How Blockchain Can Open Up Energy Markets: EU DLT Expert Explains

Aside from the buzzwords of Web3, there’s a little less catchy but not so important concept Industry 4.0, which includes new and revolutionary drivers for the next-generation industrial landscape. And, especially in 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 Distributed ledger technology (DLT) could become a key enabling technology with enormous potential to impact and even disrupt the energy industry. This is not surprising given the five D’s of the digital green transition: deregulation, decarbonisation, decentralisation, digitisation and democratisation.

The report highlights key directions for blockchain in the industry, complemented by real-world case studies and insights from energy market stakeholders such as Volkswagen, Elia Group, Energy Web Foundation, and others.

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

Vlachos elaborates on the most interesting parts and concepts of the document, such as granularity criteria, the importance of self-sovereign identity, and the possible role of DLT in developing non-electrical energy consumption.

Cointelegraph: The report states that blockchain/DLT solutions have not been widely adopted by energy system stakeholders to date. Why do you think it is? Can you try to answer it?

Ioannis Vlahos: The main obstacle to the widespread adoption of blockchain solutions by energy system stakeholders has to do with the way energy markets are currently structured. Regulatory requirements for small-scale flexible assets such as residential batteries, electric vehicles, heat pumps, etc. in most countries around the world make it possible to participate in the energy market only through the representatives of aggregators.

Considering a more straightforward market design, flexible assets, regardless of their capacity, can bid directly on the energy market, which will minimize its marginal cost and will facilitate and facilitate the participation of small-scale distributed energy resources (DERs) in the energy market.

Entso-E and the European Association representing Distribution System Operators in June 2021, “Direct or Aggregate All Assets into All Markets” is recommended.

Blockchain technology provides the necessary tools to allow small-scale distributed energy sources to directly enter the energy market through the concepts of Decentralized Identifiers (DIDs) and Verifiable Credentials (VCs).

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

Four: Blockchain technology provides a way 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 important to provide the required audit trail in non-electrical supply chains such as natural gas, green hydrogen, etc.

Recently, Shell joined hands with Accenture and American Express Global Business Travel, with the support of Energy Network as a blockchain solution provider. Announce Avelia, one of the world’s first blockchain-based digital ledger and claims solutions for scaling sustainable aviation fuel (SAF).

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According to the report, the application of blockchain in the energy sector may be further explored and advanced.

What are the premises of this optimistic conclusion?

The main premise behind this conclusion is that despite the highly regulated energy environment, we have recently seen a large number of projects using blockchain technology in the wider energy sector. They do this by 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 Australian projects EDGE and Symphony).

The EDGE and Symphony projects are supported by state government agencies, the Australian Energy Market Operator and the Australian Renewable Energy Agency, and have implemented an innovative approach to integrating consumer-owned DERs, enabling them to participate in a decentralized-based future Energy Market Approach. In both projects, Energy Web’s decentralized blockchain-based digital infrastructure facilitates the secure and efficient exchange and verification of market participant data by assigning digital identities to participants.

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Furthermore, we cannot ignore the fact that blockchain technology is being cited in EU action plan for Digitizing The energy sector, with a focus on enhancing the adoption of digital technologies.

Four: The concept of granularity refers to the frequency with which data needs to be increased to enable traceability of energy commodities. Especially in the case of electricity, shifting energy consumption to a more granular (e.g. hourly) matching of monthly or annual matching of energy consumption with renewable electricity produced at a specific location is considered best practice as it minimizes Energy green cleaning.In this regard, Energy Web has partnered with Elia, SP Group and Shell to develop and release an open source toolkit for simplify 24/7 clean energy purchasing.

CT: Can you explain the concept of granularity that determines the need for blockchain in the energy sector?

CT: The report mentions self-sovereign identity, defining it as “an evolving paradigm that promotes individual control over identity data rather than relying on external authorities.” It’s easy to imagine this paradigm with online personal data, but How important is it to energy production and consumption?

Four: The importance of Self Sovereign Identity (SSI) for energy production and consumption stems from the fact that energy data of prosumers can be considered private data [Prosumer is a term combining consumer and producer roles by one individual or entity.] Especially in the context of the European Union, the granularity (sampling frequency) of smart meter data can be highly relevant to the privacy of the data under the General Data Protection Regulation. Furthermore, given the emerging business models that leverage prosumer energy data to facilitate the provision of energy efficiency and management services, it is even more important to empower prosumers to consent to the distribution, processing and storage of their energy data through the concept of SSI. A necessity rather than a luxury.