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Energy trading via Blockchain

Catharina Geiselhart

Winter Academy 2018

Trading, Sales and Financing in the European Energy

Market and Industry

Just a hype or starting point of a revolution?

After hitting the financial sector by storm, Blockchain takes on the energy sector

The decentral Blockchain model can make metering companies, energy traders and banks redundant

Blockchain offers disruptive potential for the energy sector

Conventional

power plants

Grid operators Banks and

payment services

Energy suppliers

EVU Bank

Traders

Electricity

Payments

Blockchain:

payments and

Blockchain

Grid operators

1043,27

Metering companies

The energy world with Blockchain

Storage PV and other

renewable energies. Wind energy

Domestic and

commercial consumers

Conventional

power plants Storage Wind energy

Today’s value chain

transaction data

Domestic and

commercial consumers

PV and other

renewable energies.

Agenda

1 The Blockchain technology

2 Our study on the developing role of Blockchain in the energy sector

3 First energy trading Blockchain projects

4 Conclusion and perspectives

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1

What is Blockchain?

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• Blockchain is a decentralized ledger of all transactions in a network (without intermediaries)

• Participants in the network can execute transactions with no need

for a trusted third party as intermediary

• Blockchain technology enables the distributed and thereby efficient and secure documentation of transactions and other data

What exactly is Blockchain?

Smart contracts

The ability to execute

additional business logic

means that an agreement

on the expected behavior

can be embedded in the

Blockchain.

Cryptography

Integrity and security are

ensured by cryptographic

functions

Distributed Ledger

Each participant in the

network has simultaneous

access to the transactions

history

Key concepts of Blockchain that explain the added value of the technology

Consensus

Verification is performed by

participants who mutually

confirm changes, thereby

replacing the need for a

third party.

Overview of companies and projects active in Blockchain technology in energy – June 2016

Blockchain Radar – June 2016

Blockchain Radar – November 2017

B2C energy trading / Peer-to-peer systems

Mobility Asset management

Further applications the energy sector

Further applications

Active company/ utilitiy Blockchain developer / Startup Project/Initiative

*Interesting peer-to-peer model, currently without the use of blockchain

** Not based on a Blockchain, but on a Distributed Ledger, which, by its own account, overcomes the Blockchain´s inefficiency.

Europe

USA

Rest of the world

Enerchain

TransActive Grid Ecochain

Ponton TenneT

Vandebron

Conjoule

freeel.io

Slock.it

Powerpeers*

Fortum

sonnen

Alliander

Lumenaza*

StromDAO

Share&Charge

Demos

Car eWallet Vattenfall

BTL

Lykke

Stadtwerke Energie Verbund

AdptEve

Vector

KEPCO

LO3 Energy

Power Ledger

LedgerAssets

The Sun Exchange

La‘Zooz ElectraSeeD

Filament

Electron

Smart Solar

Kleiner Racker

Grünstrom Jeton

Stromhaltig.de

GridSingularity

OneUp

Volt Markets

SolarChange

Wattcoin Labs SolarCoin

ElectriCChain

WienEnergie

Arcade City

Powertree

Lisk

Guardtime

Parity

ChromaWay

etherisc

ChainOfThings

Linq

NASDAQ

InnoEnergy

WanXiang

Vodacom

Bankymoon

Ethereum

IOTA**

Energy-Blockchain Lab

Marubeni

M-PAYG

MultiChain

Hyperledger

TEPCO

Toyota

Origin FinTech4Good

Grid+

Rheinenergie

TWL

Allgäu

Other company / organization

ConsenSys

Siemens

innogy

Wuppertal

2

Our study with the World Energy Council

Winter Academy 2018 in Brussels

The developing role of Blockchain in the energy sector

https://www.worldenergy.org/publications/2017/the-developing-role-of-blockchain/

Utilities, Blockchain start-ups and grid operators gave us their thoughts about Blockchain in the

energy sector

• Dr. Urban Keussen, CEO at TenneT • Brigitte Colombo, R&D Manager at Powerco • Lawrence Orsini, CEO at LO3 Energy • Michael Merz, Founder at PONTON • Oenone Scott, Communication Manager & Joanna Hubbard,

COO and co-founder at Electron • Owen Williams, Senior Advisor, Strategy and Innovation at Statoil • Allison Clift-Jennings, Filament • Carsten Stöcker, Innovation Director at Innogy

• Christian JACOB, Innovation Manager at Stromnetz Berlin

• Philipp RICHARD, DENA

• Pamela TAYLOR, Partner, Enforcement & Head of Innovation link at

OFGEM • Kengaku Shin-ichiro, Managing Executive Officer at Tokyo Electric

Power Company Holdings, Inc. • Xiao chen, President at Fintech4good

• Deanna Mcdonald, CEO at BLOC • Cao Ying, Founder Energy Blockchain Labs and principal energy analyst of

China Cinda Securities

Is Blockchain the enabling technology for a future decentralized energy world?

