating new sustainable distributed energy resources (DER) into the existing grid, designed to distribute centrally generated energy, is as appealing as it is challenging.
Tapping energy from renewable sources is generally more cost-effective than generating energy from fossil or nuclear sources, which makes the trend very compelling; and, once started, irreversible.
So, what needs to change for this exciting evolution to occur?
To better understand, let's examine changes one step at a time.
Step #1: Separate infrastructures
Currently, grid operators control the entire energy transaction environment, collecting money from millions of households and distributing funds to the power plants.
This system has no way of including and using regional, distributed intelligence provided by new energy assets and the IoT.
There is a growing need to decouple providing power lines from gathering information from new assets - like solar panels on the grid's edge.
In other words, we are moving toward divorcing the way we finance physical infrastructure from the management of energy data and IoT deployments that enable intelligence in the field.
More flexible infrastructure can bring in added revenues for both operators and asset owners.
Let's explain.
As people buy energy assets for their own homes and buildings, they become more independent of the energy infrastructure.
Consequently, grid use patterns are changing, and operators become consumers of big data users without being obliged to gather and manage all the data originating on the consumer side.
This is an essential evolution because operators can now aggregate information from many sources and use artificial intelligence (AI) for predictive maintenance, outage prevention, and improved service quality.
Step#2: Implement IoT-based smarter energy solutions
The IoT and connectivity are at the center of the smart energy ecosystem evolution, and both must be trusted.
By connecting meters and new assets to the Internet, ecosystem participants can use their energy assets to become part of the revenue stream.
The result?
This process brings clear benefits for energy providers, enabling operators to manage over- and under-capacity intelligently – and avoid extensive investment in grid capacity.
However, grid operators must trust the data they receive from these assets.
The information offered by new entrants needs to be as reliable as the data produced by a grid asset that operates under full control and ownership of a grid operator.
With trusted data, grid operators can identify participants taking care to adapt their usage to local energy generation availability and reward them appropriately.
What are the security challenges specific to smart energy?
For a flexible smart energy management system to be successful, we need end-to-end security and privacy designed into the ecosystem to create a sustainable, trusted transaction environment.
Multiple layers of digital security are required to achieve this goal, including:
- Building a trusted and flexible transaction environment
- Strong encryption and secure authentication for data, devices, networks, and platforms
- Trusted key provisioning
- Security life cycle management
All data flowing through the system needs strong encryption and authentication technology to ensure integrity.
As the smart energy market grows increasingly complex, many different stakeholders and actors need access to encrypted data.
And each party needs access to different data sets. For this to occur, the identity of each stakeholder needs to be authenticated and verified.
Ecosystem participants need to trust implicitly that players are who they say they are.
And once authenticated, players need keys to access specific data required to play their part in the ecosystem.
For instance, a homeowner needs access to their energy usage and production information along with specific data from grid operators.
Grid operators, on the other hand, need access to energy use and production data from all homeowners in a specific region as well as substations and other equipment.
These access rights are dependent on security policies and keys provisioned throughout the ecosystem and over time.
These policies and access rights need to be securely managed and updated over time without expensive service visits to update meters and equipment in the field.
For instance, when a new homeowner moves into a home with a solar installation, that person needs to manage their energy usage and production quickly and easily.
Besides, the ecosystem needs a flexible and trusted transaction environment visible to all parties involved.
So, how do we address the four levels of security goals for the evolving smart energy ecosystem?
Let's break it down by level.
Level#1: How do we ensure a trusted and flexible transaction environment?
This requirement could be achieved through the advantages of blockchain technology and advanced ID management solutions for assets, platforms, and people.
Blockchain itself is the trust-building entity for processing Information allowing users to see and fundamentally trust data that devices publish to the blockchain.
Also crucial in building end-to-end trust is authenticating the source and integrity of the data inserted into the blockchain.
What is blockchain?
Blockchain is an example of a distributed public ledger, 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 particular type of transaction holds a copy of the entire ledger.
The cool thing is that 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-security levels.
The chronological chain of transactional information is created so that each block added protects the information in the previous one.
This ensures that no party in the system can modify or tamper with the data, thus guarding fraud, theft, hacking and other misdemeanors.
How does blockchain secure transactions?
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 provides 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.
Level#2: How do we protect devices, data, networks, and platforms?
Another requirement of a trusted and booming shared energy economy is that devices, data, networks, and platforms are 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 millions of customers and privately-owned energy assets is accurate and reliable.
Blockchain technology alone can't prevent original data from being manipulated or compromised before communicating over the Internet.
For that, basic security infrastructure comprising hardware and software is needed to protect the system from physical and digital tampering.
Level#3: What hardware for end-to-end security architecture?
Hardware components, known as Hardware Security Modules (HSMs) and Secure Elements (SEs), can be embedded in connected energy systems providing an added layer of protection, data integrity, and defense against cyber-attacks.
Secure Elements ensure that device data is stored safely 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 – another essential element to a trusted ecosystem.
Level#4: What software for end-to-end security architecture?
Strong encryption and authentication that use well-vetted algorithms and end-to-end security solutions are paramount to the ecosystem's success.
These solutions protect energy equipment and smart metering devices and secure networks while preventing fraud in the system.
The 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.
This solution will ensure that data is received from a legitimate source while safeguarding against data tampering and fraud at all points in the ecosystem.
Besides, secure technology is needed to facilitate dynamic key and credential updates and authorizations, without costly service visits to update equipment in the field.
What does Thales have to offer the Smart Energy market?
A lot!
Leveraging decades of IoT and digital security expertise, Thales offers a suite of technology solutions to Connect, Secure, and Monetize the evolving smart energy ecosystem.
To know more about smarter energy solutions, contact us today using the form below.