How blockchain could open energy markets: EU expert DLT . explains

Aside from the new buzz of Web3, there is a less attractive but no less important concept in Industry 4.0, which includes the new and revolutionary drivers of the next generation industrial landscape. Especially when it comes to the energy sector, blockchain is at the heart of these technologies.

The authors of the recently published EUBlockchain Observatory report “Blockchain Applications in the Energy Sector” are convinced that distributed ledger technology (DLT) can become a major enabling technology with a very high potential to influence or even disrupt the energy sector. This was not surprising, given the five elements of green digital transformation: deregulation, decarbonization, decentralization, digitization, and democracy.

The report highlights key blockchain trends 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 to one of the report’s co-authors, EMEA commercial director at Energy Web and member of the EU Blockchain Monitor and Forum, Ioannis Vlachos.

Flachus detailed the more interesting parts and concepts in the document, such as the criterion of detail, the importance of sovereign self-identity, and the potential role of DLT in the development of non-electrical energy consumption.

Cointelegraph: The report notes that to this day, no blockchain/DLT solution has been widely adopted by stakeholders in the energy system. Why do you think this is? Could you try to answer it?

Ioannis Flachus: The main barrier to widespread adoption of blockchain solutions by energy system stakeholders is related to the way energy markets are currently regulated. Regulatory requirements, in most countries around the world, for small-scale flexible assets such as residential batteries, electric vehicles, heat pumps, etc. make it possible to participate in energy markets only by being represented by the pool.

Consider designing a more direct market where flexible assets, regardless of their capacity, can bid directly in the energy market reducing their marginal costs and promoting and enhancing the participation of small-scale distributed energy resources (DERs) in energy markets.

This need for direct asset participation in markets was identified and considered as an overarching principle in the joint report “Roadmap on the Evolution of the Regulatory Framework for Distributed Resilience” by Entso-E and European Associations representing Distribution System Operators published in June 2021, where it is recommended that “access to all markets for all assets, either directly or in aggregate.

Blockchain technology, through the concept of decentralized identifiers (DIDs) and verifiable credentials (VCs), provides the tools to allow such direct access for small-scale DERs to the energy markets.

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

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

Recently, Shell, in collaboration with Accenture, American Express Global Business Travel backed by Energy Web as a blockchain solutions provider, announced Avelia, one of the world’s first blockchain-powered digital book and claims solutions to scale the scale of Sustainable Aviation Fuels (SAF) .

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The report claims that the application of blockchain in the energy sector is likely to be explored and developed.

What are the reasons 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 either by implementing use cases outside the existing regulatory framework such as the Shell SAF project or with support from 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 Agency, implementing an innovative approach to integrating consumer-owned DERs to enable their participation in the future energy market based on decentralized approaches. In both projects, the decentralized blockchain-based digital infrastructure of Energy Web is used by assigning digital identities to participants thus facilitating the secure and efficient exchange and validation of market participant data.

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Moreover, we cannot neglect the fact that blockchain technologies are referred to within the EU action plan for the digitization of the energy sector, with a focus on promoting the uptake of digital technologies.

Fourthly: The concept of segmentation refers to the need to increase the frequency of data that will allow the traceability of energy commodities. Especially in the case of electricity, moving from monthly or annual matching of energy consumption with renewable electricity produced at a given location to more accurate (eg, hourly) is a best practice as it reduces the use of green energy. In this regard, Energy Web, in collaboration with Elia, SP Group and Shell, has developed and released an open source toolkit to simplify the 24/7 clean energy procurement.

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

CT: The report mentions identity self-sovereignty, defining it as “a growing model that promotes individual control over identity data rather than relying on external authorities.” It’s easy to imagine this type of model using online personal data, but how important is it to energy production and consumption?

Fourthly: The importance of SSIs for energy production and consumption stems from the fact that consumer energy data can be considered private data. [Prosumer is a term combining consumer and producer roles by one individual or entity.] Especially in the EU setting and in light of the GDPR, the accuracy (sampling frequency) of smart measurement data can be closely related to data privacy. Moreover, due to the fact that new business models are emerging that use consumer energy data to facilitate the provision of energy management and efficiency services, empowering the consumer through the concept of SSI to consent to the distribution, processing and storage of their energy data is more a necessity than a luxury.