Taking Energy ExponentialFriday, August 24, 2018
Blockchain-based frameworks are the first step towards the unification of fragmented energy markets, said Energy Web Foundation chair Mr Ewald Hesse.
When you flip a switch at home today, the electricity that powers your lights and kitchen appliances most likely came from a regional or national grid. In the future, this may no longer be the case—the energy industry, historically a centralised one, is fast becoming much less one-sided. With the proliferation of distributed resources such as power generators, solar panels and storage systems, consumers have more options to choose from, and can even take on the role of energy producers who sell excess power back to the grid.
One technology in particular is poised to disrupt this increasingly complex energy landscape: blockchain, the decentralised, encrypted ledger that underpins cryptocurrencies like Bitcoin. “[In energy], blockchain has the promise to streamline transactions and cut transaction costs. It is also an enabler for consumers to trade energy directly with each other without the need for an intermediary,” said Ms May Liew, vice president of Open Innovation at energy utilities corporation SP Group. Ms Liew was hosting the ‘Future of Energy: Building the Grid on the Blockchain’ session earlier this month, an event organised by SGInnovate in partnership with SP Group.
Also addressing the audience gathered at 32 Carpenter Street was the event’s keynote speaker Mr Ewald Hesse, chair of the Energy Web Foundation (EWF), a non-profit organisation that is developing a public, open source blockchain to accelerate innovation in the energy sector. “[The energy market] is so ripe for disruption… what we are offering is a decentralised operating system—think of Google Drive without Google—where everyone is in control of their data and can share it peer-to-peer,” he said.
Exploring the world beyond the meter
As distributed resources become cheaper to maintain than older, centralised infrastructure, the energy sector is shifting away from the “old world behind the meter”, said Mr Hesse—that is, the value in the sector is being transferred from traditional grid assets to consumers.
Traditional systems for keeping track of energy production are error-prone, incur high transaction costs, and do not cater to small players like individual households. “There is no liquidity in any energy markets for small participants, although small participants are getting more and more generation and storage capacities,” explained Mr Hesse.
This is where EWF’s Ethereum-based blockchain comes in: it provides a new architecture with the decentralisation, privacy, regulatory compliance and scalability required for a more complex and diverse energy grid. Startups, corporates and other innovators can use the blockchain to build any number of energy-related applications; the end goal is to move the energy industry towards a cleaner and more efficient future.
Innovators can take [EWF’s] open source, free framework and build their proprietary business model on top of it... the goal of EWF is to tear down every entry barrier that exists in the energy market, to foster faster innovation.
Some 250 companies are already using the EWF blockchain to develop a wide range of applications, the majority of which focus on peer-to-peer energy. Other business models being explored include certificates of origin, asset refinancing, real-time asset valuation, electric vehicle infrastructure management and utility billing.
Take SP Group, for example: the corporation has been working with EWF to develop one of the world’s first blockchain-powered renewable energy certificate marketplaces, scheduled to launch in Singapore by the end of 2018. “Smart contracts enable a more efficient marketplace, lowering transaction costs. This also enables rack buyers and sellers of any size to participate, hopefully opening up and broadening the marketplace,” Ms Liew explained.
Mr Hesse, chair of Energy Web Foundation, on the right of Ms Liew, vice president of Open Innovation, SP Group
Scaling with a common denominator
Because energy markets today are typically diverse and fragmented, current business models tend to be linear, not exponential, continued Mr Hesse. By providing next-generation transaction architecture, EWF’s platform has the potential to change the scale at which business is done.
“All our affiliates—the startups, the energy companies which join us—agree upon the smallest common denominator, which is the transaction protocol. This is the first step towards the unification of all energy markets around the globe,” Mr Hesse explained. Alongside the market, regulations and standards surrounding blockchain will also start to unify, he added.
With blockchain, the energy market can leapfrog the centralised business models seen in the IT industry—the likes of Google and Facebook, for example—into ‘value technologies’ that commoditise trust and require no central party, said Mr Hesse. In this environment, another strategy that can help take energy business models exponential is the use of tokens as software licences, where companies build software that is open source but that requires utility tokens to use, a model similar to Ethereum’s, he explained.
Asked what advice he had for those keen on entering the blockchain space, Mr Hesse encouraged budding entrepreneurs to get their feet wet by writing their first smart contract on Ethereum—a task that would take those with no programming experience only around two weeks. “This is the easiest entry point, and you’re entering into the biggest ecosystem,” Mr Hesse responded.
Once one becomes acquainted with the decentralised nature of blockchain, a world of new possibilities opens up beyond traditional, highly proprietary business models. “Be prepared, because once you dive inside and start to think about different business models, you will experience a lot of self-disruptions in your own thinking… it’s a massive, fast space. In blockchain, a week is like a month in other markets.”
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