Beyond the noisy Web3 neologism, there is the slightly less flashy but equally important concept of Industry 4.0, which includes the new and revolutionary drivers of the next generation industrial landscape. And, especially when it comes to the energy sector, blockchain is at the heart of these technologies.

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The authors of the recently published EUBlockchain Observatory report “Blockchain Applications in the Energy Sector” are convinced that distributed ledger technology (DLT) can become a key technology and has a very high potential to influence or even disrupt the energy sector. This is not surprising given the five pillars of the digital green shift: deregulation, decarbonization, decentralization, digitalization and democratization.

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The report highlights the main uses of blockchain in the sector and complements factual case studies and opinions from energy market stakeholders such as Volkswagen, Elia Group, Energy Web Foundation and others.

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Cryptooshala spoke with one of the co-authors of the report, EMEA Commercial Director at Energy Web and a member of the EU Blockchain Observatory and Forum, Ioannis Vlahos.

Vlahos elaborated on the most intriguing parts and concepts of the document, such as the granularity criterion, the importance of sovereign identity, and the possible role of DLT in the development of non-electric energy consumption.

Cryptooshala: The report notes that to date, no blockchain/DLT solution has been widely adopted by energy system stakeholders. Why do you think this is so? Could you try to answer it?

Ioannis Vlachos: The main barrier to the widespread adoption of blockchain solutions by the stakeholders of the energy system is related to the structure of energy markets at the present time. Regulatory requirements in most countries of the world for small-scale flexible assets, such as household batteries, electric vehicles, heat pumps and others, allow participation in energy markets only through their representation by an aggregator.

Considering a more direct market design, whereby flexible assets, regardless of their size, can directly trade in the energy market, will minimize their marginal costs and encourage the participation of small distributed energy resources (SERs) in energy markets.

This need for direct participation of assets in the markets was identified and recognized as an overarching principle in the joint report of Entso-E and European associations representing distribution system operators, “Roadmap for the development of the regulatory framework for the flexibility of distributed systems”, published in June 2021, where “access to all markets for all assets either directly or collectively” recommended.

Blockchain technology, through the concept of decentralized identifiers (DIDs) and verifiable credentials (VCs), provides the necessary tools to allow small DERs to directly access energy markets.

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

IV: Blockchain technology provides the means to create a trusted participant ecosystem where all information exchanged between assets, systems, and participants can be independently verified using DIDs and VCs. This is extremely important to ensure the necessary audit trails in the supply chains of non-electric energy such as natural gas, green hydrogen and others.

Recently, Shell, along with Accenture, American Express Global Business Travel, supported by Energy Web, as a blockchain solution provider, announced Avelia, one of the world’s first blockchain-based digital accounting and enrollment solutions for sustainable aviation fuel (SAF) scaling.

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The report argues that the application of blockchain in the energy sector is likely to be further developed and developed.

What are the prerequisites for such an optimistic conclusion?

This conclusion is mainly based on the fact that, despite the highly regulated energy environment, we have recently seen a large number of projects in the broader energy sector using blockchain technology. They do this by implementing use cases outside of existing regulatory frameworks, such as the Shell SAF project, or with the support of national regulators and market operators, such as the EDGE and Symphony projects in Australia.

The EDGE and Symphony projects are supported by government agencies, the Australian Energy Market Authority and the Australian Renewable Energy Agency and are taking an innovative approach to integrating consumer-owned DERs to ensure their participation in the future energy market based on a decentralized approach. Both projects use a blockchain-based decentralized Energy Web digital infrastructure that assigns digital identities to participants and thus facilitates the secure and efficient exchange and verification of market participants’ data.

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In addition, we cannot ignore the fact that blockchain technologies are mentioned within the framework of the European Union action. plan per digitalization energy sector, focusing on expanding digital adoption.

IV: The concept of granularity refers to the need to increase the frequency of data that will allow tracking of energy products. Particularly in the case of electricity, moving from monthly or yearly energy consumption matching with locally generated renewable electricity to a more granular one (e.g. hourly) is considered best practice as it minimizes energy greenwashing. In this regard, Energy Web, in collaboration with Elia, SP Group and Shell, has developed and released an open source toolkit for simplification Round-the-clock purchase of clean energy.

CT: Could you explain the concept of granularity that drives blockchain demand in the energy sector?

CT: The report mentions sovereign identity, defining it as “a growing paradigm that promotes individual control over identities rather than reliance on external authorities.” It’s easy to imagine such a paradigm with online personal data, but what does it mean for energy production and consumption?

IV: The importance of sovereign identifiers (SSIs) for energy production and consumption stems from the fact that prosumer energy data can be treated as private data. [Prosumer is a term combining consumer and producer roles by one individual or entity.] Especially in the context of the European Union and in light of the General Data Protection Regulation, the granularity (sampling rate) of smart metering data can be closely related to data privacy. In addition, given the fact that new business models are emerging that use consumer energy data to facilitate the provision of energy efficiency and management services, enabling consumers through the SSI concept to consent to the dissemination, processing and storage of their energy data is more important. . a necessity, not a luxury.