A global collaboration of energy companies is working to accelerate the commercial adoption of blockchain technology in the energy sector. Centrica plc, Elia, Engie, Royal Dutch Shell plc, Sempra Energy, SP Group, Statoil ASA, Stedin, TWL (Technical Works Ludwigshafen AG), and Tokyo Electric Power Co (Tepco) have joined forces to support the Energy Web Foundation (EWF). EWF is a partnership between Rocky Mountain Institute (a US non-profit working toward efficient resource use) and Grid Singularity (a blockchain technology develop in the energy sector).
Blockchain technology is emerging as an innovation that is as disruptive as the Internet. By combining information technology, cryptography, and governance, blockchain permits direct transactions without the need for costly third parties. Applications that relate directly to energy may allow radical modernization, in the 19th century, regulated industry. From faster methods of clearing and settlement in the wholesale markets to secure peer-to-peer transactions at the distribution level, the applications relate to the entire energy value chain.
Blockchain technology reduces transaction costs by avoiding reconciliation and settlement steps. The unique attributes give the technology the potential to be a game-changer role in the energy sector. The added transaction efficiency means that blockchain technology can reduce utility bills and working capital requirements. As devices connected to the Internet of Things, blockchain technology can allow energy devices to transact with each other while enabling utilities and grids to vary renewable energy capacity at much lower cost.
“The main challenge of the electricity sector in the 21st Century is to integrate more renewable energy into the grid in a cost-effective fashion in a context of largely flat or diminishing demand. The only way we know how to do this is by automating the demand side—by allowing many more participants in the grid. That means automation at the distribution edge, and integration of this automation with wholesale markets,” Hervé Touati, a managing director at RMI and president of EWF, said. “We are excited by the potential of blockchain technology as an enabler to realize that vision. Blockchain will not be the only building block of the 21st Century grid, but it will most likely be a key building block. It also provides much higher levels of cybersecurity essentially for free—which addresses, as a by-product, one of the key concerns of utility executives when it comes to distributed energy resources.”
Grid Singularity is leading development of an open-source, energy-specific blockchain infrastructure. Grid Singularity will address limitations of speed and transaction costs in the current blockchains, and enable features focused on energy-specific applications.
“The current test-network “Kovan,” is a proof-of-concept for a consensus algorithm. It has the ability to perform up to 1,000 transactions per second (tps) and is already in use in blockchain start-ups. Along with development of an open-source IT infrastructure, EWF will also analyze use cases and organize to push use cases into proof of concepts and commercial applications.