Blockchain is emerging as a promising technology to manage the complex electricity grids of the future as it offers greater automation, better data management and higher security for the electricity industry, which is fast moving towards a more decarbonised, digitised and decentralised structure.

While the more publicised use cases centre on peer-to-peer electricity transactions, blockchain offers many more possibilities such as coordination of electric vehicle (EV) charging and management of renewable energy (RE) certificates. Blockchain is also very appealing to electricity system operators with its potential of leveraging the flexibility of distributed energy sources (DER) for grid balancing services. Some transmission system operators (TSOs) are already moving to embrace this digital transformation with blockchain-backed projects.

With this background, Global Transmission organised a virtual conference titled ‘Blockchain in the Electricity Grid’ on December 9, 2020. The conference focused on the applications, use cases, regulations and outlook of blockchain in the electricity grid. This led to a detailed discussion on  the perspectives of developers, network operators, utilities, technology experts, consultants, investors, regulators and research organisations exploring the future of blockchain in the electricity industry.

The key takeaways from the conference are presented below.

European Commission’s (EC)  perspective

Dr Lukas Repa, Senior Policy Officer, EC, shared the policy initiatives that the EC was undertaking for blockchain. He also highlighted the role of blockchain in the area of energy and electricity. He discussed how blockchain does require the construction of an entirely unique ecosystem, which makes it a particularly interesting and powerful application.

Dr Repa indicated that blockchain plays an important role in the portfolio of technologies in the European Union (EU) that are considered to be particularly future-oriented. Presently, EU faces a twin challenge, namely, supporting the digitisation of the economy and at the same time, delivering the green deal aimed at controlling climate change. In view of this twin challenge, the very first use of blockchain is that it can support the convergence of other technologies such as big data, artificial intelligence (AI) etc. This is because it is capable of acting as the pipeline that brings data from the fields where it is created to the ultimate filter. The second use of blockchain is related to supporting sustainability of supply chains by tracing and tracking.

Blockchain technology has been referred to in several communications in the European digital strategy, which was published in February 2020 and is valid till 2024. In particular, some of the blockchain initiatives undertaken by EU during 2017–2020 are as follows:

  • Joint Political Vision and Action (EU-MS): Declaration on the establishment of think tanks like European Blockchain Partnership (EBP) and the development of the European Blockchain Services Infrastructure (EBSI) for cross-border digital services of public interest and of an EBP regulatory sandbox.
  • Public-Private Dialogue: Involves creation of the International Association of Trusted Blockchain Applications (INATBA), a multi-stakeholder organisation to promote trust and interoperability at the global level.
  • Connecting Global and European Expertise: The EU think tank Blockchain Observatory And Forum (Eubo&F ) brings together leading global experts to identify obstacles, incentives and practical solutions to promote blockchain uptake.
  • Investing in EU Research, Innovation and Start-Ups: Through the Connecting Europe Facility (CEF) and H2020 programmes, the EU is co-investing in the most advanced digital infrastructure and the most innovative EU start-ups; new  investment scheme for AI and blockchain. 

Apart from these, the EU Blockchain Partnership, which has around 27 member states, has been playing a crucial role in bringing all policymakers together to develop standards and concepts that fit well in the European horizon. The ambition of this partnership is to have a single blockchain platform that is interoperable for the public service in EU in the next five years. Another important initiative by EU is the establishment of the International Association of Trusted Blockchain Applications, which is a neutral platform with over 160 companies as participants to discuss legislative and regulatory questions with the blockchain industry players and users. It is open to membership to any blockchain company in the world, and to the government of any country in the world.

In Europe, blockchain applications in the electricity sector have tested the potential of blockchains to disintermediate parties that stand in between consumers and businesses to trade electricity. Thus, the work so far has been done only for energy communities at the local level. However, the technology has also been used in several interesting pilots in the north of Amsterdam in the Netherlands. For instance, an initiative to connect roughly 50 households on houseboats to one another through a blockchain to enable the trading of rooftop solar power among households was highly successful in the Dutch state. Even in the US (in Brooklyn and New York), microgrids were used to connect local households with peer-to-peer trading marketplaces using blockchain technology to trade electricity directly with one another.