67% of the interviewees think that

unclear regulatory protocols are the most important barriers to the further development of Blockchain in the energy sector.

13

53% of the interviewees think that

Blockchain will bring new cybersecurity risks

100% of the interviewees think

that Blockchain will be able to disrupt the functioning of the industry and contribute toward accelerating the speed of the energy transition.

92% think that blockchain

technology will start making the most disruptive impact within the next 5 years.

Potential barriers Opportunities

Key messages from our study

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First energy trading Blockchain projects

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Peer-to-peer energy trading in the neighborhood – Brooklyn Microgrid

Five households produce surplus energy

Five households buy excess energy (currently manual)

Payment via energy token (no intermediary necessary)

Metering of electricity production, conversion of information into blocks

Calculation of electricity surplus and demand in fictional tokens

In the future: expansion of the microgrid

Individual decision between alternative contractors, immediate implementation of the transaction

Electricity

Data

Token-System

(Blockchain)

Microgrid

Involved companies are LO3

Energy and Siemens

Ethereum Blockchain

Meanwhile about 50 feeders and

300 households involved

A BMG App has been developed

(it shows green electricity

production/consumption and

integrated electricity into the

grid)

Regulatory hurdles still exist

The first significant blockchain pilot project in the energy sector is being expanded: 50 feeders and 300 households connected

30+ European energy trading companies develop a peer-to-peer trading system in the wholesale energy market using blockchain technology. Key objectives

• Standardized transactions between various trading partners

• Lower transaction costs

Status

• First trade in October 2017

• Further detailing and deployment in 2018

European peer-to-peer energy trading platform – Enerchain

Peer-to-peer power grid – Powerledger

Power Ledger is a startup developing peer-to-peer power grids using Blockchain technology in Australia and NZ Established Blockchain business model

• Peer-to-peer pilot projects already up-and-running

• Own proof-of-stake Blockchain ("EcoChain") • EcoChain designed to be open platform for

utilities Growth funding using ICO in 2017

• Sale of token "POWR" worth 21 mn. € • > 20.000 token holders

Peer-to-peer regional energy trading – Conjoule

Pilot project in Essen-Kettwig and

Mülheim

Created at the Innogy Innovation

Hub

Participation of the Japanese RU Tepco

Based on Ethereum

Developed by Consensys

Blockchain used as a medium for

securing energy certificates.

The predicted, generated and

consumed amounts of energy of the

participants are recorded

In the second step, kWh based

timetables are added to billing-related

topics

Currently no pricing on the Blockchain

possible

The peer-to-peer trading of regional power certificates is only a starting point for more Blockchain-applications

PV system owners decide for

themselves who they use to

provide their surplus energy

1

The Conjoule platform connects PV system owners

and regional customers

(matchmakers)

2

The customers are supplied with energy

from regional production

3

Transactions are saved in

a blockchain

Consumer defines concrete energy mix

Virtual direct trading between plant and

consumer

Plant operator

• Possibility of supplementary earnings

• Security of selling produced energy

• Supporting energy trading for renewables

• Shorter payment due dates and contract settlement

• Caretaking of administrative processes through supplier

• Multiplicity of provision

• Visualization and proof of origin

• Single-Platform, independent of selected plant

• Technological trustful billing

• Fair prices through regional energy selling

Consumer

• Customer acquisition through product innovation

• Commodity selling as basic provider

• Positive image effect (regional trading and renewables)

• Efficient market processes

• Increasing consumer insights (consumer behavior)

• Gain Blockchain insights and develop new strategies

Energy supplier

B2C – trading initiatives offer various advantages for plant operators, consumer and energy suppliers

Blockchain‘s added value for peer-to-peer energy trading use cases

4

Conclusion and perspectives

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Web technology

Blockchain

Blockchain 2.0/3.0

Next Level decentral technologies

e.g. IOTA, Hashgraph

Standardization of data exchange

Efficient execution of micro-transactions

Flat “no hierarchy” systems (peer-to-peer)

Enable decentral business models

Increase cost efficiency

Main objective: increase flexibility and scalability

Blockchain Technology is a hype, but it strongly supports the implementation of decentral business models

Blockchain is still in the early stages of development

understanding of technology

standardization

regulation

scaling & Performance

culture & mindset governance

costs & benefits

data protection & security image problem (Bitcoin)

Challenges to overcome for a safe and efficient application in the energy sector

To settle Blockchain as a credible alternative, we need to overcome current challenges

