Energy Sector Turns to Ethereum to Test Blockchain

"There's really a lack of specificity and understanding of what the use cases are."

Jesse Morris, a principal at the Rocky Mountain Institute (RMI), is a little critical of the discussions around blockchain technology trials in the energy sector. While plenty of companies have discussed the technology, outside of a handful of pilots, the use cases and their benefits have been vague, he argued.

To tackle that challenge, the RMI, a Colorado-based non-profit advocacy group for green energy, has established the Energy Web Foundation (EWF) in partnership with Grid Singularity, a Vienna-based blockchain startup. The foundation aims to foster blockchain projects in the energy sector for commercial deployment.

In early May, the foundation announced that a number of global energy companies had joined the initiative, including Centrica, Elia, Engie, Shell, Sempra Energy, SP Group, Statoil, Stedin, TWL and Tepco – firms that have pumped $2.5m into the EWF so far.

With the help of these companies, the RMI and Grid Singularity will whittle down the use cases to what they consider the most cogent and attainable.

"A couple of different research firms have identified something like 200 use cases of blockchain in the energy sector," Morris told CoinDesk, adding:

"We used that as a starting point and culled that list down to a much more manageable list where we have hypotheses around blockchain having commercial value."

The use cases

The EWF has already devised a number of applications in the energy sector that could benefit from the integration of blockchain technology, including customer billing, renewable energy certificates and peer-to-peer (P2P) energy sharing networks.

Morris dived into renewable energy certificates, which are used to trade green energy resources and are logged on registries that track the provenance of energy from renewable power systems.

"If you look at those systems, they’re basically screaming at the top of their lungs for a blockchain-based solution," he said.

Morris told CoinDesk:

"You have different power plants that are generating energy and that energy creates certificates, they're assigned attributes and they’re exchanged. The existing system has a lot of problems, [like] certificates being double spent, not everyone can access the marketplace, [and] there are lots of small regulatory challenges between all of them."

The RMI and the EWF believe a blockchain solution could more effectively track the provenance of these certificates.

Another use case the foundation highlighted is in P2P energy trading, where there is already some activity. In New York, startup LO3 Energy is collaborating with Siemens to create a grid that allows energy trading among peers.

In light of this, Morris envisions buildings wired up with IoT devices running on a blockchain allowing for the trading of excess renewable energy.

He explained:

“When we look at blockchain technology and we couple it with that vision of buildings being fully transactive agents with both peer buildings and different levels of the electricity grid, that’s where the real potential of a blockchain-based energy application lies.”

But all this work might first start with more prosaic but still crucial activities of the energy sector, such as customer billing.

By creating virtual identities on a distributed ledger for every building that receives power from the utility, energy suppliers could remove a lot of the human processes that are prone to error, said Morris.

Laying the foundations

In this initial stage, the EWF has opted to build on ethereum for the experiments.

"It's going to be a proof-of-authority-based blockchain that is starting with ethereum," Morris said. "However, we’re building this core tech that's going to be drawing upon different companies, different approaches, ideas and technologies."

The wheels are already in motion at Grid Singularity, the foundation's technical partner, to trial the consensus algorithm that would eventually power these energy sector blockchain solutions.

In particular, Grid Singularity is working with other ethereum-focused startups through the foundation such as Parity Technologies, Slock.it and blockchain consultants Brainbot.

While scaling a blockchain for energy usage will be a challenge, Ewald Hess, CEO of Grid Singularity, said that while the technology itself is feasible, the challenge lies in details like regulation and industry standardization.

However, the major energy companies joining the initiative should help overcome these hurdles, by providing not only capital, but some cohesion and consistency in formulating blockchain solutions.

Hess told CoinDesk:

"It is much easier to do this when you have a lot of decision-making companies at the table to agree on a specific smart contract which is issuing specific tokens. Then the other task you would need is whitelisting identities, that power plants are eligible to issue tokens, and whitelisting smart contracts."

This is a "political task", Hess remarked, referring to the highly regulated nature of the energy sector, which differs country to country.

Correction: This article originally identified the LO3 technology as being based on ethereum, which is no longer the case.

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