Several blockchain pilots in the energy space in Europe and the US have been deployed successfully, but so far they have failed to scale up. According to Dr Repa, it is a very complex endeavour to start peer-to-peer trading of electricity in general and challenges in scaling up are not specific to blockchain technologies. This is because in most EU member states, the trading of electricity is a legal monopoly of utilities. So a change in the regulatory framework would be required to allow the peer-to-peer trading between prosumers. Another issue with blockchain application relates to providing privacy to individual customers who produce and consume electricity. In view of these issues, there is an urgent need for a careful calibration of the business model serving electricity distribution.

Beginning in 2018-19, several new initiatives were seen where blockchain was used for renewable electricity beyond the peer-to-peer trading model. Under a very interesting initiative by Netherlands and Germany’s TSO TenneT, possibilities to balance the grids by storing surplus green power in the batteries of electric cars were discovered. The most promising fact about this initiative is that there is a potential to scale it away from a single company that is putting batteries in households to a wider ecosystem.

Promising applications and use cases I

Dr Ioannis Vlachos, Engagement Manager, Energy Web Foundation, gave an overview on Energy Web technology, its origin, and details on Energy Web Flex. Dr Vlachos discussed that electricity systems are experiencing major disruptions in the current transition towards supporting cleaner and distributed grids. There is thus a need for new technologies like blockchain that can play an important role in facilitating this transition in the energy sector. According to Dr Vlachos, customer spending on RE and DERs is on track to eclipse utility investment.

Energy Web, as a non-profit organisation, helps grid operators transform as per the latest energy markets and programmes. It develops and deploys a decentralised digital operating system for the energy sector in support of a low-carbon energy future.

In the energy sector, decentralised technology can unlock the most value in two domains. First is the origin, which is like a marketplace that allows buyers to meet with producers of RE on a single platform. Energy Web has developed EW origin, which is an open source software development toolkit that helps companies build their own renewable energy procurement platforms that solve various market pain points. These new procurement platforms are purpose built to meet the evolving needs of different types of renewable buyers such as corporate buyers, small and medium size enterprises (SMEs), cities and communities, households and EV  fleet owners.

Second is Energy Web Flex, which makes DER participation in electricity markets trusted by utilities as easy as online shopping for customers. This happens through several steps such as pre-qualification under which local grid operators determine which market or service DER types can be provided based on their technical characteristics; registration under which customers self-register via a mobile application; market operation and activation; and delivery and settlement.

Michael Merz, Founder, Ponton, started with a discussion on blockchain projects undertaken by Ponton such as Enerchain, NEW 4.0, Share the Sun, ETIBLOGG, and Excursus: trading of ball bearings.

Under the company’s signature Enerchain–Decentralised Wholesale Trading project, the platform is designed to be operated by a trading robot, which eliminates the broker or exchange and in turn reduces the cost. In addition, traders are allowed to define their own products and blockchain serves as a decentralised infrastructure for trade execution. The process is designed in such a way that whoever participates in the market has a view on the different orders that have been submitted for products like intraday power or intraday gas. The major challenge in scaling this project is that it requires a large investment as the designed platform would compete with existing platforms that are relatively less capital intensive.

Another project, NEW 4.0, was executed for four years in Germany. The focus of the project was on flexibility because Germany has heavy RE production in the north, whereas industrial consumption is in the south, resulting in frequent congestion in the north to south transmission infrastructure . The project involved setting up a decentralised marketplace, which allowed flexibility providers to participate in end to end trade.

According to Mr Merz, blockchain is not needed in more that 98 per cent of the energy-related cases he has experienced in the past. This is because decentralised trading scenarios rarely seem to require blockchain as the elimination of a third party (broker) is the actual intention of the system. In general, the energy sector is highly regulated and will be for the foreseeable future. There will always be authorised, trusted, single third parties (grid operators), so a centralised approach is more natural.

