How Blockchain Can Open Energy Markets: Says EU DLT Expert

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Besides the buzzing neologism of Web3, there is a slightly less catchy but hardly less important concept of Industry 4.0, which includes the new and revolutionary engines of the next generation industrial landscape. And, especially when it comes to the energy sector, blockchain is at the heart of these technologies.

The authors of a recently published EUBlockchain Observatory report “Blockchain Applications in the Energy Sector” are convinced that Distributed Ledger Technology (DLT) could become a key enabling technology and has very strong potential to influence, or even disrupt the energy sector. This is not surprising, given the five Ds of digital greening: deregulation, decarbonization, decentralization, digitalization, and democratization.

The report highlights key blockchain directions in the industry and complements them with real case studies and insights from energy market players such as Volkswagen, Elia Group, Energy Web Foundation and others.

TAUT spoke with one of the report’s co-authors, Commercial Director for the Europe, Middle East and Africa (EMEA) region at Energy Web and member of the EU Blockchain Observatory and Forum, Ioannis Vlachos.

Vlachos elaborated on the most intriguing parts and concepts of the document, such as the granularity criterion, the importance of self-sovereign identity, and the possible role of DLT in the development of consumption of non-electric energy sources. .

TAUT: The report notes that to date, no blockchain/DLT solution has been widely adopted by energy system players. Why do you think this is? Could you try to answer it?

Ioannis Vlachos: The main obstacle to the large-scale adoption of blockchain solutions by energy system actors is related to the way energy markets are currently structured. The regulatory requirement, in most countries around the world, of small-scale flexibility assets such as home batteries, electric vehicles, heat pumps and others only allows participation in energy markets through their representation by an aggregator.

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Considering a more direct market design where flexible assets of any capacity can directly bid on an energy market will minimize their marginal costs and promote and promote the participation of small-scale distributed energy resources (DERs) on energy markets.

This need for direct participation of assets in the markets has been identified and considered as a fundamental principle in the joint report “Roadmap on the evolution of the regulatory framework for distributed flexibility” by Entso-E and the European associations representing distribution network published in June 2021, where “access to all markets for all assets, directly or aggregated”, is recommended.

Blockchain technology, through the concept of Decentralized Identifiers (DID) and Verifiable Identifiers (VC), provides the necessary tools to enable this direct access of small-scale DERs to energy markets.

CT: How could blockchain be used to track non-electric energy sources, such as biofuels?

IV: Blockchain technology provides the means to create an ecosystem of trusted actors, where all information exchanged between assets, systems and actors can be independently verified through DIDs and VCs. This is extremely important to provide the audit trails required in non-electric energy supply chains such as natural gas, green hydrogen and others.

Recently, Shell, in conjunction with Accenture, American Express Global Business Travel with the support of Energy Web as a blockchain solution provider, announced Avelia, one of the first blockchain-powered digital booking and claims solutions in the world for scaling up Sustainable Aviation Fuel (SAF).

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The report claims that the application of blockchain in the energy sector will likely be explored and advanced.

What are the premises for such an optimistic conclusion?

This conclusion is mainly based on the premise that despite the highly regulated energy environment, we have recently seen a large number of projects in the broader energy sector that use blockchain technology. They do this by implementing use cases outside of the existing regulatory framework, such as Shell’s SAF project, or with the support of national regulators and market operators, such as the EDGE and Symphony projects in Australia.

The EDGE and Symphony projects are supported by state government agencies, the Australia Energy Market Operato and the Australian Renewable Energy Agency, and implement an innovative approach to integrating consumer-owned DERs to enable their participation to a future energy market based on a decentralized system. approach. In both projects, Energy Web’s blockchain-based decentralized digital infrastructure is used by assigning digital identities to participants and thereby facilitating the secure and efficient exchange and validation of market participants’ data.

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Moreover, we cannot overlook the fact that blockchain technologies are referenced in the European Union’s action plan for the digitalisation of the energy sector, which focuses on improving the adoption of digital technologies.

IV: The concept of granularity refers to the need to increase the frequency of data that will allow the traceability of energy raw materials. In particular in the case of electricity, the transition from a monthly or annual matching of energy consumption with renewable electricity produced in a specific location to a more granular matching (e.g. hourly) is considered. as best practice as it minimizes energy greenwashing. In this regard, Energy Web, in collaboration with Elia, SP Group and Shell, has developed and published an open source toolkit to simplify the supply of clean energy 24/7.

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CT: Could you explain the concept of granularity, which defines the demand for blockchain in the energy sector?

CT: The report mentions self-sovereign identity, defining it as “a growing paradigm that promotes individual control over identity data rather than relying on external authorities.” It’s easy to imagine this kind of paradigm with personal data online, but what does it matter for energy production and consumption?

IV: The importance of self-sovereign identities (SSIs) for energy production and consumption stems from the fact that prosumer energy data can be considered private data. [Prosumer is a term combining consumer and producer roles by one individual or entity.] Particularly in the context of the European Union and in light of the General Data Protection Regulation, the granularity (sampling rate) of smart metering data can be strongly associated with data privacy. Additionally, given the emergence of new business models that use prosumer energy data to facilitate the delivery of energy efficiency and management services, it is more of a necessity rather than a luxury.