Ten energy majors back global blockchain initiative

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 EWF, a non-profit organization whose mission is to step up the commercial deployment of blockchain technology in the energy sector.

This support provides EWF, a partnership between the Rocky Mountain Institute, an independent, U.S.-based nonprofit organization focused on driving the efficient and restorative use of resources, and Grid Singularity, a blockchain technology developer specializing in energy sector applications, with the first round of funding, which amounts to $2.5 million.

The technology behind Bitcoin has the potential to play a game-changing role by allowing millions of energy devices (such as HVAC systems, water heaters, electric vehicles, batteries, solar PV installations) to transact with each other at the distribution edge, while supporting utilities and grid operators to integrate renewable energy capacity at a much lower cost.  Blockchain reduces transaction costs by keeping a single logical copy of transaction records, and can be used to reduce the cost of utility bills or the need for working capital in wholesale market gas or electricity transactions.

“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.”

As a cofounder of EWF, Grid Singularity is leading the development of an open-source, energy-specific blockchain infrastructure that will be maintained by EWF and supporting affiliates. Grid Singularity, together with its partner Parity Technologies, will bring the most advanced blockchain technology, addressing the limitations in terms of speed and transaction costs of the currently available blockchains, and enabling features that are focused on supporting energy-specific applications.

“The current test-network ‘Kovan,’ which is a proof-of-concept for the new consensus algorithm, has the ability to perform up to 1,000 transactions per second (tps) and is already used by many blockchain start-ups. By embedding further state channel technology, we intend for our architecture to facilitate scaling to 1 million tps over the next several years,” Ewald Hesse, chief executive of Grid Singularity and vice-president of EWF, said. “With the ‘Polkadot’ design conceived by Parity Technologies, we are also introducing the concept of interoperability among multiple blockchain architectures, which should free users from technology lock-in.”

Against the backdrop of the growing trend of distributed energy resources (DERs) in Japan as well as the rest of the world, Hirokazu Yamaguchi, Executive General Manager, Global Innovation & Investments at TEPCO, said: “We believe that blockchain technology has the potential to play a significant and critical role in the transition to a more secure, resilient, cost-effective, and low-carbon distributed energy paradigm, and that joining EWF will help us to offer new and improved services to TEPCO customers.”

As the activities and discussions about the technological aspects and business cases based on the new technology are heating up, there are still some institutional issues that for now remain unaddressed. In terms of using blockchain to enable PV plant operators to sell electricity directly to consumers, the pending question is how to collect taxes and surcharges when people opt out of the system.