Promising applications and use cases II

Dr Thomas Brenner, Chief Technology Officer, OLI Systems GmbH, discussed that transparent and automated distribution grids are crucial as with more green energy production, additional distributed generation is added, predominantly within distribution grids. In addition, sector coupling adds additional (flexible) loads to the distribution grid and complex processes involving several stakeholders such as asset owner, operator, aggregator, DSO and TSO require extra attention. Moreover, using ripple control is no longer an option. Any solution aimed at addressing these issues should be bidirectional, transparent, secure, fast, scalable and economic.

According to Dr Thomas, applications in electric mobility and green power tracking are set to hit the market in 2021. Grid management and energy trading applications will soon start to leave the point of control (PoC) level and demand-driven adoption will be witnessed. Future solutions will be fitted into existing frameworks, both from an application and an information technology (IT) perspective.

Mattia De Vecchi, CEO, Prosume, described how energy consumption models have greatly evolved and are now characterised by freedom of choice from regulated to deregulated markets and energy account access from product to service; and energy consumption awareness dominated by digital and environmental awareness.

The evolving consumer of RE communities has presented several opportunities for the stakeholders of the energy sector. Some of these are demand-side flexibility, decentralised power needs, and support to the grid. These opportunities come hand in hand with several challenges such as higher complexity, confusion and mistrust.

As per Mr Vecchi, blockchain-based solutions for RE communities should be characterised by digital sovereignty, flexible infrastructure, interoperability and immutable data storage. This can be achieved through providing software tools (toolkit) that can regulate energy data management and settlement procedures; automate the process of service and data exchange; and support demand/response for more flexibility and grid balancing.

Grid operators’ response – plans, projects and issues

Kai Schmied, Innovation Manager, Elia, shared that new technologies enable an efficient shift from a centralised to a decentralised and consumer-centric power system. Elia Group started the distributed ledger (DLT Lab) to explore the potential of DLT. A recent decentralised identifier (DID) project undertaken by Elia is with Energy Web under a multi-year partnership. The project focuses on testing and validating the technological promises of enterprise-grade, blockchain-based solutions for supporting the energy markets Elia Group serves through its subsidiaries Elia (Belgium) and 50Hertz (Germany).

Elia is also exploring new ways of integrating small-scale flexibility. It is working on building a dynamic registry to support the identification of EVs and charging poles to

improve data availability, increase trust and allow stakeholder coordination. Elia’s DLT Lab builds a decentralised platform to uniquely identify vehicles and charge points for power market integration. It is also collaborating with car manufacturers and charge point operators to test and validate the concept in the near future.

Policy and regulatory challenges

Tara Waters, Partner, Ashurst, discussed that the current regulatory landscape in the European energy sector includes policies and strategies that revolve around the European Green Deal, Europe fit for the Digital Age, industrial strategy, energy system integration strategy and data strategy. The programmes and plans are about digital Europe and a circular economy action plan. The majority of directives and regulations aim at clean energy.

In particular, the regulatory landscape for European blockchain strategy involves policies and strategies such as European Blockchain Partnership; programmes and plans like Blockchain Observatory and Forum, European Blockchain Services Infrastructure, PILOT Regime and Regulatory Sandbox; and directives and regulations like markets in crypto assets regulation. The regulatory landscape for markets in crypto assets covers unregulated crypto assets, and token issuers and service providers; regulates authorisation, disclosures and governance and some energy sector use cases and activities.

Ms Waters also highlighted that in western Europe, there is consensus amongst stakeholders that a clear and strategic government policy is required to back the technologies to be taken forward by the private sector. The key barriers for the application of these technologies include lack of commercial incentives, access to capital, cost of transactions and lack of information for decision-makers. According to Waters, adoption of such technologies can be promoted in the energy sector with the help of active promotion, levelling the playing field, incentivisation model and regulatory certainty.

Summing up

In the energy sector, there is a need for technologies that can manage distributed generation, and blockchain is a well placed technology for this purpose. It can support various type of interactions, real time and trustworthy data exchanges between TSOs, distribution system operators and utilities. Another big potential of blockchain is that it allows electricity generators to act as a trust anchor for the production of renewables. However, to scale up its use there is an urgent need to change the regulatory framework, especially for peer-to-peer electricity transmission. There is also a need to end the legal monopoly of utilities and to open markets for a framework that is conducive to peer-to-peer trading.