In our approach we design, test and implement Blockchain business models

• Develop Blockchain-based business models for your company in a Design Spring

• Get a deep understanding of the technology and get insights from global Blockchain experts

• Evaluate the specific benefit of Blockchain technology for your company

1 Design

• Develop prototyp products and processes for your company based on developed business models

• Test both with real data and integrated additional features

• Get deeper understanding from regulatory perspective

• Develop you business model towards a market fitting product

2 Pilot

• Optimize internal processes and implement additional ones for the go to maket

• Prepare your operational staff and sales in order to utilize the tools and to approach the customer

• Develop a strategic growth plan to scale the technology in the next years

3 Rollout

Our procedure: Develop new business models in an innovative process

Individual, but guided step-by-step development of use cases; pre-existing solutions are taken into consideration

Decision for a final approach and preparation of a storyboard

Fast development of a first prototype – just detailed enough to get first customer feedback

Interviews with potential customers generate first market feedback (3-5 test persons)

Define long-term goals and identify challenges by incorporating experts

1 Learn 5 4 3 2 Diverge Decide Prototype Test

Structured approach for the development of new business models and products

Design of a testable prototype, that enables first customer feedback – short process reduces failure times

Creative working atmosphere and extreme focus on the practical implementation of the prototype

The bigger the challenge the better – Challenges can be addressed iteratively within a structured framework

Benefits:

Monday

Studying

Tuesday

Use Cases

•Corporate conference with key notes from global Blockchain experts and founders

• Inventory pervious Blockchain activities

•Overview of Blockchain activities and the underlying business models

• Inclusion of potential problem and action fields

•Brainstorming potential use cases, Creation of a "Longlist" (approx. 10-15)

• First prioritization of approx. 5-10 use cases

•Estimation of economic efficiency and content focus on prioritized use cases

•Selection of a promising use cases

• Focus on profitability assessment

•Concretization of the use case, creation of storyboards as foundation for the prototype

•Validation of the use case through a 3 hours “Ask the expert” session.

Thursday

Prototyping

•Decision on the design of the prototype (e.g. Demo-app, website, video)

• Elaboration of the prototype (Storyboards, texts, processes, programming)

•Compiling a documentation of the use case, e.g. as a flipchart-storyboard

Wednesday

Story boarding

Friday

Validation

•Validation of the use case: interviews with potential customers

•Collecting feedback about use case and prototype

•Development of next steps for the implementation

•Final expert talk “The future of energy is decentralized”

•Get Together

Blockchain Sprint – schedule for the week

Use cases are developed, prioritized and tested based on a prototype

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AXEL VON PERFALL

Blockchain, Energy Sector

PwC Blockchain Experte

STEPHANIE HUBERT

Blockchain, Data Science

CATHARINA GEISELHART

Blockchain, Energy Sector

JEROEN B. VAN HOOF

PwC Experience Center NL Blockchain

Expert

SEBASTIEN CHOUKROUN

PwC Blockchain Lab France

Blockchain Expert

JOACHIM LOHSE

Blockchain Expert, Energy sector

Partners

HUGO BRUNET

Blockchain, Programmer

Our Team

Winter Academy 2018 in Brussels 27

Thank you for your attention!

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Contact:

Catharina Geiselhart

Berlin +49 151 72832263

Catharina.geiselhart@pwc.com

A few questions arise in a blockchain-based electricity trading business model

Obligations as supplier to consumers via blockchains

§ 41 EnWG: As a supplier, Prosumer is obliged to conclude simple and understandable energy supply contracts that respect the minimum information on consumer rights.

§ 3 Nr. 18 EnWG: As a supplier, the prosumer is also an energy supply company according to the EnWG

§ 5 EnWG: Disclosure obligation for suppliers in the (permanent) household customer supply (human resource, technical and economic capacity) towards regulatory authority.

§ 4 StromNZV: Naming of a Balance group operator. In particular, reporting load forecasts to grid operators; compliance with the market rules e.g. "MaBis" and "GaBiGas".

§ 60 EEG: The utility is normally obliged to pay the EEG levy to TSOs

§ 5 Abs. 2, Abs. 1 Satz 1 StromStG: Supplier ist subject to electricity tax

Obligation as regards third acces to and use of grids in the blockchain network

StromNZV: Compliance with the general conditions for all prosumer applications when using the public grids.

StromNEV: Applies to all blockchain applications that use the public grids as regards network fees

StromGVV und GasGVV: Obligation to conclude contracts in the framework of the basic electrical supply - Obligation to supply at fixed prices

MsbG: Accurate measurement at the Prosumer possible by smart meters; plausibility check and preparation of measured values according to § 2 No. 17 MsbG instead of the network operator