Blockchain platforms and applications have many potential applications in the energy sector - a well quoted study by German energy agency DENA suggests more than 110.
One use case at proof-of-concept stage is for peer to peer energy trading.
Earlier this year, Belgium-based energy technology company Ferranti developed an app in just three months to tap into a distribution system operator (DSO) sweet spot - next-day energy positions.
Ronnie Dibbaut, Subject Matter Expert MPO at Ferranti Computer Systems, explains that the blockchain-enabled solution is playing within the parameters of energy suppliers giving daily energy nominations to transmission system operators.
“The ‘portfolio view’ is a net view of the energy supplier’s portfolio,” explains Dibbaut. “It consists of decentralised producers and energy consumers looking to trade energy so we thought why don’t we let them play with each other.”
And the enabling technology to manage these transactions is Ethereum with its smart contract functionalities.
Ferranti’s app - which crucially positions the DSO as the middleman - allows producers and consumers to view the Smart Contract Rules, from energy off-take and energy injection prices to expected consumption and contract validity.
Smart contracts for transactive energy
While blockchain 1.0 was characterised by the deployment of transactions using cryptocurrencies, the definition of 2.0 extends the use case to transactions between two parties using the smart contract feature and may or may not involve digital currency.
Ferranti’s app was originally tested on the Ethereum blockchain application but Dibbaut says the company is shifting to HyperLedger, an open source platform designed for multiple industries which allows transactions to be made in real currency as opposed to virtual.
He says: “There are several reasons why we are moving platforms. First, we thought it was important to trade in currencies that are actually used in the energy market. And because the platform doesn’t depend on miners releasing bitcoins or other cryptocurrencies into the network, contract validation is faster and uses less computational power.”
Open source platform or private?
The proliferation of blockchain platforms in the market shows the race is on to develop networks that are more closely meeting the needs of business to business users.
The Energy Web Foundation this week made the source code public for the blockchain network that its members are developing specifically for energy sector use cases including smart contracts.
The test network - Tobalaba - is based on the Parity Ethereum client, which the foundation says is the “most advanced, fastest and lightest full-node Ethereum implementation”.
Speaking at an industry event in October 2017, Ewald Hesse, CEO of Grid Singularity and Vice President of the Energy Web Foundation, said the network also allows for “compliant secrecy” within the smart contract function.
The permissions features enable whitelisting of smart contracts and identities in a bid to meet regulatory needs of standardisation and maintaining security in an otherwise open network.
“You can take a whitelisted smart contract and interact with parties within it and the parties outside don’t know the final agreed prices,” says Hesse.
Energy smart contracts at scale
Privacy is a key consideration for the energy sector when making transactions such as peer-to-peer energy trading, says blockchain specialist Oriol Pujoldevall.
Pujoldevall, who leads a European Institute of Technology course on blockchain, says scalability is the other major obstacle for the sector to overcome.
“Initiatives such as the Energy Web Foundation’s will help accelerate the technology allowing it to scale up to support over one million transactions per second and offer compliance privacy.”
With the bitcoin network taking 15 minutes to complete a transaction and Ethereum around 10 minutes, this is one reason why Ferranti has chosen a private transacting environment, says Dibbaut.
“For an energy sector application like peer-to-peer trading, it is unlikely you’ll have 100,000 nodes all coupled on the network as the players are all big consumers. This means that transactions will be faster”
Hesse agrees with the need for scale and speed. He says that while Ethereum created the public blockchain platform, the company knew it couldn’t scale it “so that is why the Energy Web Foundation is taking it to next level.”
And what of the need for energy suppliers to back the right blockchain horse? Pujoldevall says the foundation’s chain is the only one designed to specifically address the needs of the energy industry. And besides solutions are emerging to make all blockchains interoperable.
“You have the likes of Polkadot that aims to be a bridge between blockchains. This will allow us to achieve a true global interconnection between users.”
Smart contracts in the blockchain - webinar
Ferranti’s Ronnie Dibbaut and blockchain specialist Oriol Pujoldevall will both present on an Engerati webinar - ‘Emerging technologies: Energy transactions using blockchain’. Register for free to watch it live or on demand.