Blockchain Europe: Utilities pilot peer-to-peer energy trading

More than 20 European energy trading firms will conduct peer-to-peer trading in Europe’s wholesale energy market using blockchain technology.
Published: Thu 01 Jun 2017

2017 is turning into the year of the blockchain for the energy sector, with new projects across a range of use cases emerging with increasing regularity.

Indicative of the extent of activity now under way, there are currently some 40 startups operating globally in the energy blockchain, according to David Groarke, Managing Director of Indigo Advisory Group, who is tracking the space.

However, the technology is currently too slow to handle real-time market requirements and still needs to mature, which the core developer network estimate to be two to five years away.

Groarke points to two key differences for blockchain in the energy sector compared with the financial services sector, where the technology is also advancing rapidly.

One is the higher output volume, e.g. 1m transactions per second, to make IoT applications a reality. The second is around privacy concerns with the likelihood of permissioned-based blockchains emerging due to national, regulatory and privacy concerns.

With their focus on standards and interoperability, these are areas where consortia such as the Energy Web Foundation and the recently formed cross-industry Enterprise Ethereum Alliance should play a role.

<h2>P2P trading platform</h2>
<p>Pilot projects are another essential step in this process and what promises to be one of the largest, at least in terms of the number of participants, is now under development in Europe.</p>
<p>In November 2016, the German energy software and IT services provider Ponton demonstrated a blockchain European energy trade at the EMART event. Following this, 23 energy trading firms in the region have joined forces in order to undertake peer-to-peer trading on an enhanced version of the platform.</p>
<p>Ponton’s Enerchain framework allows trading organisations to anonymously send orders to a decentralised orderbook using encryption technology, which can be hit by other trading organisations, i.e. peer-to-peer without a central marketplace operated by a third party.</p>
<p>“The project practically shows the power of the blockchain by creating a marketplace that does not require a physically centralised platform,” explains Michael Merz, Managing Director of Ponton.</p>
<p>“Enerchain demonstrates what can be expected for the future in related areas of energy trading: peer-to-peer wholesale trading, flexibility trading in the regional grid, and synchronising grid management processes between TSOs and DSOs.”</p>
<h2>Blockchain Europe - collaboration</h2>
<p>Among the companies supporting the project are major players including EDF, Endesa, Eneco, Engie, Enel, E.ON, Iberdrola, Vattenfall and RWE.</p>
<p>Others include Alpiq and Axpo Trading from Switzerland, Salzburg AG from Austria, and Arge Netz, BKW, Capital Stage, ES.FOR.IN, Leipziger Stadtwerke and Uniper from Germany, as well as the hydropower company Statkraft and oil and gas giant Total.</p>
<p>These participants have committed to share the required development costs for a proof of concept with a full-scale prototype which is integrated into their existing trading infrastructure and supports a decentralised credit limit solution required for bilateral trading.</p>
<p>The variety of the participants is reflected in the broad range of traded products, including forward trades, spot trades, load curves and more exotic trades – all with physical delivery – as well as the focus on regional markets, states Ponton in a statement.</p>
<p>The aim is for Enerchain to support a broad range of energy products, including day-ahead, monthly, quarterly and yearly baseload for power and gas.</p>
<p>During the proof of concept, which will run until the end of 2017, participants will get significant exposure to the blockchain technology and find out whether a decentralised solution can support the trading volumes and transactional speed known from existing markets.</p>
<p>A crucial phase of the project will be during the fourth quarter when participants intend to start live trading on Enerchain.</p>
<p>Enerchain is powered by the open source&nbsp;blockchain engine, Tendermint.</p>
<h2>Blockchain for system operators</h2>
<p>Blockchain is expected to be a <a href=""><font color="#0066cc">key technology</font> </a>for the future digital transmission and distribution system operators (TSOs, DSOs) in Europe.</p>
<p>Several projects are targeting this area. For example, in Austria Wien Energie has launched <a href=""><font color="#0066cc">a pilot</font> </a>to test blockchain for gas trading.</p>
<p>The TSO TenneT has <a href=""><font color="#0066cc">launched pilots</font> </a>in Germany and the Netherlands to explore the integration of storage and electric vehicles to provide flexibility to the grid with a blockchain-based solution.</p>
<p>Another project exploring flexibility for the German market is the NEW 4.0 (Norddeutsche Energiewende – northern German energy revolution), of which Ponton is also a participant.</p>
<p>NEW 4.0 aims at balancing production and consumption locally in the Schleswig-Holstein and Hamburg region – the former being one of the largest net exporting regions for renewable energy and the latter a huge consumer right nearby. Due to grid capacity constraints, an increasing share of generation capacity has to be shed in high load situations.</p>
<p>Ponton is developing a smart marketplace to link flexibility providers and grid operators.</p>
<p>Ponton also says it is working at the request of a group of Austrian DSOs on a “radically new technology” to synchronise the grid balancing activities of TSOs, DSOs and aggregators.</p>
<p>The solution is yet to be tested in the field, but stated results of simulations include an integrated process that coordinates requesting of balancing power between TSOs, DSOs, aggregators and generation units within seconds and a reduction in the settlement time from more than a month to just 15 minutes.</p>