How can blockchain play a role in the energy sector? Consider one use case, the tracking of renewable energies for the provision of guarantees of origin. In some cases, such awards are made on the basis of forecasts but in Europe their issue is on the basis of the electricity provided and specifically the legislation stipulates that “disclosure is made only once” and double counting and double disclosure should be avoided. Blockchain, with its use of smart contracts and prevention of double spending, can cut through the complexity by utilising real-time generation data to make awards in real-time, potentially reducing the need for central verification agencies and enabling public administration agencies to cut their costs.
While this is one out of the large number of use cases of blockchain being introduced into the energy sector, it was selected for its “transformative power” by the Energy Web Foundation (EWF) for the development of a reference application – EW Origin – to run on the organisation’s EW Chain blockchain.
“Here we can lower the transaction costs, increase the transparency and reduce the complexity,” says Neil Pennington, Strategic Advisor to the EWF.
In an Engerati webinar now available on demand Pennington and Ian Kelly, Principal for Affiliate Engagement, give a high level overview on blockchain technology and its value and a progress update and roadmap on the EWF’s programme.
The EWF’s technology is comprised essentially of four layers, at the bottom the physical world, then the sector specific EW Chain blockchain, a middleware layer and the application layer on top, where implementers can develop and run their own use cases.
In addition to Origin, which includes an electric vehicle (EV) charging toolkit and is being used by companies including Equinor and Engie, other resources that the EWF has developed – that sit in the middleware layer – are Link, a set of architectures and standards for securely connecting physical assets to the blockchain, D3A, a market simulation tool, and an internet of things (IoT) connectivity solution under development with community partner Slock.it.
“Our approach has been based on two key ingredients, technology and community,” says Kelly, noting the Foundation has over 100 affiliates and growing.
Looking towards the current year’s developments, Kelly explains that the 2019 roadmap is driven by applications.
In addition to the Origin attribute tracking, other application domains that are being piloted and are expected to be commercialised in 2019 are EV charging for supply and settlement at charge points, virtual peer-to-peer trading for utilities to build new business models for individuals and communities, and demand response and virtual power plants to enable small scale generators to participate in wholesale markets.
“These are the areas we are seeing most interest in the sector so far,” he says. “In the short term, the promise of blockchain is in simplification and saving time and money through that but then in the longer term to get to exciting things such as a transactive energy system.”
Kelly notes that these are driving several immediate key requirements for blockchain, notably high scalability, data privacy and secure IoT integration.
“While we have the ability on the blockchain currently to manage reasonable transaction volume expectations, we are aware of developments in the blockchain space and over time as we see how these function in practice, we expect to start incorporating them into future versions of the EW Chain,” he comments. “We are aware of the cutting edge of blockchain but not literally on it as we need to keep the reliability and security of the grid in mind and only incorporate proven technologies into the chain.”
Two further requirements are security tokens and token-curated asset and user registries, with the latter under development as a community resource.
“The hype of bitcoin and cryptocurrencies in general has done a bit of a disservice to tokens but ultimately a token is a way to secure an operation on the blockchain,” Kelly points out. “We have a token for this purpose for the EW Chain and we also believe that it will enable companies who wouldn’t otherwise become involved with cryptocurrencies to experiment with this digital asset.”
For example, in the functioning of the registries, in order to build trust in such shared, decentralised databases, tokens would be used by participants to ‘vouch’ for the authenticity of data reads and writes.
Looking ahead companies are clearly starting to develop applications and think through the business models that can be built around them that will allow them to unlock value and more applications are expected to emerge over time.
But it is not the technology that is the challenge in advancing blockchain, says Pennington. “We see the bigger challenge as the mindset towards blockchain. As utilities face new roles the incumbent technologies that have been used to run the centralised systems risk getting in the way of enabling the new energy system and so it is important for people to trust and use this new technology and find out what contribution it can make.”