A US-Austrian initiative to develop blockchain in the energy sector, the Energy Web Foundation, has completed its first goal with the securing of 10 affiliate companies supporting its first round of funding amounting to $2.5m.
The Foundation was established by the Rocky Mountain Institute (RMI) energy research organisation and blockchain technology developer Grid Singularity. Its aim is to develop an open source blockchain platform along with use cases for use in the sector.
At the time of the initial announcement, some of the supporting companies had been named – Engie from France, Stedin from the Netherlands, Tokyo Electric Power (Tepco) from Japan and TWL (Technical Works Ludwigshafen AG) from Germany.
The balance of the ten are the utilities Centrica from Great Britain, Sempra Energy from the US and SP Group from Singapore, the transmission system operator Elia from Belgium and oil companies Royal Dutch Shell and Norway's Statoil ASA.
Together these companies show the extent of interest in blockchain, both across the broader energy sector and across the globe, encompassing not only the energy delivery supply chain but also upstream multinationals.
“The main challenge of the electricity sector in the 21st century is to integrate more renewable energy into the grid in a cost-effective fashion in a context of largely flat or diminishing demand,” says Hervé Touati, Managing Director at RMI and President of Energy Web Foundation.
“The only way we know how to do this is by automating the demand side … (which) means automation at the distribution edge and integration of this automation with wholesale markets. We are excited by the potential of blockchain technology as an enabler to realise this vision.”
The development of the blockchain infrastructure is being led by Grid Singularity.
Together with its partner Ethereum developer Parity Technologies, Grid Singularity aims to bring the most advanced blockchain technology, addressing the limitations in terms of speed and transaction costs of the currently available blockchains, and enabling features that are focused on supporting energy-specific applications.
“The current test-network ‘Kovan,’ which is a proof-of-concept for the new consensus algorithm, has the ability to perform up to 1,000 transactions per second (tps) and is already used by many blockchain start-ups,” comments Ewald Hesse, Chief Executive of Grid Singularity and Vice-president of Energy Web Foundation.
“By embedding further state channel technology, we intend for our architecture to facilitate scaling to 1 million tps over the next several years.”
He adds that the ‘Polkadot’ design conceived by Parity Technologies enables the introduction of the concept of interoperability among multiple blockchain architectures, which should free users from technology lock-in.
In parallel with the development of an open-source IT infrastructure, Energy Web Foundation also will work on analysing use cases and organising task forces to push the most promising use cases into proof of concepts and commercial applications. In addition, it will incubate an ecosystem of application developers, and cooperate with regulators and standardisation bodies to facilitate deployment.
Collaboration with other technology providers who support the open-source approach also is being sought.
A new white paper from blockchain technology developer BTL Group points to a multi-billion savings potential for blockchain and its fit as a “foundational technology” in the energy sector.
BTL Group with its proprietary Interbit platform is running a pilot with Wien Energie in Austria, testing the potential of blockchain for cross-border gas trading.
“During this process, we have learned a great deal about how blockchain technology could benefit the energy sector by significantly increasing efficiencies and reducing costs,” comments Guy Halford-Thompson, CEO of BTL.
The focus of the white paper is mainly on the oil and gas sector but it is instructive more widely. Use cases discussed in the white paper cover the streamlining of operations, the Internet of Things and enterprise security.
As an example of the latter, the white paper quotes the Federal Bureau of Investigation’s 2016 bulletin warning on the threat of business email compromise, which cited ‘actual or attempted’ losses from this cause of $3.1bn globally since 2013.
In this, cyber criminals hack a vendor’s email account and intercept invoices sent as PDF attachments by a legitimate vendor, proceeding to change the destination bank account details before sending the invoice back on its way. Within the purchasing company, nothing is seen as amiss until the actual vendor makes noise about the missing payment, by which time the money is gone.
Blockchain’s immutable record and consensus mechanism work to avert this type of threat. If vigilance fails when a compromised invoice arrives, and a transaction is initiated, it would be flagged as invalid as soon as it was broadcast on the network.
Since the invoice account details would not match those in the record, a consensus would not be reached, and the transaction would not be executed. A lapse in diligence upon payment data entry would not be punished by a loss to cyber criminals.
The account discrepancy would be immediately apparent to all members on the blockchain, and an audit would uncover the attempted fraud.
Energy companies running blockchain pilot projects are taking first steps toward a restructuring of information management that will reform back office processes, supply chain management and security practices, the white paper states.