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Blockchain for the Energy Industry

June 4, 2018
Blockchain has appeal in our industry because we are being asked to handle increasingly complex transactions

I admit that, when I first looked into cryptocurrencies, I found them to be quite confusing. Of course, that is the norm when new technologies and processes are introduced. The premise behind cryptocurrencies is to create a trading medium with the middlemen removed. There is a lot I don’t understand, including how bitcoins are mined - although I understand it takes quite a lot of computing power.

Bitcoin is the most widely recognized cryptocurrency, but we also have Etherium, Ripple, Litecoin. Dash, NEM, Monero and Zcash. And there are literally hundreds more. So how does Blockchain enter into the picture? Here are few of the fundamental characteristics of blockchain: 

  • Blockchain is the foundational platform over which crypto-currencies are exchanged.
  • Blockchain is an encrypted, verified set of files that can be transferred without third-party intermediaries.
  • Blockchain networks can be used over the internet, but they can also be used over private networks
  • Money as well as many other assets can be exchanged instantly over blockchain
  • Big entrenched energy companies are investing in initiatives with blockchain as an enabling technology.  

In an article in the Harvard Business Review, entitled "How Utilities Are Using Blockchain to Modernize the Grid," James Basden and Michael Cottrell state, “Blockchain will become part of the answer to updating and improving centralized, legacy systems with a distributed hybrid system made up of a patchwork of both large power plants and microgrids powered by distributed energy resources such as solar power."

Blockchain has appeal in our industry because we are being asked to handle increasingly complex transactions between producers and consumers as more decentralized renewable energy sources come onto the market.  It is likely that many of our mainstream energy companies will create business units to take advantage of the opportunities that are made possible with blockchain. Let’s run through a few of the global blockchain initiatives being launched in our energy space.

Global energy giants E.On and Enel combined to be the first mover when last October they successfully traded power via a blockchain-powered platform without the need for a central intermediary.

Austrian utility Wien Energie, fresh from experimenting with blockchain applications in commodity trading, announced their intention to market end-customer products, focusing initially in Vienna.

Conjoule is developing a platform where local energy can be bought and sold. They are initially focused on serving customers in Germany. The platform is designed to make the energy market more transparent and it should ease entry of new domestic market participants by acting as a matchmaker. Conjoule received $5.3 million in early funding from Tokyo Electric Power to support peer to peer trading.

Grid + is another entrant that is based in the United States. Grid+ intends to use blockchain to speed peer-to-peer transactions bringing alternative energy sources into the marketplace. They will be a Texas retail electric provider focusing initially in Austin, providing customers with access to lower energy prices. Grid+ is targeting the second quarter of 2018 for the launch of its retail company with a target of 100,000 Texas customers by the end of 2019.  The Japanese utility Tokyo Electric Power Company has signed a Memorandum of Understanding with Grid+ and should be able to provide Pacific region market exposure to the Grid+ platform.

Austrian startup Grid Singularity is using blockchain technology to develop a decentralized energy exchange platform that can host applications ranging from validating electricity trades to monitoring grid equipment, in part because such a platform has the potential to prolong the life of equipment, improving both large and small power-generation system operators’ earnings.

BP and Eni have been running scenarios using blockchain to track gas trading. Enel and E.on have also conducted electric energy trials using the Ponton blockchain platform.

Various industry consortia are emerging to bring some degree of consensus to the development of blockchain. Major players in Europe launched the Enerchain initiative. Participants include E.On, Total, Wien Energie, EDF and Vattenfall. Their goal is to create a decentralized European marketplace for energy trading.

And now Spain has launched what appears to be the first national consortium that is focusing on many aspects of commerce including energy.

Named Alastria, this initiative is led by leading Spanish banking, energy and telecommunications companies, among others. This non-profit consortium describes itself as “the world's first regulated national network based on blockchain.”

The aim of Alastria is to accelerate the digital transformation of industry and business by providing a common collaborative platform on which participants can create digital tokens to drive the development of new products and services.

The more than 80 participants in Alastria also include vendors, consultants and academic and research organizations. Energy company participants include Endesa, which last year opened a blockchain lab, Iberdrola and Fenosa.

The driver in Spain as elsewhere is to re-invent the use of the internet so that commerce can move forward  in a verified and secure way. In Spain, the participants are looking to create a national standard that allows all industries along with the developer community to work from the same platform.

Probably the biggest driver to move to blockchain is the inherent security of the ledger based model. Clearly our industry – along with many others must develop secure means to transact business on line and in real time.  

We are now reaching a consensus that a new distributed energy future is here. We must now develop secure platforms upon which to transact exchanges over our existing power network.

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