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18.08.2021

Energy Transition Via Blockchain: How Berlin Start-ups Are Fine-tuning The Decentralised Future Of The Electricity Market

Few other sectors currently offer as many practical use cases for blockchain as the energy sector. Much has been done in recent years to develop and disseminate innovations in this area. Berlin start-ups are playing a decisive role in this.

Blockchain has the potential to fundamentally change the traditional ways of working in many industries. In the energy sector in particular, the technology is proving to be the key to advanced concepts, and work on their practical implementation is proceeding at a rapid pace. Start-ups, for example, have shown that electricity trading between private individuals is conceivable and feasible without the involvement of energy companies. In addition, blockchain can help to simplify the integration of storage systems into decentralised energy systems and thus the balancing of supply and demand, to automate charging processes and billing in the field of electromobility and to guarantee the authenticity of green power certificates.

"The German energy industry is leading the way in the digital transformation and harnessing new technologies such as blockchain",

said Stefan Kapferer, former chairman of BDWE and now CEO of the transmission system operator 50Hertz. In Berlin's bustling blockchain scene, several startups are dedicated to this promising topic. With their work, they are setting standards for global developments in the energy sector. At the same time, however, media reports are piling up about the now horrendous power consumption of mining farms. An apparent contradiction that raises the question of where the high expectations associated with blockchain in terms of the energy transition are derived from. 

Energy transition with power-hungry technology?

Only recently, Elon Musk surprisingly announced that, for reasons of climate protection, he wanted to abandon Bitcoin as a means of payment for Tesla, and thus once again caused considerable price drops on the market. In fact, at the beginning of 2021, the power consumption of the Bitcoin network was an incredible 121 terawatt hours. A large part of the electricity comes from non-sustainable sources. The fact that blockchain may nevertheless prove to be a game-changing technology for the energy transition is because electricity consumption does not necessarily scale with alternative chains such as Polkadot.

The reason for the immense power consumption of some chains is the proof-of-work mechanism, which is used in the mining of Bitcoin but also, for example, Ethereum, Dash and ZCash. However, alternative algorithms such as proof-of-stake or proof-of-authority now exist, and they can be used to ensure the security of decentralised databases without the massive computational effort previously required. Solutions in this regard are already established on the market and are used, for example, in electricity trading or in the management of certificates in the electricity market. Bitcoin's energy consumption could be reduced by switching from proof-of-work to the proof-of-stake consensus mechanism, according to the Fabian Reetz, project manager at SNV for the "Digital Energy Transition" project, by an incredible 99 percent.

The Democratisation Of The Energy Market

With its digital platform, Grid Singularity aims to revolutionise collaboration between grid operators, energy communities and other energy market players. On its website, the company clarifies what this is all about, in quite fundamental terms: The individual and the environment should be at the center of the energy market. This is to be achieved with the help of the trading platform d3a.io which is under continuous development. The overall goal is to establish a global, open-source platform for blockchain-based energy applications. 

The od3a.i open source software  was developed to create local marketplaces and to simulate and operate energy exchanges, where end customers can trade electricity based on algorithms - and thus actively participate in the market. In doing so, Grid Singularity not only aims to promote green energy business models, but with the help of Canary Test Networks, knowledge sharing as well, which is crucial for the large-scale implementation of blockchain-based concepts for the energy market.

The Grid Singularity team brings together the expertise in energy markets, policy, and blockchain that is imperative to the success of the project. This includes prominent developers who are among the main founders of the open source non-profit organisation Ethereum. In 2017, Grid Singularity was, alongside the U.S.-based Rocky Mountain Institute, also instrumental in the creation of Energy Web (EW). EW is a global non-profit organisation that is fundamentally designed to help drive the transition to decentralised, democratised, decarbonised and digitised energy systems.

"With our market model, we map the already existing decentralised reality in the energy system by developing grid-serving local energy markets that focus on end customers and their degrees of freedom and promote transactive distribution networks – an alternative concept to today's centralised model and an overarching power exchange, exclusively for wholesale". – Leo Hille, Grid Singularity

Energy Web (EW)

EW's goal is to promote disruptive applications of blockchain technology in the energy sector. The associated business models are highly interesting not only from an economic point of view. They could also make a decisive contribution to the success of the global energy transition.

This requires getting energy companies, developers and regulators alike on board. Here, EW's work has so far proven to be a great success: With a network of now 70 companies from all over the world, the project is developing extremely positively. These include large corporations such as E.ON and Shell, but also numerous start-ups that are involved in the development of blockchain-based applications and ecosystems for the energy market.

In this context, EW forms a platform that brings together experts from all relevant fields and provides the infrastructure for the efficient development of commercial applications. The starting point is the Ethereum network, whose robustness and resistance to cyberattacks is an important factor for the ambitious open-source project. In 2019, EW launched the Energy Web Chain (EW Chain), the first public blockchain for the energy sector, which is intended in particular to guarantee that renewable electricity is actually bought and sold.

Green energy from our neighbor

The Berlin-based start-up Lition Energie has also set for itself the goal of significantly advancing the energy transition with the help of blockchain. At the heart of this is a P2P-based green power marketplace, on which consumers have the opportunity to purchase their electricity directly from renewable energy producers across Germany. Thanks to blockchain, there is no need to go through intermediaries or power exchanges. In addition, Lition also sells solar panels that allow customers to become generators themselves and earn money by selling excess electricity through Lition. Lition is certified with the ok-power seal, which guarantees that 100 percent of the electricity traded via the platform comes from renewable energy sources.

Status quo in the energy sector

In order to exchange information on the current status, progress and obstacles of blockchain developments within the energy sector, BerChain e.V., Berlin Partner for Business and Technology and Elia Group invited participants to the webinar entitled "Blockchain in Energy: Decentralisation and Sector Coupling". At the end of June 2021, experts from the energy industry and all over Germany and Austria came together to discuss and share use cases with the blockchain community. A total of eight companies, such as CircularTree, Energy Web Foundation and Fraunhofer FIT, took part in the conference and engaged in an active exchange with around 150 members of the audience. From decentralised identification to e-mobility and green tracking, many of the relevant topics that currently dominate the industry were covered. The fact that the implementation of blockchain in the energy sector is being slowed down primarily in Germany by regulations such as the data protection regulation was just one of many findings. However, looking to the future, it remains positive that blockchain is of fundamental importance for an efficient energy transition and will therefore be increasingly integrated into the energy sector. The conference is available for review here:

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