Blockchain: Green building blocks
The technology is helping to expand the uptake of renewables worldwide, Ewald Hesse, CEO of Grid Singularity, tells World Energy Focus
Q. What is Grid Singularity, and why did you decide to start the company?
A. I was a mechanical engineer, and worked for the energy group ABB in Austria for six years. I first dived into blockchain five years ago, working with bitcoin mining, and then I supported the development of Ethereum which received $18m in crowdfunding and then took one and a half years to build. It is still so far the most advanced blockchain platform. Two years ago, we decided to open a new company, Grid Singularity, with the purpose of further developing the blockchain technology suitable for energy markets.
Q. Can you explain how a blockchain transaction works, from beginning to end?
A. Bitcoin, which is a currency, was the first use of blockchain technology and is the most well-known. With bitcoin, you are simply moving numbers in a transaction from left to right. Blockchain technology reduces transaction costs by keeping a single logical copy of transaction records. Once a transaction is requested, it is broadcast to a network of computers, verified by a series of validators, and then once complete, it is added to the existing blockchain of transactions, where it can never be removed or altered.
Q. Is blockchain 100% secure, and can we be sure of that?
A. The decentralised character and consensus engine makes it the most secure system in the world. Single entity driven systems require a trust premium.
Q. How would it work for an energy consumer?
A. Think of it like the internet—the average person will just download an app, they don't have to understand how it works. The app will trade for them and get them the cheapest locally-produced energy. Every single device—from air conditioning systems to batteries—can become a trader with blockchain.
Q. How can big energy companies benefit from adopting blockchain technology?
A. We decided to set up the Energy Web Foundation (EWF) together with the Rocky Mountain Institute. Many big utility and energy companies such as Shell, Statoil and Engie have joined it. It is a non-profit organisation whose mission is to accelerate the commercial deployment of blockchain technology in the energy sector and fund the development of core technology. The challenge is how to embed regulation with this "decentralised computer". In our system design, the EWF members become validators and thereby they are the authorities, so while anyone can use the network, only the authorities can validate transactions. Regulation is further being enabled through white-listing of smart contracts, apps and identities.
Q. How far off are we from seeing blockchain widely adopted across the energy sector?
A. The Ethereum network is usable now, and the enhanced EWF blockchain will be launched in Alpha in the third quarter of 2017. An energy web development hub has been established in Berlin. We plan to go live officially in February 2019.
Q. What are the challenges?
A. In some countries, energy markets are very nationalised, and in others they are very much privatised, and separate the grid from the free market. The biggest problem we have is creating something which can be used by all.
Q. Will it be greener?
A. This technology is the last piece of the puzzle which will finally allow a 100% renewable world. The resilience aspect is built into the code.
Q. What should policymakers and energy companies start doing now to prepare for this new technology?
A. For utilities, this is the only way forward, you can't stop it. Most are pretty excited. There are about 20% or maybe fewer who are aggressively going forward and creating things themselves.
Q. Is the energy sector behind when it comes to the take up of new forms of technology?
A. In the past 15 years, look at what has happened in the energy sector. Energy prices have fallen drastically, and the 15 largest energy companies in the European Union are all losing profits. Meanwhile, start-ups are coming into the field at an exponential rate. The change is happening right now, and it is only going to accelerate.
Q. Is it fair to call this a revolution?
A. It will be at least as impactful as the internet. The internet is only a copy of existing business models, but blockchain means you can exchange information or contracts peer-to-peer, it's a direct challenge to companies like Google. It will change the business model for everything, not just the energy sector.
This article appears in the annual issue of World Energy Focus, the magazine of the World Energy Council, with content produced by Petroleum Economist. For more information and to read the annual in full, visit worldenergy.org.