How blockchain can open up energy markets: EU DLT expert explains

Apart from the buzzing neologism of Web3, it is a slightly less captivating, but hardly less important concept for Industry 4.0, which includes the new and revolutionary drivers for the next generation of industrial landscapes. 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) can become a key activation technology and has a very high potential to affect or even disrupt the energy sector. This does not come as a surprise, given the five Ds of the digital green shift: deregulation, decarbonisation, decentralization, digitization and democratization.

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

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

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

Cointelegraph: The report notes that to date, no blockchain / DLT solution has been used by energy system stakeholders. Why do you think this is? Can you try to answer that?

Ioannis Vlachos: The main barrier to broad use of blockchain solutions by energy system stakeholders is related to the way energy markets are currently structured. The regulatory requirement, in most countries around the world, for small-scale flexibility instruments such as home batteries, electric vehicles, heat pumps and others makes it possible to participate in the energy markets only through their representation of an aggregator.

Assessing a more direct market design where flexible assets, regardless of capacity, can bid directly into an energy market, will minimize their marginal costs and will promote and promote the participation of small-scale distributed energy resources (DER) in the energy markets.

This need for direct participation of assets in markets was identified and considered to be an overarching 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 system operators published in June 2021, where “access to all markets for all assets either directly or aggregated” is recommended.

Blockchain technology, via the concept of decentralized identifiers (DID) and verifiable credentials (VCs), provides the necessary tools to allow this direct access to small-scale DERs to energy markets.

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

IV: Blockchain technology provides the means to create a reliable ecosystem of actors, where all information exchanged between assets, systems and actors can be verified independently using DIDs and VCs. This is extremely important to provide the necessary revision tracks in non-electrical energy supply chains such as natural gas, green hydrogen and others.

Recently, Shell, along with Accenture, American Express Global Business Travel with support from Energy Web as a provider of blockchain solutions, announced Avelia, one of the world’s first blockchain-driven digital book-and-requirements solutions for scalable sustainable aviation fuel (SAF).

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The report claims that the use of blockchain in the energy sector is likely to be further explored and advanced.

What are the premises for such an optimistic conclusion?

This conclusion is mainly drawn 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 either implementing use cases outside 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 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 them to participate in a future energy market based on a decentralized energy market. approach. In both projects, Energy Web’s decentralized blockchain – based digital infrastructure is used by assigning digital identities to the participants and thereby facilitating secure and efficient exchange and validation of market participant data.

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Furthermore, we cannot overlook the fact that blockchain technologies are referred to in the EU’s action plan for the digitalisation of the energy sector, with a focus on increasing the use of digital technologies.

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

IV: The concept of granularity refers to the need to increase the frequency of data that will allow traceability of energy products. Especially when it comes to electricity, it is considered the best practice to go from a monthly or annual matching of energy consumption with renewable electricity produced in a specific place to a more granular (eg hour) as the best practice since it minimizes energy green washing. In this connection, Energy Web, in collaboration with Elia, SP Group and Shell, developed and launched an open source tool to simplify 24/7 purchases of clean energy.

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

IV: The significance of self-governing 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 European Union and in the light of the General Data Protection Regulation, the granularity (sampling rate) of smart meter data can be strongly linked to the privacy of data. Given the emergence of new business models that use energy data from consumers to facilitate the delivery of energy efficiency and management services, it is more to enable the consumer to consent to the distribution, processing and storage of their energy data via the SSI concept. of a necessity rather than a luxury.