The DIY Grid: Blockchain and energy

What happened at the EU Blockchain Observatory Workshop on Energy & Environment, which took place online on 5 March, 2020.

We recently published the detailed Workshop reportof our Energy and Sustainability workshop, which took place on 5 March. Due to the COVID-19 pandemic, the workshop was held online. Below are some of the highlights. For a detailed look, please see the report.

P2P energy markets

The day started with a presentation from the University of Lucerne on how we might use blockchain to create peer-to-peer (P2P) energy markets. Today’s energy markets are run on a top-down basis, with a local power distributor providing energy to the grid, and consumers buying it. Yet today there are many more opportunities for individuals to create their own power, for example via solar cells. These “prosumers” do not have an open market in the status quo setup: if you want to sell energy back to the grid today, you have to go through the LPD, which as the only customer can set the conditions. Using blockchain, we could create P2P energy markets based around a decentralised auction house (DAH), in which consumers and prosumers can come together in a multilateral market. Such a market could provide prosumers with more incentives to produce surplus energy, catalyse decentralised energy production in general, and help local communities attain a degree of energy autonomy. 

Reinventing energy grids with P2P and decentralised technologies

The presentation was followed by a panel discussion on reinventing energy grids with P2P technologies. Among the points made was the fact that payments are a big issue. Despite an extremely heterogeneous landscape, it is desirable to have a common payments solution as that is easier for users. Trust is a big issue in local P2P energy markets too, particularly trust in the identity of actors on the network and the provenance of the data. Blockchains can help in certifying what has happened with an asset, which is an advantage. The real hurdles in P2P energy however are not technical but in the legal and regulatory framework. How do you handle liability, for example in the case of a blackout? How can you incentivise all actors to behave for the common good of the grid? 

Another important element that blockchain brings to P2P energy markets is smart contracts. But while smart contacts can automate payments, they cannot be used to actually deliver energy. Fairness is also a big issue in P2P energy markets. If only those who can afford solar panels, for instance, can join such markets, that will be seen as unfair. While P2P energy markets have a lot of promise, for example in promoting energy sustainability, it can be difficult to demonstrate short-term ROI. This can be a barrier to investment, and may be a reason why, despite a lot of experimentation, there are so few such markets in production now. That said, payments has been discovered as an excellent use case for blockchain in energy markets. Grid+ in Texas, for example, uses blockchain to make it less costly to collect payments, and to do so daily. This has been welcomed by many. There are many legal and regulatory issues that need to be settled before P2P energy markets can go mainstream. For one, it needs to be legally permissible to use personal energy usage data to bill someone. Regulatory sandboxes can be a good way for policy makers to understand these issues. Japan's sandbox for energy use cases, for instance, led to an amended law allowing use of energy data in other fields.

Presentation by the Energy Web Foundation

This was followed by a presentation by the Energy Web Foundation, a non-profit foundation  with over 100 members that is building open source blockchain solutions for the energy sector.  The EWF’s technology stack includes an Ethereum-based blockchain layer, two SDKs to enable building applications on that blockchain, and a set of seven dApps addressing energy use cases. The presenter showcased the two SDKs. EW Origin is an SDK to build track and trace solutions for renewable energy and trading of certificates. EWF is currently working with a Thai energy producer to use the EW Origin toolkit to build a decentralised, open market for renewable energy. EW Flux is an SDK that supports the otherwise complex process of onboarding and managing decentralised energy resources (DERs), for example solar panels on a residence, onto a grid. EWF is working on a pilot with E.IDS, a transmission system operator in Germany, and Sonnen, a German battery company whose batteries are located in individual homes, to develop a pilot for settlement via blockchain for grid services provided by Sonnen that allow excess energy to be stored on batteries located in residences.

How to accelerate use cases

The transition to a zero carbon society could become the largest markets on earth, and blockchain can help with the transition through the unique identification and tracking not just of objects and producers but also of outcomes. By being able to trade and monetise good outcomes, it incentivises good energy behavior. Making a significant market for this will however require public support. The idea for carbon markets is quite old. But they haven’t been successful so far due to a number of technological and governance issues. Blockchain could help dramatically on the technical side and parts of the governance side through tokenisation, trace and trace and enabling various forms of incentivisation and gamification. This could support the “re-internalisation of externalities”: with transparent, trustworthy track and trace people will be more aware of the impact of their energy behavior, and so may be more inclined to change it.

EU priorities for sustainability of blockchains

Sustainable energy is a big issue facing companies and also the public. There has also been a lot of bad press for blockchain due to the energy question. Discussion therefore took place around how we can assess the energy usage of blockchains, measure their improvement, and get that message out. This included suggestions for an EU ratings system for blockchain sustainability, an idea with its pros and cons. Another option is to fund more targeted research, so we have better facts and figures and therefore make better comparisons. By looking at real energy use per transaction, for example, we may be able to compare blockchains to other sectors, for example cloud providers. That could also put the energy consumption of blockchains into perspective.

Workshop details

Detailed reports on all our workshops, including links to the presentations and the video of the day, can be found on our Reports page. 

• The Workshop took place online on 5 March, 2020.
• There were 60 people registered for the event.
• Speakers and panelists included:
  • Alexander Denzler (Lucerne University of Applied Sciences and Arts)
  • Alexandra Schneiders (UCL)
  • Jun Takashiro (Japanese Ministry of Economy, Trade and Industry)
  • Ken Timsit (ConsenSys)
  • Etienne Gehain (Engie)
  • Meerim Ruslanova (EWF)
  • Pietro Grassano (Algorand)
  • Miroslav Polzer (Climate Chain Coalition & GLOCHA)
  • Maiko Meguro (European Commision)
  • Ana Karen (ClimateTrade)